A draft government ordinance amending the Romanian insolvency law was published on September 12. The bill is intended to increase recoverability of state receivables from insolvent companies and to reduce the debtor’s control over the proceedings.

One of the main changes relates to denying the existing right of the insolvent debtor to nominate an insolvency practitioner to be appointed as official receiver. Under the current procedure, it was mandatory for the insolvency court to follow debtor’s proposal, if the creditors did not make a proposal of their own.

Also, the amended law would no longer allow debtors to petition for their insolvency if more than 50% of their debt consists of state receivables.

The amendments also remove a ban on debt to equity swaps in cases of state receivables. Previously debt to equity swaps were only allowed for private creditors.

The Romanian government intends to adopt the amendments through an emergency government ordinance. The government indicates that the urgency is generated by a 20% increase in the amount of non-recoverable taxes (including due to insolvency) and a tax recovery rate of just 4.6% from insolvent companies.

We are closely monitoring the status of this bill and will revert with a more detailed update as soon as the bill is adopted.