Greece: Restructuring & Insolvency

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This country-specific Q&A provides an overview of the legal framework and key issues surrounding restructuring and insolvency in Greece.

This Q&A is part of the global guide to Restructuring & Insolvency.

For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/restructuring-insolvency/

  1. What forms of security can be granted over immovable and movable property? What formalities are required and what is the impact if such formalities are not complied with?

    In Greece security rights over movable and immovable property are granted in the form of in rem security, which gives secured creditors the privilege of preferred priority to the liquidation proceeds of the pledged assets or mortgaged property in all cases and an absolute right of collection in case of receivables, claims and rights, even post-bankruptcy since, according to the Greek Insolvency Code (Law 3588/2007) (“GIC”) the enforceability of individual security rights is generally not be prohibited or restricted as a result of the application of Greek insolvency rules. Moreover creditors benefiting from a security right in rem are entitled post-bankruptcy to liquidate the pledged property or direct collection and, to the extent the value of such pledged property does not suffice for the full satisfaction of their claims, to seek satisfaction from the remaining assets together with all other unsecured creditors.

    Consequently, although the notion of assignment of claims/rights by way of security (“katapisteftiki ekhorisi”) also exists under Greek law, it is rarely used as it does not entail the same privileges as the in rem security.

    The type of in rem security rights that a lender can acquire are exhaustively provided for under Greek law (the numerus clausus principle): real estate is subject to a mortgage; movable and intangible assets of the borrower (inventory, equipment, shares, trademarks, securities, bank accounts, all kind of trade receivables, rights etc) are subject to a pledge.

    a) Mortgage and Mortgage pre-notation
    The Greek Civil Code (GCC) provides that a mortgage can be established by a court decision or a notarial deed. Its establishment is quite costly as it entails registration, stamp duty and notarial fees calculated as a percentage aggregating to approximately 8-10% on the amount secured.

    The common practice in Greece is for lenders to obtain a court decision ordering registration of a prenotation of a mortgage, i.e. register the pre-emptive right of a lender to obtain a mortgage established as of the date of registration of the prenotation, once the secured claim becomes final. The beneficiary of a pre-notation of mortgage is treated as a mortgagee but will only collect proceeds from an auction after its claim has become final.

    A mortgage or a prenotation of mortgage is constituted as of its registration to the competent land registry or cadastrial office. The class of a mortgage (whether in the form of a full mortgage or of a prenotation), depends on the date it is registered. If two mortgages are registered on the same day, they have the same class and will share liquidation proceeds equally.

    b) Pledge
    The Greek Civil Code (GCC) provides that a pledge is constituted by a private agreement having a certain date and delivery of the pledged assets to the secured creditor or a jointly appointed custodian by the pledgor and the pledgee. A pledge over rights, claims and receivables is permitted, provided that such rights, claims or receivables are assignable, and the pledge will result to an assignment of the pledged claim or receivable to the lender.

    Certain date is achieved by having the agreement executed before a notary public (but this involves notarial fees and costs) or by service of the pledge agreement by a Court Bailiff to the pledgee or the third party (in case of pledge of thirty party assets) which entails only the cost of bailiff.

    As regards the pledge of claims and receivables, the service by bailiff is necessary in order to establish a direct right of the pledgee to collect the pledged receivables by the third party debtors as the third party becomes obliged to pay directly the assignee, only if the latter is duly notified.

    i) Non listed shares
    The pledge on shares of a non listed limited liability company in the form of a societe anonyme (SA) must be registered in the societe anonyme’s shareholders books and the share certificates have to be delivered endorsed due to the pledge, to the pledgee. Monetary rights of the pledged shares are assigned to the pledge but voting rights are to be exercised by the pledgor unless otherwise agreed.

    ii) Security rights created under law 3301/2004
    Law 3301/2004 transposing into Greek law Directive 2002/47/EC (the Collateral Directive) on financial collateral arrangements, both as amended and in force, (the Financial Collateral Law) creates security rights which benefit from the appropriation right over the asset on which security has been granted provided the parties specifically agree to it in the relevant arrangements.

    The financial collateral to be provided must consist of cash, financial instruments (including listed shares (but excluding non-listed shares ) or other listed securities) or credit claims. The financial collateral arrangement itself as well as the provision of the financial collateral under such arrangement must be evidenced in writing, or in a legally equivalent manner (as opposed to pledges or assignments perfected under the Greek Civil Code, for which a notarial deed or an agreement bearing certain date is required). The evidencing of the provision of the financial collateral must allow for the identification of the financial collateral to which it applies. The Financial Collateral Law prevails over all previous laws in its field of application, including all general and specific insolvency law provisions. The Financial Collateral Law eliminates all risk of recharacterisation of title transfer collateral within its field of application. Greece has opted for the wide implementation of the collateral directive, including in the scope of application of the Financial Collateral Law to repurchase agreements.

    iii) Security granted under Legislative Decree 1923
    Greek Banks and Banks within the EU can be granted a mortgage over real property or a pledge over claims, receivables and bank accounts in accordance with the legislative decree of 1923. Such special legislation grants the bank a direct right of immediate enforcement by way of a simple notification of a payment request and as regards the pledge it results to a direct assignment by way of security and the immediate legal protection of a quasi-onwer of the pledged claims and rights.

    iv) Fixed and Floating Charge under law 2844/2000
    Group of assets and inventory which remain in the possession of the Pledgor and general trade receivables including future business receivables (other than claims against consumers) that can be identified in detail, can be pledged in accordance with Law 2844/2000 on “taking of security by using personal property, or, in certain cases, rights or claims as collateral in the form of a charge, fixed or floating”.

