Source: https://iclg.com/practice-areas/corporate-recovery-and-insolvency-laws-and-regulations/greece
Timestamp: 2019-04-20 20:46:47+00:00

Document:
The ICLG to: Corporate Recovery & Insolvency Laws and Regulations covers common issues in corporate recovery and insolvency – including issues that arise when a company is in financial difficulties, restructuring options, insolvency procedures, tax, employees, cross-border issues, groups and reform – in 31 jurisdictions.
1.1 Where would you place your jurisdiction on the spectrum of debtor to creditor-friendly jurisdictions?
As a general principle, winding up proceedings (bankruptcy) are less creditor-friendly than pre-bankruptcy rehabilitation and reorganisation proceedings, which give leeway to creditors to apply for their initiation or to contribute to negotiations with the debtor, while being subject to stricter completion deadlines as opposed to winding up. Also, pre-bankruptcy rehabilitation and reorganisation proceedings, special administration, and recently, out-of-court workout contribute to the maximisation of going concern value of the business of debtors and are subject to the “no worse off principle”, in application of which creditors may not be found in a worse financial position in comparison with the level of their satisfaction in the context of bankruptcy.
1.2 Does the legislative framework in your jurisdiction allow for informal work-outs, as well as formal restructuring and insolvency proceedings, and to what extent are each of these used in practice?
In principle, the legislative framework in Greece does not allow for informal work-outs; however, there are two specific insolvency-related processes available to debtors, which, although not informal, can inherently boast certain scintilla of informality.
The new extrajudicial debt settlement mechanism called “Out of the Court Workout” (“OCW”) introduced by virtue of law 4469/2017. OCW allows for the extrajudicial settlement of amounts due by a debtor to any creditor by submitting an online application before the Special Secretariat of Private Debt Management until 31.12.2018 via a special electronic platform held on the latter’s official website. The proceeding may be also initiated by the creditors (Greek state, Social Security Funds, Public Law Legal Entities or financial institutions) by inviting in writing the debtor to be submitted to the OCW. Law 4469/2017 provides for the possibility (and not the obligation) of the Settlement Agreement’s judicial ratification (by means of a court ruling). The judicial ratification is required in order for the Settlement Agreement to legally bind the non-contracting creditors. The court decision ratifying the Settlement Agreement constitutes an ex lege enforcement title.
The pre-bankruptcy Rehabilitation process provided for by art. 99-106f GBC. The core of this process is the – private – rehabilitation agreement which is contracted by and between the debtor and a qualifying majority of its creditors, i.e. a majority of 60% of total claims, including at least 40% of the claims secured by securities in rem or a pre-notation of mortgage or holding a special lien, providing for the restructuring of the debtor’s debts with the aim that the debtor remains operational after the ratification. However, this process cannot be deemed informal since it involves the ratification by the competent court of the relevant rehabilitation agreement.
2.1 What duties and potential liabilities should the directors/managers have regard to when managing a company in financial difficulties? Is there a specific point at which a company must enter a restructuring or insolvency process?
Undue delay of bankruptcy (GBC art. 98 par. 1): According to the GBC, the management (directors, administrators) of the debtor company is obliged to file a bankruptcy application within 30 days from the point of time when it ceased its payments. Unreasonable (wilful) delayed filing of a bankruptcy application may cause further damage to the company, the creditors and the market as a whole, as it allows the continuation of a business which is not capable to pay its creditors while its debts are increasing. In that case, the directors of that company will be found jointly and severally liable towards the company’s creditors for not filing the bankruptcy application within the aforementioned timeframe either because they knew or they wilfully ignored the cessation of payments. Such liability applies even if the delay is caused due to efforts to place the company under a restructuring programme (unless the restructuring efforts flourish and there is no damage). However, any management’s efforts made in good faith aiming to avoid the insolvency (i.e. due to the fact that the management subjectively considered the restructuring of the company possible) will be taken into consideration for liability mitigation purposes. To be noted that due to the difficulty to prove the actual facts, in practice, it has been really difficult to substantiate the directors’ liability on above grounds.
Causing the cessation of payments (GBC art. 98 par. 2):In case the cessation of payments is attributed to the management’s wilful misconduct or gross negligence, the directors will be held liable jointly and severally towards the company’s creditors for the damage caused. In substance, the directors will be liable for mismanagement, false business decision-making, frivolous risk undertaking, competitive actions to the detriment of the company, and in general any action or omission harming the company’s creditors. To be noted that when examining the extent of the directors’ wilfulness, the “business judgment rule” (art. 22a of Greek law 2190/1920) shall not apply. The liability for causing the cessation of payments shall be distinguished from the case in which the company was already in financial difficulties and the management just aggravated the situation. In the latter case, the general rules of the Greek corporate law regarding the administrative liability will apply.
