• Klaudia Grochowska

WITHDRAWAL FROM THE CONTRACT BY THE ADMINISTRATOR IN REMEDIAL PROCEEDINGS

Remedial proceedings, regulated in the Act of 15 May 2015 Restructuring Law (hereinafter the Act), is aimed at "resuscitating the enterprise" - healing the structures and return to profitability of the project. Withdrawal from the contract by the administrator is one of the institutions that allows the debtor to "free" from obligations that are not profitable from the position of the debtor, while the occurrence of specific circumstances.


First of all, the contract must be reciprocal, i.e. the performance of one party is equivalent to the performance of the other party. The administrator may withdraw from a contract which was not completed in full or in part before the opening date of the rehabilitation proceedings, if the service of the other party is an indivisible benefit.


Where the other party's performance is divisible, then the administrator may withdraw from the contract in part of the performance that would be due after the opening of the remedial proceedings.


When considering withdrawal from the contract, the administrator must clearly determine reciprocity and the status of the obligation under the agreement - whether or not it has been performed, and whether the performance is divisible - as a rule, it will be cash benefits and items marked as to their nature. If the other party's performance is divisible, the administrator may withdraw from the contract in the part which was to be performed after opening the remedial proceedings.

Therefore, it is not possible to withdraw from the contract that has been fully performed.


The administrator's action must be directed towards the good of the remedial estate, i.e. the entity in remedial proceedings. Therefore, it is assumed that the administrator should take steps to withdraw from unfavorable, unilateral contracts and encumbering the entity's assets in remediation beyond the need. The administrator may withdraw from one contract or several contracts, while one does not determine the other, only some agreements may be withdrawn. The criterion should then be economic factors or what we gain from the performance of a given contract and at what cost and effort. This criterion is objective, which protects both the other party to the contract and the administrator against the charge of arbitrariness.


The administrator of the remedial estate is entitled to withdraw from the mutual contract, after obtaining the consent of the judge-commissioner, who must put into consideration both the purpose of the remedial proceedings and the important interest of the other party to the agreement when considering such a request. An important interest may be that withdrawal from the contract will potentially lead to the insolvency of the other party to the contract or to significant social costs due to reduction in employment. Importantly, the term “important interest” is vague and will be interpreted by the judge-commissioner. A decision of the judge-commissioner may only be appealed by the debtor and the other party to the agreement.


If the situation is unclear, the other party to the contract may request information from the administrator about the contract that connects the party with remedial estate. The administrator within 2 weeks either request the consent of the judge-commissioner in the above procedure or inform the other party that he will not submit such a request. The 2-week period is very important, because after it expires without information, the administrator loses the right to request consent to withdraw from the contract.


The manager may not withdraw from framework contracts for specific forward financial operations, loans of financial instruments or sale of financial instruments with an obligation to repurchase them. Such a contract should be terminated in accordance with terms and conditions. A separate issue is the termination of the tenancy agreement by the landlord or the lease agreement by the lessor, where enterprise is running.


After obtaining the final consent of the judge-commissioner, the administrator submits to the other party a statement of withdrawal from the contract, which has effect for the future -from the moment the statement of withdrawal from the contract is received by the other party.


The other party to the contract, not sure about the contract, may ask the administrator to take a position on the contract between that party and the remedial estate. On the oher hand, after the judge's consent, the other party may appeal against the decision. The other party should also seek the status of participant in the proceedings in order to know in which direction the administrator's actions are heading.


The other party to the contract from which the administrator has withdrawn is entitled to claim for compensation for non-performance of the obligation and for compensation for losses incurred as a result of withdrawal. This claim is not covered by the agreement and does not include contractual penalties reserved in the event of withdrawal or non-performance. In this way, the potential financial risk of withdrawal loss is minimized.


Withdrawal from the contract is a "healing" instrument and is intented to relieve the debtor from unfavorable contracts that caused the need to initiate remedial proceedings. The other party to the contract must carefully and closely observe what is happens in the remedial proceedings and whether the existence of the contract to which it is a party is "threatened" to take steps to maintain it as soon as possible and object its termination.


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