    In addition to the pledge agreement and in order to establish the pledge, the parties have to fill in the special form provided by the Pledge Registry, where the particulars of the pledge are stated (the names of the parties concerned, the loan amount and the amount secured, the nature and specific terms of the underlying pledge agreement, whether the charge is fixed or floating etc.) and the object of security is described. The special form is registered with the Land Registry (acting for this purpose as the Pledge Registry), which is the registry of the residence or seat of the person granting the security or, if the Pledgor does not have residence or seat in Greece, the Athens Land (Pledge) Registry.

    v) Trade marks
    For trademarks security a registration of the relevant security agreement in the Trademarks registry is needed.

  2. What practical issues do secured creditors face in enforcing their security (e.g. timing issues, requirement for court involvement)?

    The general rule is that a secured creditor will need to obtain an enforcement title to commence liquidation of security and assets are mandatorily liquidated through public auction procedures. Moreover enforcement proceedings can be contested by a debtor. Consequently enforcement on assets in Greece, entail court involvement in various stages which results into delays and suspensions in the process. In addition there is cost element in obtaining an enforcement deed, in participating in court hearings and in initiating a liquidation process. Therefore timing and cost are the most important practical matters that creditors have to take into consideration in enforcing their security. In addition, the value of the assets to be auctioned is set by an expert at the start of the procedure and may be adjusted in case of unsuccessful auction. Hence the final proceeds of the auction might not necessarily match the expected.

    According to the Greek Code of Civil Procedure (GCPC), in order to enforce against a debtor, the secured creditor must obtain an enforcement title, in the form of either a:

    1. Final court decision; or
    2. a court mandated order to pay (a “Payment Order”).

    Greek Banks and Banks within EU, granted security in accordance with the legislative decree of 1923 can initiate enforcement over the secured assets by way of a simple notification of a payment request once the loan is defaulted.

    Payment Orders are issued within 1-2 months following an application to the court accompanied by concrete uncontested evidence of the claim. When serviced to the debtor by a court bailiff, the Payment Order together with a demand for immediate payment, it constitutes the enforcement title pursuant to which the creditor commences the enforcement procedures against the debtor. If the prerequisites for a Payment Order cannot be met, the creditor will need to file a lawsuit. Regarding lawsuits filed from 1-1-2016 and afterwards, in view of amendments to the GCPC in force as of 01.01.2016, which inter alia shortened the procedural deadlines for the cases brought before Court with the ordinary proceedings, the time needed for the final judgment is reduced. Given that there is no precedent on the basis of the new provisions of GCPC, the exact duration under the new procedure to obtain a final decision is estimated to take about 1-3 years.

    To be noted that a final and conclusive enforceable judgment against a debtor rendered by a court of a member state of the European Union in any suit, action and proceedings would be enforced by the Greek Courts without any declaration of enforceability being required and without re-examining the merits of the case unless one of the exceptions to recognition and enforcement of judgments laid down in Article 45 of EU Regulation 1215/2012 (Regulation) applies. Consequently, subject to the provision of the enforceable judgment issued by such court, as well as the certificate issued pursuant to Article 53 of the Regulation to a court bailiff, a creditor will be entitled to directly enforce on any assets of a borrower located within Greece. To the contrary, judgements rendered by a non-EU Court, will be enforceable subject to their recognition by the Greek courts (the exequatur procedure). This procedure may take up to two years in a Greek court, if the debtor objects to the procedure and files an appeal against the first instance recognition judgement, otherwise the first instance decision is immediately enforceable and therefore steps can be taken to enforce on the assets of the obligor.

    In case of an enforcement by way of a Payment Order and once the enforcement proceedings have commenced, the obligor has the right to contest the Payment Order by filing a complaint for annulment and simultaneously file a petition for suspension of commenced proceedings before the Court of First Instance (Division of Interim Measures), based on the assumed allegation that the Court will accept the petition of the annulment. When filing the petition for suspension the obligor might receive an immediate suspension of the enforcement procedures until the hearing date. The Court, in order to suspend the enforcement procedures, shall briefly evaluate the accuracy and certainty of the allegations contained in the petition of annulment against the Order of Payment. If judged to be valid the enforcement is suspended until the trial of the case before the First Instance Court and the issuance of a decision by the Court of First Instance validating or annulling the Order of Payment.

    In any enforcement proceedings, the debtor can file with the competent court of first instance a petition for the annulment of certain actions of the enforcement proceedings based on reasons pertaining to both the validity of the enforcement title (if not already contested) or to procedural irregularities. The filing of an annulment petition entitles the obligor to file with the relevant court of first instance a petition for the suspension of the foreclosure proceedings until the relevant decision of the court of first instance on the annulment motion is issued. As for the suspension of enforcement proceedings, foreclosure proceedings may be suspended until the hearing of the suspension petition or until a final non-appealable decision is issued by the Court of Appeal.

    The above described procedure and the delay to the enforcement procedure may take up to approximately two and a half years.

    Furthermore, suspension of the auction for up to six months may be sought by the Obligor, on the grounds that the Obligor will be able to satisfy the amount owed to the enforcing party or that, following the suspension period, a better bid offer would be achieved at auction.

    There is a period of mandatory suspension for all enforcement procedures between 1 and 31 August of each year, while an auction cannot be conducted between 1 August and 15 September of each year.

  3. What is the test for insolvency? Is there any obligation on directors or officers of the debtor to open insolvency procedures upon the debtor becoming distressed or insolvent? Are there any consequences for failure to do so?