Criminal liability (art. 171 GBC): In case the directors cause the cessation of payments, even though the company objectively would not have reached, without their acts and/or omissions, a general, permanent, and not transitory, inability to pay its commercial debts when they fall due, then the directors of the company might be found criminally liable and be sentenced to the payment criminal fines or imprisonment of a minimum duration of two (2) years (art. 171 GBC). The GBC provides for certain illegal practices which may be used by the directors and lead to a false cessation of payments such as the following: (a) concealing or compounding assets belonging to the bankruptcy estate of the company contrary to the rules of wise financial administration; (b) conclusion of risky, detrimental or speculatory agreements contrary to the rules of wise financial administration or spending extremely high amounts on betting; (c) sale of goods at extremely low prices contrary to the rules of wise financial administration; (d) false presentation of the company as a debtor of third parties or false recognition of inexistent third party rights; (e) compounding, hiding or destroying of the fiscal books and documents of the company in order to prevent the examination of the financial status of the company; (f) failing to draft the annual financial statements of the company; or (g) decreasing the company’s estate by any means. Such practices are also illegal as such, i.e. irrespectively of the fact whether they lead or not to a cessation of payments status, when they are adopted during the suspect period or within six (6) months prior to the declaration of bankruptcy.
Directors may also be held personally criminally liable (facing up to two years of imprisonment) for favourable treatment of creditors while the company face a situation of cessation of payments or of a threatened inability to regularly meet outstanding monetary obligations, satisfy creditors’ claims, provide security or knowingly favor a creditor against other creditors and in case of receiving in advance payments exceeding those provided for in the company’s articles of association.
2.2 Which other stakeholders may influence the company’s situation? Are there any restrictions on the action that they can take against the company? For example, are there any special rules or regimes which apply to particular types of unsecured creditor (such as landlords, employees or creditors with retention of title arrangements) applicable to the laws of your jurisdiction?
The shareholders of a company are not deemed creditors; therefore, they are not able to influence a company’s situation, nor can they proceed with a relevant action against the company. In general, any action taken against the company is associated with the enforcement measures and therefore there is a distinction among secured and unsecured creditors. Creditors secured in rem are able to initiate enforcement proceedings against the debtor, whereas, all enforcement proceedings against the debtor are suspended for unsecured creditors as of the time of such declaration. However, the law grants a general ranking privilege to employees (art. 154 par. 1 (b)), while there is a particular regime regarding: a) the right of third parties to retrieve their objects that are in the debtor’s possession (known as “Separation Right”); b) the right of third parties to seek their goods which were delivered to the debtor in order to be resold (known as “Bankruptcy Claim”); and c) the preservation of the bilateral and employment agreements, retention of title agreements and set-off arrangements (art. 28 GBC et seq.) (please refer to question 4.5 below).
2.3 In what circumstances are transactions entered into by a company in financial difficulties at risk of challenge? What remedies are available?
Art. 41 GBC provides that certain transactions which were made within the timeframe of the cessation of payments of the debtor and the declaration of insolvency and can be detrimental for the creditors’ group must be revoked. The law also provides for certain transactions which may be revoked.
the provision of a security in rem, including registration of a pre-notation of mortgage or provision of other securities of contractual nature for pre-existing obligations, for which the debtor has not undertaken a relevant obligation or in order to secure new obligations undertaken by the debtor in replacement of formerly existing obligations.
Under the provisions of Art. 43 GBC, every payment by the debtor with respect to outstanding debts that was made after the cessation of payments and before the declaration of liquidation bankruptcy by the competent court (i.e. liquidation) may be revoked, if the counter party was aware at that time that the debtor was in a cessation of payments status and such act was detrimental for the other creditors.
Furthermore, Art. 44 GBC provides that any transaction of the debtor that has been effected intentionally (by the debtor) to the detriment of its creditors during the last five (5) years prior to the declaration of insolvency (i.e. liquidation/receivership) by the competent court, must be recalled and reversed, to the extent that such third parties were aware of the fraudulent intent of the debtor.
3.1 Is it possible to implement an informal work-out in your jurisdiction?
Considering that an “informal work-out” has the notion of a process not taking place before the court, reference should be made to the two specific insolvency-related processes described above under question 1.2. However, in both cases, in order for the agreement entered into (as the case may be) to be legally binding erga omnes and to have any enforcement power, this should be ratified by a court decision.
