Issue 2 2019

12 Acquisition International - Issue 2 2019 1810AI18 Serafim Sotiriadis and Associates provides a diverse range of legal and business services with a specialty in commercial law, insolvency law and business restructuring and recovery. Serafim Sotiriadis the firm’s Managing Director, provides us with an insight in into pre-bankruptcy regime in Greece. ow has the pre-bankruptcy regime formed in Greece in the last years? The pre-bankruptcy mechanisms give the Greek companies with the opportunity to restructure their debt and continue operating by extending the repayment of their obligations, writing off a proportion of their debt and acquiring refinancing facilities. The Greek Bankruptcy Law provides businesses with the essential legal tools to achieve these goals. The most prominent ones are the “Pre-pack Agreement” according to art. 106b found in the Greek Bankruptcy Code (BC) and the “Company Transfer Agreement” according to art. 106d found in the Greek Bankruptcy Code (BC). Apart from these, a newly introduced procedure in the Greek Law called “Special Administration” gives the opportunity to the company’s creditors to get into an accelerated scheme. In general, the special administrator sells the business as a going concern either as a whole or in parts seizing a higher value for the assets sold than in case of bankruptcy or special liquidation proceedings. The Greek regulator has moved towards simplification and acceleration of the pre-bankruptcy (and bankruptcy) proceedings in the last years. This shift has a great impact on potential investors’ eyes. For many years, investors have been declining the chance to get involved in the promising Greek market due to the fact that the procedures were too slow and cumbersome, but now the landscape is different and undoubtedly more attractive, especially to foreign investors. Can you briefly describe the pre-bankruptcy processes? Business Restructuring in Greece is widely known as Business Rehabilitation. Articles 106b and 106d of the Bankruptcy Code give debtors the opportunity to sit on the table with the creditors and negotiate their company’s future. The process begins with the negotiation between the debtor, its creditors and the potential investor. The negotiation is followed by the signing of the rehabilitation agreement by the parties concerned (creditors must represent the qualified majority, at least the 60% of the total debtor’s obligations). Further, a business plan must be prepared by an accredited accounting firm that presents predictions regarding the viability of the company. At this point, the Greek Law proceeded to a revolutionary change. It is not the Greek courts that are going to examine the viability of the business to make up its mind, but this task is exclusively left to the accounting expert. Following that, the company does not only restructure its debt but also reorganises its business’ operating sector making important Bankruptcy and Restructuring Lawyers changes in the employees and suppliers status quo, in the expenses etc. The agreement must be ratified by the Greek courts; therefore, an application must be filed, and approved by a court decision, which will be in effect erga omnes (it binds even the creditors who did not consent to the agreement). Similarly, article 106d of the Bankruptcy Code predicts the transfer of the business to a third company, either in whole or in part, with the debt restructuring taking place on the transferred liabilities. The third company may be either an existing or a newly established company and all the restructuring law provisions accordingly apply in this case as well. In essence, the third company purchases the part of the assets that prefers (taking a proportional part of the liabilities as well) leaving the rest in the old entity. It has to be mentioned that the Greek Law requires the agreement to make safe predictions for the repayment of the old entity’s debt obligations that left in the old entity after the transfer. This mechanism turns out to be very popular in Greece in the last two years, especially among foreign investors who mostly seek to acquire a company under a healthy legal and financial environment of a new company, especially in cases where the exposure of the acquired entity is too large. How can investors (both domestic and foreign) benefit from these proceedings? Do you see any opportunities? The pre-bankruptcy proceedings used to be cumbersome and time- consuming, as already said, discouraging investment initiatives. The last reforms have created a new legal environment that is faster and more simplified encouraging investments and discouraging law circumvention. The previous regime used to have a long-time schedule from the signing to the execution of a deal, but now this is not the case. The decision is issued within four to six months, while the application filing automatically grants a four-month suspension of any enforcement measures. This prediction reassures that the companies’ assets will remain intact during the crucial interim period. Furthermore, in case of interim financing from a bank or an investor, this investment is not lost in a scenario where the court rejects to ratify the agreement. The amount of the interim financing turns into “preferential claim” in case where the rejecting decision is followed by asset liquidation. The interim financing is crucial to the post- execution value of a business, especially for financially distressed companies, while at the same time the financing provider can protect its investment. More importantly, up until recently, the Greek authorities, creditors and the courts were very aggressive against companies which were H