    Insolvency may be declared when a debtor is unable to fulfill its overdue financial obligations in a general and permanent way (cessation of payments) or when the debtor foresees an imminent inability to fulfill its financial obligations when they become due and payable and requests to be declared bankrupt (threatened cessation of payments).

    Bankruptcy proceedings are initiated only through the issuance of a court decision upon application of the insolvent debtor, its creditor(s) or, for public interest purposes, of the public prosecutor. The debtor is obliged to apply for bankruptcy anytime before the cessation of payments but within thirty (30) days from its occurrence. To this effect, the directors and corporate administrators of the debtor have an obligation to take every individually possible action or measure for the purposes of the adoption and implementation of the necessary corporate resolutions in order to file for bankruptcy in a timely manner.

    In case the application for bankruptcy is not filed by a company in a timely manner, the members of the board of directors or the administrators are jointly liable for the decrease of the bankruptcy estate to be distributed to the creditors as a result of the delay. The same liability is attached to any party, such as a controlling shareholder, that instigated the members of the board of directors or the administrators to delay filing.

    Moreover if the bankruptcy of a company is caused by willful misconduct or gross negligence of the directors or administrators, they are jointly liable for compensation of the creditors. The same applies to any party who instigated the willful or negligent actions that caused the bankruptcy.

    In addition there are certain potential criminal liabilities of directors, administrators and other executives in case of bankruptcy, (i) if they have undertaken certain actions that lead to a misrepresentation of the true financial position of the company or presented fictitious creditors; (ii) if they undertake loss-making or risky transactions in a manner which is contrary to prudent financial management; (iii) if they purchase merchandise or securities through credit and then resell them at prices materially below their value in a manner which is contrary to prudent financial management. A separate criminal liability is provided for if the company, while in a status of cessation of payments or in a condition in which the normal satisfaction of its due obligations risks is to become impossible, discharges the obligations of a creditor or provides security to a creditor, knowing that this will be to the detriment of other creditors.

  4. What insolvency procedures are available in the jurisdiction? Does management continue to operate the business and / or is the debtor subject to supervision? What roles do the court and other stakeholders play? How long does the process usually take to complete?

    The Greek Insolvency Laws provide for the following insolvency proceedings:

    1. Stricto sensu bankruptcy - liquidation;
    2. Stricto sensu bankruptcy – restructuring plan (article 107 of the Greek Bankruptcy Code);
    3. the pre-bankruptcy scheme proceedings of articles 99 106f of the Greek Bankruptcy Code; and
    4. Special administration proceedings of articles 68 – 77 of the Special Administration Law.

    Upon initiation of the bankruptcy proceedings by the competent court, a bankruptcy trustee (syndikos) is appointed the exact date of cessation of payments with respect to the debtor (which may not be set more than two years prior to the date of declaration of the bankruptcy) is determined and the estate of the debtor is sealed. Upon the debtor’s request and at the court’s discretion, an injunction may be granted upon the filing of the bankruptcy petition, in order to protect the debtor from its creditors.

    In the interim period between application and proclamation of bankruptcy, the management of the entity remains with the board of directors or company’s administrators which though have to act for the protection of the bankruptcy estate to the benefit of the creditors.

    After the initiation of the bankruptcy proceedings the insolvent entity is exclusively administered by the bankruptcy trustee, who is obliged at a later stage to publicly invite the creditors to announce their claims in order for them to be verified by the trustee.

  5. How do creditors and other stakeholders rank on an insolvency of a debtor? Do any stakeholders enjoy particular priority (e.g. employees, pension liabilities)? Could the claims of any class of creditor be subordinated (e.g. equitable subordination)?

    After deducting judicial costs, the expenses for the administration of the insolvency estate, which include the temporary and final remuneration of the bankruptcy trustee and of any creditor group credits, in general, any sale proceeds will be distributed between creditors based on the type of privilege they enjoy.

    Namely the following priority of payments applies during bankruptcy proceedings:

    General privileges
    a. The claims from the financing of the debtor’s business of whatever nature, made in order to ensure the continuation of its activities and of its payments, its rescue and the maintaining or increase of its property based on the rehabilitation agreement or the reorganization plan. The claims of persons who, based on the rehabilitation agreement have contributed goods or services towards the purpose of continuing the activity of the business and the payments, also have the same privilege for the value of goods or the services they have contributed. Also, the same privilege enjoy the claims from financing of any nature, provision of goods and services to the debtor’s business, given for the purposes of the rehabilitation of restructuring plan and arising at the time period of the negotiations for the conclusion of rehabilitation agreement, which may be up to a maximum six months from the date of filing of the ratification application. Such privileges exist irrespective of the ratification or not of the rehabilitation agreement, provided that the purposes of the financing or of the provisions of goods or services and the relevant priority were expressly provided for in the rehabilitation agreement or in contracts concluded at that time. To be noted that such privileges are not granted to shareholders or partners for their contributions in cash or in kind in the context of a capital increase of the debtor (the New Money Claims).

    b. The claims of employees and claims for fees, expenses and compensation for lawyers remunerated with a fixed periodic payment, provided that these have ensued within the last two years prior to the declaration of insolvency. Employees’ claims for dismissal compensations services, claims of the State for VAT and withholding and imposed taxes with surcharges of any nature and accrued interest encumbering such and claims for social security contributions.

    c. Claims of farmers or agricultural co-ops from the sale of agricultural products, if these arose during the last year prior to the declaration of insolvency.

    d. Claims of the State and local government bodies for all causes, together with surcharges and accrued

    Special Privileges
    Also the GIC provides for special privileges for secured creditors and claims having a lien over a certain movable or immovable object or over a quantity of money are ranked in the following order:

    a. Claims for expenses incurred for maintaining the property in the last six months before the declaration of bankruptcy.

    b. Claims for capital with interest of the two (2) last years for which there is a pledge or a mortgage or a prenotice of mortgage, in case of real property.