3.2 What formal rescue procedures are available in your jurisdiction to restructure the liabilities of distressed companies? Are debt-for-equity swaps and pre-packaged sales possible? To what extent can creditors and/or shareholders block such procedures or threaten action (including enforcement of security) to seek an advantage? Do your procedures allow you to cram-down dissenting stakeholders?
In general, the Greek bankruptcy legal framework provides for a number of rescue proceedings aiming at the satisfaction of the business’s creditors and the restructuring of the liabilities of distressed companies. Below is a brief summary of the pre-bankruptcy rescue procedures available under Greek law.
A. The Rehabilitation Proceeding (art. 99 GBC et seq.):The core rescue (pre-bankruptcy) procedure provided by the GBC is the rehabilitation proceeding (in Greek: “προ-πτωχευτικήδιαδικασίαεξυγίανσης”) (the “Rehabilitation Proceeding”) the main purposes of which are: a) for a company debtor to secure the viability of its operations while avoiding the implications and constraints of statutory bankruptcy (including but not limited to the alienation of the company debtor from the management of its property and the latter’s submission to the powers of the bankruptcy administrator); and b) for creditors to avoid the absolute freezing of their claims (subject to the ipso facto suspension effects of rehabilitation and the potential order of provisional measures by the bankruptcy court, while achieving an “à la carte” satisfaction of those claims, other than according to the ranking and the timeframe provided by the GBC for statutory bankruptcy. In the context of the rehabilitation proceeding, the company debtor concludes an “early” agreement with its creditors (the “Rehabilitation Agreement”) in order to rescue and restructure its operations at the pre-bankruptcy (insolvency) stage; the pattern, timing and conditions of satisfaction of creditors are regulated by the – freely negotiated – “pre-packaged” Rehabilitation Agreement that becomes valid and enforceable upon its ratification by the bankruptcy court.
the divestiture of the company’s assets of the company’s business en bloc or of parts thereof, etc.
The Rehabilitation Agreement may also include inter-creditors agreements regulating the sequence and priority of satisfaction of the claims of each of the creditors or of each creditor’s class, while the transfer to the debtor’s business in whole or in part as a restructuring tool can be also agreed upon in the Rehabilitation Agreement (Art. 106d GBC). In particular, such transfer of business can be effected in two ways: a) either by means of the Rehabilitation Agreement in which the acquiring party shall by a signatory as well; or b) by a separate (subsequent) agreement, concluded in execution of the Rehabilitation Agreement. In addition, the GBC provides that, while the assets of the company debtor can be transferred as a whole (unless otherwise agreed), the liabilities are not transferred, unless otherwise agreed. Non-transferred debt is repaid by the purchase price of the business transfer or is written off or is capitalised (Art. 106d para. 1 GBC). The debtor’s business can be transferred to: a) any third party; or b) by way of a contribution in rem to a Greek Société Anonyme especially established by the creditors or to any other (existent or newly established) company.
B. The Special Administration Process (Greek law 4307/2014): An attempt-to-rescue pre-bankruptcy procedure provided by Greek law 4307/2014 is the special administration process (the “Special Administration Process”), which is more of a liquidation nature than of a restructuring one. In particular, no restructuring amendments are provided therein, nor any debt arrangements or relevant. Instead, it aims at maintaining and divestiture of the business, if possible, as a whole. It is a fast track procedure pursuant to which shall either succeed within a timeframe of one year (a success is considered to be the divestiture of 90% of the assets) or fail in which case the business is driven to bankruptcy.
C. The Out-of-Court Work Out Mechanism (“OCW”) (Greek law 4469/2017): OCW allows the extrajudicial settlement of amounts due by a debtor to any creditor by submitting an online application before the Special Secretariat of Private Debt Management until 31.12.2018 via a special electronic platform held on the latter’s official website. OCW aims at the conclusion of a debt settlement agreement through the involvement of a coordinator who is in charge of notifying all creditors of the debtor referred to in the application. Creditors representing 50% of all claims should participate in order for the settlement to proceed.
restrictions regarding the write-off and/or settlement of the claims of the Greek State and the social security funds; for the calculation of such amounts and considerations, the following are deducted from the creditors’ claims: (i) the aggregate amounts of interest due for late payment; (ii) 95% of the claims of the Greek State stemming from fines imposed by the tax administration; and (iii) 85% of the claims of the Greek State and the social security funds stemming from increases and interests for late payments.
The relevant legislative framework provides for the option (and not the obligation) of the debt restructuring agreement’s judicial ratification by means of a court ruling. The judicial ratification is required in order for the settlement agreement to legally bind the non-contracting creditors. The court decision ratifying the Settlement Agreement constitutes an ex lege enforcement title.
