Romanian Cos File For Insolvency To Benefit From Law’s Advantages – Lawyer

Romanian companies with debts have distorted the very purpose of insolvency and very often resort to the measure for its advantages, to shield themselves from foreclosure and from paying debt penalties, said Wednesday Dan Costinescu, partner at law firm Schoenherr si Asociatii.

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"If this procedure is used abusively, a debtor's claim for insolvency may be considered premature and may be rejected and is also drastically punishable," Costinescu said during a seminar organized by newspaper Ziarul Financiar.

He added in most cases, debtors filing for insolvency don't have plans to reorganize their business and are just looking to benefit from the bankruptcy law's advantages such as evading foreclosure and debt and penalty payments.

On the other hand, he said, insolvency is also used by creditors as a way to recover debt.

"Insolvency may become a way to protect debtors rather than a measure used to pressure debtors," Costinescu said.

He explained insolvency doesn't always entail bankruptcy and judicial reorganization may be a solution to revamp a business.

Over 2,000 companies entered insolvency procedures in January 2010, nearly 10% more than in December last year. Also, in 2009, 18,421 companies filed for insolvency, according to Trade Registry data.

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