    In case of the sale of the business as a whole (articles 135 et seq.), if there are special privileged creditors over individual items of the debtor's estate, these are ranked specifically for the amount of the part that corresponds to the transferred item over which a special lien exists, the value of which is taken into account for their ranking.

    General privileges and special privileges will be satisfied in case of concurrent claims as follows:

    The general privileges claims are satisfied up to one third of the sale proceeds that has to be distributed to creditors and the two thirds are given to satisfy the special privileges for asset maintenance and secured claims.

    The claim of the higher rank is preferred over the claim of a lower rank and if claims are of the same rank, they are satisfied pro rata.

    If, apart from the general and special privilege claims there are non-privileged claims, then, following the full satisfaction of the “New Money claims”, general privileges claims are satisfied up to sixty five percent (65%), special privileges claims up to twenty five percent (25%) and the non-privileged claims are satisfied up to ten percent (10%) of the amount of the insolvency sale proceeds that have to be distributed to creditors pro rata. If there are special privilege claims and non-privileged claims, then the first are satisfied up to ninety percent (90%) and the second up to ten percent (10%) of the amount of the insolvency sale proceeds, which has to be distributed to the creditors pari passu. If there are general privilege claims and non-privileged claims, then following the full satisfaction of the New Money Claims, the remaining general privilege claims are satisfied to a percentage up to seventy percent (70%) of the proceeds of the insolvency sale that has to be distributed to creditors, while the non-preferred creditors are satisfied by the remaining percentage pari passu.

    Moreover the following should be noted regarding the applicable creditors classification:
    In case the business is sold as a whole, if there are special privileged creditors (i.e. pledgees or mortgagees) over specific assets of the debtor's total assets, these are ranked specifically for the amount that corresponds to the value of the asset.

    If the proceeds from the sale of an immovable, are distributed before the proceeds from the sale of movables, or simultaneously, mortgage creditors, who have not been fully satisfied from the value of the immovable property, concur as to the remaining balance with the unsecured creditors, in any distribution with the latter, provided that the claims of privileged creditors have been verified.

    If before the distribution of the price of an immovable, cash distributions are made from the movable property or from a quantity of money, the general privileged or mortgage creditors whose claims have been verified, concur to these for the full amount of their credits. In this case, if the general privileged creditors or the mortgage creditors are ranked in the price of an immovable for the entirety of their claims and have received such amounts, the unsecured group is substituted in their place by the amounts they may have received from the movable property or a quantity of money.

    If the general privileged or mortgage creditors are ranked in the price of the immovable property for only a part of their claims, they are ranked for the remainder as unsecured with the other creditors. In case the general privileged or mortgage creditors have received more than their final share, the unsecured creditors are substituted in their place for the amount received in excess of their final share. Those of the general privileged creditors or mortgage creditors, who are not ranked beneficially in the price, are considered unsecured creditors.

  6. Can a debtor’s pre-insolvency transactions be challenged? If so, by whom, when and on what grounds? What is the effect of a successful challenge and how are the rights of third parties impacted?

    Transactions entered into by the debtor in the period between commencement of the cessation of payments, as this is defined by the competent court, and the declaration of bankruptcy (“suspect period”, which cannot exceed two (2) years) and that are deemed detrimental to the debtor’s creditors are either mandatorily revoked by the court or are revocable at the court’s discretion. An application for the revocation of the above transactions before the competent court is filed by the bankruptcy trustee. Exceptionally, a creditor may file such application if it requests the bankruptcy trustee to apply for a revocation and the latter fails to take any action within two (2) months from the creditor’s request.

    The following transactions which are entered into within the suspect period are deemed to be detrimental to the creditors of the insolvent entity and are mandatorily revoked by the court: (a) donations, gratuitous dispositions and all transactions done at an undervalue; (b) payments of obligations that were not due and payable; (c) payments of due and payable obligations that were not made in cash or in the agreed means of payment; and (d) provision of security in order to secure pre existing claims for which the debtor had not assumed an obligation to provide such security, or in order to secure new claims assumed by the debtor in replacement of pre existing obligations.

    Any contract or payment of due and payable obligations within the suspect period may be revoked at the court’s discretion provided that the third party knew that the debtor was in cessation of payments and that the payment was detrimental to the debtor’s creditors. Such knowledge is presumed for persons and entities which are affiliated with the debtor/legal entity in accordance with art. 32 of Greek law 4308/2014 (the law on consolidated accounts).
    In addition, acts of the insolvent debtor concluded during a five year period before the declaration of bankruptcy are revoked if the debtor acted with the intention to harm or to benefit certain of its creditors and its counterparties knew that the debtor was acting maliciously.

    Upon declaration of bankruptcy there is a moratorium (suspension) on enforcement of claims by creditors. In particular, it is prohibited to initiate or continue any enforcement procedures as well as to file any new lawsuits or continue any (pending) litigation against the insolvent debtor in connection with the insolvency estate.

    The above prohibition does not apply in case of creditors the claims of which have been secured by specific privilege or security in rem on specific assets of the insolvency estate. The above though does not apply in cases where such assets are functionally and directly connected with the debtor’s business activity, i.e. the suspension of enforcement shall apply in this case as well for a maximum period of 10 months from the declaration of bankruptcy.

  7. What restructuring and rescue procedures are available in the jurisdiction, what are the entry requirements and how is a restructuring plan approved and implemented? Does management continue to operate the business and/or is the debtor subject to supervision? What roles do the court and other stakeholders play?