In view of the above and the brief outline of the available distress rescue tools, the current legislative framework provides for a wide range of restructuring measures mostly freely negotiable among the involving parties.
Due to the fact that a company’s restructuring measure usually requires a shareholders’ consent or approval, in the context of the Rehabilitation Proceeding, there is a measure explicitly provided in the GBC in case shareholders fail to cooperate by providing their required consent to the restructuring measure or obstruct the relevant measure (the “Hold-Out”). In case one or more debtor’s shareholders declare that they will not participate in the General Shareholders’ Meeting or that they will countervote the relevant item of the agenda, and they actually do so, the court, if deems such approach abusive, may appoint a special representative empowered to exercise the standing and voting rights of the debtor’s shareholders who do not cooperate in making the required decisions for the implementation of the Rehabilitation Agreement, subject to a prior application by the debtor or a creditor.
Nevertheless, once a Rehabilitation Agreement or an OWC debt settlement agreement has been ratified by the court, it binds all creditors, even those who have dissented in the proceeding or did not participate in (the “Cram-down effect”); however, their claims are regulated therein, which means also that provisional (suspension) measures provided under the rehabilitation agreement are binding on non-consenting creditors, but only for a three-month period as of the ratification.
3.3 What are the criteria for entry into each restructuring procedure?
A. The Rehabilitation Proceeding:a debtor company is eligible to file a ratification application, if it can establish a current or future (threatened) inability to meet its non-contingent and outstanding monetary debts. Such inability must be of a general nature and relate to all or the vast majority of the company’s outstanding debt. The inability should nevertheless not be necessarily durable (i.e. nonreversible), because, should this be the case, it would amount to a “cessation of payments” justifying the opening of a bankruptcy proceeding (rather than a pre-bankruptcy rehabilitation proceeding). Alternatively, the rehabilitation proceeding can also be initiated when actual inability of the debtor to meet its obligations, as they fall due, is yet not present but there is a likelihood of insolvency of the debtor and the bankruptcy court considers that its insolvency could be avoided through the recovery proceeding. Nevertheless, any contracting creditor may file as well the ratification application with the court, in case there is an agreement between the company debtor and the creditors. Otherwise, in case of an agreement only among creditors, the ratification application may be filed only by any of the creditors. To be filed by creditors, the Rehabilitation Agreement must relate to a debtor company that is already in cessation of payments (i.e. neither in a status of threatened inability or of likelihood of insolvency, as above).
B. The Special Administration Process:The going concern businesses to which such mechanism refers to must be domiciled in Greece, pursue a commercial scope and must be unable to fulfil their overdue financial obligations in a general and permanent manner. Corporations (and capital companies in general) can also be placed under special administration, if the conditions for their placement under liquidation or under corporate law are met for two consecutive fiscal years (i.e. when either the corporation does not have the minimum capital provided for by the law, or the shareholders’ equity is less than 1/10 of the nominal share capital and the general meeting of shareholders does not take any measures to cure the shortfall). The special administration process is initiated by an application filed by lender(s) representing at least 40% of the debtor’s aggregate obligations, among which at least one is a financial institution, a financial leasing company or a factoring company.
C. The OWC Mechanism: Individuals who may be declared bankrupt according to the Greek Bankruptcy Code, i.e. merchants – natural or legal persons – and associations of persons with legal personality, which pursue economic purpose; and legal entities which earn income from business activity pursuant to the Greek Tax Income Code and have a tax residence in Greece, are considered eligible debtors and can submit an application until 31.12.2018 in order to be placed under the beneficial provisions of the relevant law, provided that any of the following main conditions are met: (a) as of 31.12.2018: (i) the debtor had outstanding debts towards financial institutions arising from loans or credits in arrears for at least ninety (90) days; (ii) the debtor had debts settled after 01.07.2016; (iii) the debtor had outstanding debts towards tax authorities or social security funds or other public law entities; (iv) the debtor had issued checks that have been confirmed as bounced; or (v) payment orders or court judgments for outstanding debts had been issued against the debtor; (b) the total debts to be settled exceed €20,000; and (c) for debtors keeping double-entry accounting books, the debtor must have positive EBITDA or positive equity at least in one of the three financial years preceding the submission of the application and for debtors keeping single-entry accounting books, the debtor must have positive net EBITDA in at least one of the three years preceding the submission of the application.
3.4 Who manages each process? Is there any court involvement?
In general, the Greek court is involved in all restructuring procedures. While in the context of the Rehabilitation Proceeding and the OWC debt settlement agreement the court’s involvement, inter alia, lies in the ratification of the relevant agreements rendering them binding erga omnes, in the special administration process the court intervenes in two stages in order: a) to accept the respective application and appoint the special administrator; and b) to approve the special administrator’s report on the highest bidder for the sale of the debtor’s assets.
