Government to streamline approval of plans for company rehabilitation

The Government is studying a new change to mechanisms for rehabilitating companies as an alternative to insolvency. One of the measures being studied involves revising the necessary majorities for an agreement between creditors towards rehabilitation.

But there is a number of other fields where the cabinet wants to intervene, by finally implementing a team of mentors to advise entrepreneurs and disseminate early diagnosis of financial difficulties. There will also be an increase in the number of court-appointed auditors.

PÚBLICO questioned the minister of economy about impending changes to the Special Revitalisation Process (SRP)  and to the System for Extrajudicial Company Recovery (SECR), created by the former PSD/CDS cabinet: "Some measures are being discussed, for example concerning the level of majority required for an agreement”. Caldeira Cabral specified that "the goal of these changes is precisely to streamline  the approval of the majority of creditors”.

Right now, and after the first Passos Coelho cabinet changed the mechanisms it launched as an alternative to insolvency, the abovementioned recovery plans can be approved by creditors representing more than 50% of the total debts, instead of the previous two thirds minimum. The 66% mark only remains in effect in cases where a third of the credits is represented at the time of decision. Although the ministry is not clear on this point, the goal of streamlining plan approvals should require further reducing these quorums.

Although SPR and SECR led to a decrease in the number of insolvencies, through faster processes and lessening the negative connotation of a legal bankruptcy, the truth is they have failed to fully fulfil their goals, namely increasing the number of recoveries. The Troika often criticized both mechanisms and requested the government to revamp them. This demand has been reinstated during the evaluations that followed the adjustment programme, together with renewed concerns regarding the heavily indebted Portuguese companies.