    Bankruptcy - Restructuring plan
    The restructuring proceedings of article 107 of the GIC allow insolvent debtors to avoid bankruptcy or to distribute the estate on a certain manner, on the basis of a restructuring plan. The restructuring plan may provide for the continuation of the debtor’s business as a going concern, where the debtor may retain management of the business with the supervision of the bankruptcy trustee, based on the terms and conditions of the plan. A proposed restructuring plan may be submitted to the competent court by the debtor along with the application for declaration of bankruptcy or within three (3) months from the decision declaring bankruptcy, where such period may be extended by the Insolvency Court for an additional period not to exceed one (1) calendar month. A restructuring plan may also be submitted to the competent court by creditors representing 60% of claims, at least 40% of which must be of secured creditors, along with the application for declaration of bankruptcy.

    The proposed restructuring plan may provide for any restructuring measure, including, inter alia, haircut of claims, rescheduling of payments, capitalization of debts, the sale of any of the debtor’s business sector(s) as a going concern, simple and complex refinancing or asset sales, etc. The proposed restructuring plan should at least include the following information:

    1. accurate and complete information on the debtor’s financial status;
    2. comparison of the expected satisfaction of creditors’ claims on the basis of the restructuring plan against their satisfaction in the course of bankruptcy proceedings;
    3. measures implemented or proposed to be implemented (e.g. financing, corporate restructuring) in order to fulfill the terms of the restructuring plan; and
    4. description of the rights and obligations of each creditor and of the debtor pursuant to the restructuring plan.

    Following the acceptance of the proposed restructuring plan by creditors representing at least 60% of the total claims value, including 40% of the claims of secured creditors, the plan is submitted to the competent court for ratification. Upon ratification by the court the plan is binding upon all creditors of the debtor including any dissenting and non participating creditors. Thereafter, the bankruptcy proceedings are terminated and, unless otherwise provided in the restructuring plan, the debtor resumes administration of its business with a view to fulfilling the terms of the restructuring plan.

    Pre-Bankruptcy Scheme proceedings
    Articles 99 106(f) of the GIC establish a collective pre bankruptcy rehabilitation procedure that allows debtors who are in a status of cessation of payments or facing an imminent threat of cessation of payments to avoid bankruptcy and to remain operational on the basis of a rehabilitation plan (the rehabilitation plan). The objective of such scheme is the execution and ratification by the insolvency court of a “rehabilitation agreement” between both the debtor and its creditors or between the creditors with the aim that the debtor satisfies (even partly) its creditors and remains operational following ratification of the agreement. The hearing date for the ratification of the agreement is set within 2 months from the submission of the application for the ratification.

    The submission of the application may also be filed even if a petition for the declaration of bankruptcy has already been filed. In such case, the petition for the declaration of bankruptcy is examined by the court if the court rejects the ratification of the rehabilitation agreement.

    The agreement must be concluded prior to the opening of the scheme process (in the form of a so-called “pre-pack”). If the debtor is in a cessation of payments it submits together with the pre bankruptcy application, an application for the declaration of bankruptcy. The court has the discretion to approve either applications and on the basis of the evidence submitted regarding rescue possibility for the debtor.

    The rehabilitation agreement is ratified by a court decision and initiated following submission of an application to the competent court by (a) the insolvent debtor and provided that it has been concluded between the debtor and creditors representing 60% of claims, at least 40% of which must be of secured creditors, or (b) creditors representing 60% of claims, at least 40% of which must be of secured creditors, regarding the rehabilitation plan agreed between them and provided that the debtor is already in a status of cessation of payments . In order for the agreement to be ratified it has to be evidenced that the debtor’s business will probably become viable and that the “no-worse off” principle for the creditors is respected.

    Upon ratification, the rehabilitation plan is binding upon all creditors, including any dissenting and non participating creditors.

    From the submission of the application for the ratification of the rehabilitation agreement and until the issuance of a relevant court decision, any individual and collective enforcement actions against the debtor are automatically suspended for a maximum period of four (4) months. Such suspension is available only one time per debtor. Following the above mentioned 4month period, a moratorium may be imposed following an application to that effect by anyone having a legal interest. For great business or social reasons, such moratorium may also be extended in favor of guarantors. Additionally, a moratorium may also be imposed even before the submission of the application for the ratification of the rehabilitation agreement, following an application by the debtor or a creditor provided that (a) the applicant files a written declaration of creditors representing at least 20% of claims and (b) there is an urgent situation or an imminent danger. Such moratorium is valid until the application for the ratification of the rehabilitation agreement and up to a maximum period of four (4) months.

    The scheme proceedings also permit an agreement for the en bloc sale of the assets of the debtor’s business or part thereof, with or without the obligations or part thereof.

    Special administration proceedings (articles 68-77 of the Special Administration Law)
    Any natural or legal person that is eligible to bankruptcy, has its registered seat in Greece and is in a cessation of payments, may be put under special administration following a petition filed by its creditors representing at least 40% of the total amount of claims, among which at least one creditor is a financing institution. The petition is filed before the Single Member Court of the debtor’s seat and the hearing date is set within two (2) months from the filing of the petition. The decision of the court must be issued within one (1) month after the hearing. The submission of the petition to the competent court suspends any pending petitions, with regard to the same debtor, for the opening of a rehabilitation process or for the declaration of the debtor into bankruptcy.

    The acceptance of the petition results in the appointment of a “special administrator” for a period of twelve (12) months and all individual enforcement actions against the same debtor, including the administrative enforcement measures that are available for State authorities, are automatically suspended for as long as the special administration procedure is open. After the filing of the application and before the issuance of the court’s decision anyone having legitimate interest may file an application for interim measures and the court may rule the imposition of any interim measures deemed appropriate to prevent any harmful for the creditors deterioration of the insolvent debtor’s property, including the suspension of individual enforcement actions.