Nevertheless, each restructuring procedure has or may have a competent individual managing the respective process. In particular, in the context of the OCW, the coordinator (the “Coordinator”) is appointed by the competent authority by a coordinators’ registry held therein and is in charge of supervising the overall proceeding. Similarly, in the Special Administration Process, an administrator is appointed by the court with a mandate to liquidate the debtor’s asset by conducting a public auction for at least 90% of the book value of the debtor’s business and assets (the “Special Administrator”). Whereas the Rehabilitation Proceeding does not provide for a particular person supervising the pre-ratification process, the court pursuant to the ratification ruling of the agreement and following a debtor’s or creditor’s application, may appoint a special proxy in order to safeguard the debtor’s assets, to proceed with certain administrative actions and the overall supervision of the agreement’s perfection (the “Special Proxy”).
3.5 What impact does each restructuring procedure have on existing contracts? Are the parties obliged to perform outstanding obligations? Will termination and set-off provisions be upheld?
The rationale of the Rehabilitation Procedure aims at the preservation, exploitation restructuring and recovery of the debtor business, without the impairment of the creditors’ collective satisfaction. To this effect, the debtor is expected to continue its business and, subject to the terms of the Rehabilitation Agreement, to maintain its contractual relationships. In practice, Rehabilitation Agreements may provide for the continuation of certain contractual relationships considered beneficial for the debtor’s business and the termination of others.
With regard to the Special Administration Process and the OCW Mechanism, the respective legal frameworks explicitly provide that the fact that a debtor enters into such a procedure does not constitute grounds for the termination of existing contracts. Also, in case a transfer of business is agreed in the context of the above procedures, contracts may be transferred as well, regardless of any transfer restriction, to the extent such transfer is favourable to the creditors and the debtor’s counterparty agrees.
3.6 How is each restructuring process funded? Is any protection given to rescue financing?
In general, entering into a restructuring process is not subject to the available debtor’s assets to cover the relevant costs. However, insufficient funds will render each process unfruitful. In any case, the satisfaction of creditors (depending on their ranking) comes after the repayment of any restructuring costs which will be covered from the proceeds of any agreed restructuring measures (in the case of the Rehabilitation Agreement and the OCW debt settlement agreement) and the divestiture of the debtor’s assets (plus any applicable financing available) transfer (in the case of the Special Administration Process). Regarding the safeguards available in order to secure financing in order to enter into one of the restructuring processes described above, this is mostly either agreed among the parties pursuant to the agreements.
However, only in the context of the Special Administration Process there is an explicit reference to the financing necessary to be sought by the Special Administrator for the purposes of the business continuation. In particular, the law states that in order for the Special Administrator to be able to operate the business and to cover the relevant costs (including his fees), he may receive financing. What is of importance is the general privilege granted to the creditor providing such financing in accordance with art. 154 par. 1(a) GBC.
4.1 What is/are the key insolvency procedure(s) available to wind up a company?
The key insolvency procedure available in the Greek jurisdiction to wind up a company is “bankruptcy” (the term “bankruptcy” can relate both to the legal status and to the procedure – the latter being the case for this analysis), which is regulated by art. 1-98 GBC. Insolvency is commenced by virtue of a Court decision, whereas the satisfaction of certain both subjective and objective conditions is a prerequisite for the issuance of the decision declaring bankruptcy.
Persons entitled to file for a bankruptcy application (art. 5 GBC) are (i) the debtor’s creditors bearing lawful interest, i.e. having an existing and legally enforceable monetary or pecuniary claim, (ii) the eligible debtor itself, (iii) the Attorney General on public interest grounds, or even (iv) other third persons (e.g. the foreign bankruptcy administrator of the main bankruptcy proceedings who may opt for the opening up of secondary insolvency proceedings in Greece, if the debtor is domiciled in another EU country, has been declared bankrupt in that other country and has an establishment in Greece).
Upon the declaration of bankruptcy, a bankruptcy administrator (syndikos) is appointed by the Court and is responsible for the administration of the debtor’s assets for the purposes of liquidating and distributing the proceeds of such liquidation to the creditors, in accordance with their respective rights of priority. In line with the pro rata satisfaction of creditors, their claims may be only partly satisfied.
One of the most important consequences of the declaration of bankruptcy is the suspension of enforcement proceedings against the debtor for unsecured creditors as of the time of such declaration; no suspension is provided in the case of secured creditors. However, if the secured assets are closely connected with the debtor’s business, enforcement measures on them by the secured creditors are temporarily suspended, too. If the business is sold as a whole by the bankruptcy liquidator, the above suspension applies until completion of the sale of the business.
4.2 On what grounds can a company be placed into each winding up procedure?
Subjective condition: According to art. 2 GBC, the debtor shall have a commercial status as per art. 1 of the Commercial Code or constitute “an association of persons bearing legal personality and having an economic objective”. A person – natural or legal or association of persons with legal personality – has a commercial status if it professionally carries out commercial activities or objectives or when it can be attributed such status automatically by virtue of the law (ex. a limited company, a limited liability company, a private capital company, a shipping company, a partnership, etc.). Single member and foreign EU companies may be also declared bankrupt.
Objective conditions: 1. According to art. 3 GBC, (a) a debtor who is unable to fulfil his pecuniary obligations as they become due in a general and permanent manner (cessation of payments) is declared bankrupt, (b) a threatened inability of a debtor to fulfil its pecuniary obligations, as they come, constitutes grounds for bankruptcy, provided that the debtor itself files the bankruptcy application, and (c) the likelihood of insolvency constitutes grounds for bankruptcy provided that the debtor itself files the bankruptcy application along with a proposed restructuring plan as per art. 107 GBC et seq. 2. The Court presumes – based on the provided financial data – that the debtor’s assets suffice for covering the expenses of the bankruptcy procedure.
4.3 Who manages each winding up process? Is there any court involvement?
A bankruptcy administrator (syndikos) is appointed by the bankruptcy Court and is responsible for the administration of the debtor’s assets for the purposes of liquidating and distributing the proceeds of liquidation to the creditors, in accordance with their respective rights of priority.
The declaration of bankruptcy is an in-court procedure since it takes place by virtue of a decision issued by the competent multimember Court of the place of the centre of the debtor’s main business interests. The Court in its bankruptcy declaring decision also (i) appoints the rapporteur judge and the bankruptcy administrator, (ii) orders the sealing of the debtor’s property, (iii) incorporates provisions on the convocation of the assembly of creditors, and (iv) defines the exact time on the when the cessation of payments presumably commenced. This decision is valid erga omnes.
4.4 How are the creditors and/or shareholders able to influence each winding up process? Are there any restrictions on the action that they can take (including the enforcement of security)?
The shareholders of the company are not creditors; therefore, they are not able to influence the bankruptcy process. The only influence it can be deemed they have on the bankruptcy proceedings is associated with their participation in that general meeting, which will resolve on the filing of the bankruptcy application with the Court (provided that the company, under its capacity as the debtor, files the application itself).
To assess the restrictions imposed on the creditors of the company, such restrictions being first and foremost associated with the suspension of enforcement proceedings, a primary distinction among secured and unsecured ones shall be made. The secured in rem creditors are able to initiate enforcement proceedings against the debtors, whereas, all enforcement proceedings against the debtor are suspended for unsecured creditors as of the time of such declaration. However, if the secured assets are closely connected with the debtor’s business, enforcement measures on them by the secured creditors are temporarily suspended, too. If the business is sold as a whole by the bankruptcy liquidator, the above suspension applies until completion of the sale of the business.
4.5 What impact does each winding up procedure have on existing contracts? Are the parties obliged to perform outstanding obligations? Will termination and set-off provisions be upheld?
The general rule is that existing contracts remain in force despite the declaration of a debtor’s bankruptcy (art. 28 GBC). However, a distinction between instant and continuous contracts shall be made.
Upon bankruptcy, instant contracts become inactive, i.e. they are not terminated (subject to provisions in the contract or the law to the contrary), but their performance is put on hold. The bankruptcy administrator has an option to decide on their performance or non-performance on business criteria (art. 29 GBC). Should the contract be deemed beneficial to the creditors or the administrator wishes to transfer the whole contractual relationship, then the latter, following a permission by the rapporteur judge, may service a performance statement (for the whole and not part of the contract); otherwise, the administrator may reject such contract in whole either explicitly or implicitly by not responding within the deadline the counterparty may have set.
Continuous contracts (or contracts with consecutive repeated considerations) maintain their force, unless otherwise specified (art. 31 par. 1 GBC). The administrator does not have to declare their performance and no permission by the rapporteur judge is needed. However, continuous contracts may be terminated pursuant to the respective provisions in the Greek Civil Code.