    The special administrator proceeds to a public tender (on the basis of the ‘highest offer price’) with regard to the sale of the business assets (either as a whole or by sector or any parts thereof), which will then be ratified by the court assuming all legal requirements are met.

    The creditors announce their claims following a relevant invitation by the special administrator and the sale consideration paid by the purchaser(s) is distributed to such announced creditors in an identical way as provided for in the special liquidation procedure. The special administrator decides on whether the above liquidation amount suffices for the satisfaction of all creditors of the debtor. If this is not the case, the special administrator is obliged to file a petition with the insolvency court for the declaration of bankruptcy of the debtor.

    The special administration procedure may expire, if the disposal of minimum 90% of the debtor’s assets (in terms of accounting value) has not been concluded within twelve (12) months from the publication of the court’s decision to open such procedure.

  8. Can a debtor in restructuring proceedings obtain new financing and are any special priorities afforded to such financing (if available)?

    The proposed rehabilitation or restructuring plan may provide for any restructuring measure including new financing which may be agreed to rank super senior against the restructured debts. The GIC recognizes the first-class ranking privilege of claims for “new money” injected or goods or services provided to ensure the continuation of the business by virtue of a formal restructuring and irrespectively of the successful ratification of implementation of the rehabilitation or the reorganization plan.

  9. How are existing contracts treated in restructuring and insolvency processes? Are the parties obliged to continue to perform their obligations? Will termination, retention of title and set-off provisions in these contracts remain enforceable? Is there any an ability for either party to disclaim the contract?

    Generally bilateral contracts at the time of declaration of bankruptcy, maintain their force unless otherwise provided in the terms of the contract.

    The bankruptcy trustee, with the judge’s permission, has the right to continue performance on all or certain current contracts and to demand performance by the counterparty. Failure to perform by the bankruptcy trustee will give the right to the counter contracting to terminate the contract and to claim damages for non performance, being satisfied as an insolvency creditor.

    Contracts of a continued nature will remain in force but financing contracts can be terminated or amended in accordance with their terms.

    The declaration of bankruptcy is a due cause for termination in case of contracts which by nature have a “personal” connection with the debtor are terminated.

    Subject to the counterparty’s acceptance, or by order of the court, the bankruptcy trustee is entitled to transfer a contract to a third party if such transfer is in the interest of the creditors and the debtor’s counter contracting party consents.

    Employment contracts are not terminated automatically but the bankruptcy can be upheld as a valid reason for termination.

    The declaration of bankruptcy does not prejudice the right of a creditor to propose set off of a counterclaim against the respective claim of the debtor, as long as the conditions for set off under the GCC were met before the declaration of bankruptcy. The GIC provides that netting of claims arising in connection with over-the-counter derivatives and the netting of claims arising from transfer orders on payment settlement and financial instrument settlement systems, as well as those based on closed-out netting clauses, in the context of financial collateral agreements, is made according to special provisions of law. Namely:

    1. According to article 16 of law 3156/2003 (the Bond Loan Law) set-off is valid and therefore, the close-out netting provisions are enforceable, even after insolvency, provided the following three conditions are met (i) the claims being set-off derive from transactions between parties, one at least of which is an credit or financial institution , or the State; (ii) set-off is governed by an agreement; and (iii) the agreement has a certain date (i.e. a date, which is established in accordance with one of the formal procedures recognized under Greek law to establish a “date certain”), which is prior to the declaration of insolvency or the commencement of the collective measure or procedure akin to insolvency.
    2. The Financial Collateral Law provides that within its scope close out netting provisions have to be recognized and given effect in the case of insolvency. As the Collateral Directive contains no condition corresponding to the date certification, after the issuance of the aforementioned law, close out netting provisions falling within its scope are recognized without the requirement that the relevant agreements have a certain date.
  10. What conditions apply to the sale of assets/the entire business in a restructuring or insolvency process? Does the purchaser acquire the assets “free and clear” of claims and liabilities? Can security be released without creditor consent? Is credit bidding permitted?

    Sale of assets in a restructuring process may be provided in the reorganization or restructuring plan, although once a reorganization plan is ratified the debtor is free to sell assets within the frame of regular business and unless otherwise provided in the agreement with the creditors.

    In bankruptcy, after the verification of claims and the organization of creditors in a group, the bankruptcy trustee proceeds to the liquidation of the debtor's assets and distributes its proceeds to creditors either by selling the business as whole or by selling its individual components, separately or in groups. Assets sold through the public tender are transferred free and clear to the purchasers.

    If the sale of business as a whole is unlikely to be successful, the bankruptcy trustee will require the Court to issue a decision for the sale of assets as a whole, or in classes, or even individually separately for each asset. The sale is made by the bankruptcy trustee before the court with open bids by the interested parties and is subject to the court’s approval. The court may object the sale, if it considers that the price offered by the bidder is not beneficial and that the repetition of the sale process is expected to achieve a higher price.

    If it is decided, that the debtor’s business should be sold as a whole, or in its separate operating parts (branches) and the value of the business is assessed by the court to an amount less than one million (1,000,000) euro, the sale of the business, exceptionally, will be conducted in the manner and with the formalities that the insolvency court will decide. The bankruptcy trustee will request the court to permit the hiring of a certified appraiser to assess the value of the business as a whole and of the various parts, taking into account the possibility to continue the operation post sale. If real estate property is part of the assets its commercial value is taken into consideration for the valuation.