However, there are certain exceptions to the above, which can be grouped as follows: (i) certain exceptions provided by the law (for example, art. 40 of PD 34/1995 on the commercial lease agreements provides that bankruptcy constitutes an ex lege cause for termination); (ii) personal contracts, which are ex lege terminated upon the declaration of a counterparty as bankrupt; and (iii) contractual clauses that may provide for termination of the contract in case of bankruptcy of one of the contracting parties. Last, it should be mentioned that certain provisions (art. 34 GBC) apply in case of employment contracts and that financial contracts contemplating the provision of banking, security and investment services are excluded and therefore can be automatically terminated.
4.6 What is the ranking of claims in each procedure, including the costs of the procedure?
Group debts and expenditures (art. 154 GBC). The GBC does not specifically define these debts, which indicatively can refer to court expenses, expenses for the administration of the bankruptcy property, etc. In case the auction is enforced by a creditor secured in rem, group debts will cumber only the group and not those creditors secured in rem; however, they will be paid on priority, unless they are privileged as per GCPC (ex. employment claims created after the declaration of bankruptcy).
Claims bearing general privileges (art. 154 and 21 point b. GBC). These claims are ranked in a specific order as per art. 975 GCPC. This category includes indicatively claims stemming from the funding of the debtor’s business for securing continuation of business and payments, its rescue, the maintenance or increment of assets strictly as per the rehabilitation or restructuring plan. It should be noted that this privilege is valid regardless of the non-ratification of the rehabilitation plan and that it does not concern contribution by the shareholder in case of a share capital increase.
Creditors secured in rem with claims bearing special privileges and collateral securities (art. 155 and 21 point c. GBC). These claims are ranked in a specific order as per art. 976 GCPC. These are claims associated with expenditures for the preservation of the assets or the collection of their proceeds deriving during the six-month period prior to bankruptcy and the capital and its interest accrued during the last two years corresponding to claims with pledge, mortgage or pre-notation of mortgage (in case of real estate).
It should be noted that art. 156 GBC as well as new art. 156A GBC recently introduced by law 4512/2018 deal with the – usually encountered – case of concurrence of the privileges set forth in art. 154 and 155 GBC and/or non-privileged claims and set out their respective ranking of satisfaction.
Ordinary/unsecured and book creditors (art. 21 point a. GBC). Claims that are not in rem secured or do not bear a privilege fall under this category. These claims are ranked pari passu within said category.
Remaining or bottom-tier creditors (art. 21 point d. GBC). These claims are satisfied provided that all other claims (as set forth above) have been satisfied and there has been a remainder of the liquidation proceeds.
The costs of the procedure vary; therefore a rough estimate could be misleading.
4.7 Is it possible for the company to be revived in the future?
The former version of the GBC contained provisions on the restoration of the debtor that had been declared bankrupt or was about to be declared so. The effects of the repealed institution of restoration have been transferred as regards natural persons to the mechanism of declaring such person excusable (art. 167 par. 4 GBC) and as regards legal persons to the final ratification of the restructuring plan (art. 164 par. 2 GBC). Should the restructuring plan be finally ratified by the Court, then, provided that all bankruptcy creditors have been paid off, the company can be revived according to the legal provisions set forth in company law.
5.1 What are the tax risks which might apply to a restructuring or insolvency procedure?
The GBC provides for certain tax exemptions. In the regime of insolvency (bankruptcy), art. 133 GBC provides that all contracts and deeds that are entered into pursuant to the GBC provisions (art. 135–145) on the sale of the debtor’s business as a whole, as well as any transfers, transcriptions with the land registries, etc. by virtue of said contracts and deeds are exempted from the imposition of any taxes, stamp duties or any rights of the State or third parties, excluding VAT. This exemption applies ipso iure.
On the contrary, the above exemption does not apply in the context of restructuring.
6.1 What is the effect of each restructuring or insolvency procedure on employees?
According to art. 31 par. 1 GBC, contracts of “durable performance” (e.g. employment agreements, lease agreements) remain valid as from the declaration of bankruptcy. However, any contract can provide for a termination right in the event of declaration of insolvency of one of the parties to the contract. Automatic termination is nevertheless not possible, even if it is provided in a contractual clause.
Art. 34 GBC stipulates that the employment agreements are not terminated due to the declaration of insolvency. The receiver (syndic) may terminate an employment agreement of indefinite time if the employer is the debtor. In case there are chances for the viability of the company, the syndic and the debtor may ask for the maintenance of the necessary employment contracts until the approval of the rejection of the reorganisation plan.
Claims of the employees against their employer (debtor) that were born before the declaration of insolvency are considered as claims within the insolvency procedure for which the employees can be satisfied according to the privileged claims provided in Art. 154 GBC.