    The rule is that a business or parts or assets are sold though competitive bids in a public tender following the valuation by the independent appraiser and a relevant decision by the Court which sets the terms, price and publication requirements of the tender. The participants file sealed offers and the selection is done on the basis of the highest bid. In case of business sale all administrative licenses of any nature connected to the operation of the business and of the parts are also transferred ipso jure to the highest bidder. Payment may be agreed, in accordance with terms of the tender, to be in full upon transfer of the business or assets or in installments.

    If no bids are submitted duly or the ones submitted are not deemed satisfactory, the public auction is repeated one or more times depending on the nature of the assets auctioned and the minimum bidding price can be amended in subsequent auctions. If the second public auction of a business as a whole fails, then assets are sold individually again in open public tenders.

    Secured creditors are allowed to initiate proceedings on the secured real estate in parallel to the bankruptcy liquidation process. Once the creditors are organized in the group, if secured creditors have not initiated any enforcement or are unjustifiably delaying the process, the sale of the property and the ranking of creditors are conducted only by the bankruptcy trustee.

  11. What duties and liabilities should directors and officers be mindful of when managing a distressed debtor? What are the consequences of breach of duty?

    The general rule is that the Directors and officers are liable towards the company for every damage or loss of profit suffered by the company as a result of their acts or omissions which do not comply with their duties in accordance with the articles of association of the company, the law and, most importantly, the best interests of the company. The duty of loyalty is an obligation of the directors and officers to exercise their duties in such a manner that he will promote the corporate interest and the accomplishment of the objective of the company. In addition to the above obligation, the directors and officers have the negative duty to refrain from any act that may harm the interests of the company and not to pursue own interests that conflict with the interests of the company. In this regard, we also note that the directors and officers have an obligation to timely reveal to the Board of Directors their personal interests that may arise from transactions of the company which are associated with their duties. In case of breach of duty, directors and officers are liable for any direct losses suffered by the company.

    As regards companies facing financial distress please refer to question 3 above regarding the obligation of the directors and officers to file timely for bankruptcy in case of inability or threatened inability of the company to meet their obligations.

  12. Is there any scope for other parties (e.g. director, partner, parent entity, lender) to incur liability for the debts of an insolvent debtor?

    The liability of non-timely filing of bankruptcy lies primarily with the directors of the company (i.e. the members of the board and the officers). Greek bankruptcy law provides for third parties to be held liable only insofar as those persons were in a position to significantly influence and impose on the directors of the company the decision not to file, or to delay filing for bankruptcy . Such liability exists only if the company was subsequently declared bankrupt.

    The concept of “abusive support” is still not recognised by Greek law, although one can argue that financing a company facing financial difficulties may create a liability for the financing party if such financing is granted to a company that ought to have already filed for bankruptcy (i.e. it is in a status of cessation of payments) and was granted with the intention to delay such filing, reducing the assets of the company by increasing its liabilities to the detriment of the then existing creditors or creating a false impression of solvency of the company to third parties.

    Although there is no case law, the legal theory is clear that the person that supports financially a bankrupt company can be found be liable if (a) it had actual knowledge that the company was in a bankruptcy situation, (b) financing was provided with the intention to instigate a non-timely submission of bankruptcy to the detriment of the creditors and/or create a false impression of solvency to third parties.

    Not granting financing to a company facing financial difficulties might theoretically trigger a liability in the case (a) where the party denying such financing acts abusively or against moral ethics and (b) such abusive or immoral behaviour resulted into the bankruptcy of the company to the detriment of the company and its creditors.

    Such claim can be brought on the basis of the tort provisions of the Greek Civil Code either by the company (in which case it will be based on an abusive behaviour) or by any third party (in which case it will be based on an immoral behaviour and requires that the third party proves that it has directly suffered damages).

  13. Do restructuring or insolvency proceedings have the effect of releasing directors and other stakeholders from liability for previous actions and decisions?

    The GIC provides for the full discharge from its debts of a debtor who has not acted in bad faith and has been declared excusable (syggnostos) by the Court. The discharge may be requested by the debtor after the lapse of a period of two (2) years as of the declaration of bankruptcy or upon the completion of bankruptcy proceedings (whichever date comes first). The debtor may not be discharged from debts created due to an unlawful act committed due to intention or gross negligence. In case bankruptcy is completed through the ratification of a reorganization plan, the debtor is automatically discharged, except if the plan provides otherwise. The above discharge of the debtor may be effected only once, unless the new discharge is due to a reorganization plan.

    Generally a reorganization plan may provide for shareholders and guarantor to be released for their liabilities or to limit their liability to the actual size of debt post restructuring in case of a debt haircut.

  14. Will a local court recognise concurrent foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition?

    Greek courts recognize automatically insolvency proceedings opened in other EU member states pursuant to Regulation 1346/2000 and in relation to insolvency proceedings opened from 26 June 2017 onward, pursuant to Regulation 2015/848, which replaces Regulation 1346/2000. The most important innovation of Regulation 2015/848 is that it includes in its scope certain preventive restructuring proceedings in addition to traditional bankruptcy proceedings. The only conditions for the recognition of restructuring or insolvency proceedings pursuant to the above Regulations is that the relevant proceeding must fall within the scope of the pertinent Regulation and that such proceeding must have become effective in the State of the opening of proceeding.

    The reorganization and winding up of insurance undertakings, credit institutions and certain investment firms are excluded from the scope of the Regulations and are subject to directives 2001/17 and 2001/24 respectively.

    Insolvency proceedings opened in states that are not members of the EU are governed by law 3858/2010, which is based on the UNCITRAL Model Law on cross-border insolvency. The recognition takes place on the basis of an application of the foreign representative to the competent Greek court. A condition for the recognition is that the debtor must have the center of its main interests or an establishment in the state of the opening of the proceeding.

    Foreign restructuring or insolvency proceedings opened in states that are not members of the EU may also be recognized pursuant to article 780 of the Greek Code of Civil Procedure that provides for the automatic recognition of foreign decisions of so called "voluntary" jurisdiction, which includes insolvency proceedings.

  15. Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction?

    Debtors having the center of their main interests in other EU member states can enter into territorial insolvency proceedings in Greece pursuant to Regulation 1346/2000 or, as the case may be, Regulation 2015/848, if (among other conditions) they have an establishment in Greece. To the contrary, directives 2001/17 and 2001/24 do not allow secondary proceedings in relation to insurance undertakings, credit institutions and certain investment firms having their registered seat in other EU member states.

    Debtors having the center of their main interests outside the EU may become subject to insolvency proceedings in Greece, if they have assets in Greece.

  16. How are groups of companies treated on the restructuring or insolvency of one of more members of that group? Is there scope for cooperation between office holders?

    The notion of “group” of companies is not recognized under Greek law. Therefore bankruptcy of one entity within a group will not trigger insolvency in other companies of the same group.

    The restructuring plan or the rehabilitation agreement can include provisions regarding treatment of participations or provisions regarding simultaneously restructuring of affiliated companies provided that such companies are included as contracting parties to the agreement.

  17. Is it a debtor or creditor friendly jurisdiction?

    Following the recent amendments in the bankruptcy laws, Greece has adopted a more creditor friendly and creditors’ supporting insolvency rules, attempting to solve impasses created by no-cooperative debtors or shareholders in a rehabilitation pre-bankruptcy situation and limiting cases where debtors where making abusive use of protective measures granted to them under the previous regime to disallow or delay creditors rights of enforcement.

    According to the new rules, the only insolvency proceedings that a distressed debtor can initiate without the support and consent of creditors is filing for bankruptcy. Thus, the new provisions of bankruptcy law are eliminating the chances where a distressed debtor files for protection by creditors without their support.

    Moreover the fact that now creditors representing 60% of claims, at least 40% of which must be of secured creditors, can file a pre-bankruptcy rehabilitation plan agreed between them (without the consent of the debtor) provided that the debtor is already in a status of cessation of payments, proves that under the new rules creditors are considered as “stakeholders” in a distressed debtor and allows to by-pass non-cooperating debtors, to avoid bankruptcy and to preserve the business.

    To be noted that following the recent amendments, the issue of non-cooperative shareholders in a rehabilitation plan has been regulated given that the Court considers probable that in case of liquidation the shareholders will not be reimbursed by the proceeds of liquidation, it can appoint a special representative to exercise voting rights of those shareholders of the debtor, who do not co-operate for adopting decisions required for the fulfillment of the terms of the rehabilitation agreement.

  18. Do sociopolitical factors give additional influence to certain stakeholders in restructurings or insolvencies in the jurisdiction (e.g. pressure around employees or pensions)? What role does the state play in relation to a distressed business (e.g. availability of state support)?

    Greece enforcement and insolvency systems have been traditionally over-protective to debtors, employees and state entities. Moreover, there was always a clear disconnect between the rules and their practical operation, due to complexities which resulted to high cost and inefficiencies stapled with the limited capacity and poor organization of the judicial system.

    The enforcement regime, which allowed the debtor to stay the proceedings in multiple instances, undermined the timely and efficient enforcement resulting to lengthy thus costly and low recovery process.

    The Greek legal system has been less protective to secured creditors, than other EU jurisdictions, as a result of the excessive grandfathering of public interest, of employees rights and debtor defenses.

    In addition, as Greek banks were recapitalized using public funds, their management and officers have become reluctant and exhaustively bureaucratic in implementing heavy but meaningful restructurings and/or debt downsizings, as they fear to face criminal sanctions for misusing public funds.

    As regards state direct support, it has to be noted that given that Greece is EU member state and direct or direct support in a distressed business is largely disallowed due to the state aid rules. Any such support may be exceptionally allowed provided that the scheme of support is first cleared with the European Commission. On the other hand, claims of the State and public entities can be subject to a restructuring as part of the rescue plan of a business.

    Unfortunately, although the public (most importantly tax and social security) authorities have the capacity to participate and accept settlement of debts in a restructuring process, they are unwilling to engage in meaningful debt restructuring, due to criminal liability for writing-down of public debts.

  19. What are the greatest barriers to efficient and effective restructurings and insolvencies in the jurisdiction? Are there any proposals for reform to counter any such barriers?

    With the 2015 and 2016 reforms of the GCC and the GIC, Greece has opted to modernize the framework of both enforcement and insolvency rules, battle the inefficiencies of the old systems and allow Greek enterprises (in their vast majority SMSs) to restructure their long lasting debts and continue to operate to the benefit of the national economy

    Time, cost and lack of experience are still the main barriers to an effective insolvency and challenges that the new laws are to battle.

    Although the recent amendments of the enforcement and bankruptcy proceedings have aimed to condense relevant deadlines for actions or decisions of the Courts it cannot be certain on whether the deadlines prescribed by law will be respected in practice given the overload of the Greek courts’ dockets. The initiative which is currently under examination and consultation of a new law allowing out-of court settlement and rehabilitation plans, limiting the involvement of the courts in those proceedings might significantly reduce the time element of those procedures and reduce the cost of multiple hearings.

    In addition, the modernization of the public administration coupled a reformation of the penal law as regards criminal liability of public servants and officers will add value to above reforms.