Art. 154 (d) GBC provides that claims that arose within the last two years before the declaration of insolvency, for the provision of salaried work and compensation claims due to the termination of the employment agreement, are placed in the fourth place of the priority claims of the classification list drafted by the syndic, right after claims of creditors of any kind of the company, claims for funeral or hospital treatment of creditors and claims regarding provision of first aid needs such as food supplies necessary for the creditor, if such claims arose during the last six months as from the declaration of the insolvency.
On the other hand, claims of the employees that are born after the declaration of insolvency due to the continuation of the employment agreements are considered as collective claims of the creditors.
The recently adopted law 4512/2018 provides for an addition in respect to the privileged classification of employees’ claims that arose before the declaration of insolvency; more specifically, it provides that claims arising before the declaration of insolvency and pertaining to unpaid salaries under dependent labour spanning up to six months and up to the equivalent of the product of the monthly salary payable per employee entitled to the statutory minimum salary provided by law for employees over 25 years of age multiplied by 275%, are given priority over any other claim (enhanced preference right), after deduction of any court expenses, insolvency estate management expenses, including any provisional and final retainer fees of the insolvency administrator and any collective creditors’ claims arising under the liquidation procedure, as the case may be.
7.1 Can companies incorporated elsewhere use restructuring procedures or enter into insolvency proceedings in your jurisdiction?
The initiation of insolvency proceedings in Greece follows the rule of Art. 4 of the GBC, according to which Greek courts are competent to hear an insolvency case only as long the COMI (centre of main interests) of the debtor is located in Greece. COMI is designated by the location of which the debtor administers its interests, in a manner recognisable by third parties. For companies, there is a presumption that COMI coincides with their statutory seat. In light of the above, only debtors established in Greece are subject to insolvency proceedings under the GBC, save for companies that have their statutory seat in other third countries, but still their COMI is located in Greece.
7.2 Is there scope for a restructuring or insolvency process commenced elsewhere to be recognised in your jurisdiction?
In the case of debtors having their COMI in an EU Member State (other than Denmark), Regulation EU 848/2015 comes into play, and insolvency proceedings initiated in the Member State where the COMI of the debtor is located are automatically recognised in Greece, without any further formalities or requirements. Greek court jurisprudence on the issue is scarce, although the principle of automatic recognition has been occasionally confirmed by both a lower court (decision 166/2012 of the Court of First Instance of Rethymno) and the Supreme Court (decision 838/2015). Likewise, the initiation of secondary insolvency proceedings in Greece (pursuant to Article 34 of Regulation 848/2015) has been ordered by Greek courts (see, e.g., Athens First Instance Court decision 32/2104). By contrast, if the Regulation does not apply, recognition of non-Greek insolvency proceedings is only possible if the COMI of the debtor is located in a country signatory of the UNCITRAL Model Law on cross-border insolvencies (in which case, however, recognition is not automatic but is subject to an approving Greek court decision, pursuant to Article 15 of law 3858/2010, having implemented the UNCITRAL Model Law in Greece).
7.3 Do companies incorporated in your jurisdiction restructure or enter into insolvency proceedings in other jurisdictions? Is this common practice?
Foreign insolvency of debtors established in Greece should depend on the applicable laws of the country where the initiation of each proceeding is sought.
8.1 How are groups of companies treated on the insolvency of one or more members? Is there scope for co-operation between officeholders?
Under Greek law, a separate insolvency proceeding applies for each company of a group. However, when the centre of main interests of each of the companies of the same group are located in different EU Member States, arts. 56–77 of Regulation 848/2015 apply: therefore, local administrators for each company are under the duty to co-operate among each other, as also different bankruptcy courts in each Member State, where individual insolvency proceedings have been initiated for companies of the group.
9.1 Have there been any proposals or developments in your jurisdiction regarding the use of technology or reducing the involvement of the courts in the laws of your jurisdiction, which are intended to make insolvency processes more streamlined and efficient?
The newly introduced law 4469/2017 on the business debt settlement extrajudicial mechanism or out-of-court workout(hereinafter the “OCW Law”), seeks to address matters that remain unresolved under article 99 GBC (rehabilitation proceedings) and Greek Law 3869/2010 (debt settlement of non-traders natural persons), in the context of a time-barred, lax, flexible and less burdensome alternative.
For details on the OCW Law please refer to question 3.2 above and http://www.keyd.gov.gr/.
9.2 Are there any other governmental proposals for reform of the corporate rescue and insolvency regime in your jurisdiction?
Other than the most recent reforms introduced by virtue of law 4512/2018, on “Arrangements for the implementation of the Structural Reforms of the Economic Adjustment Programme and other provisions” which came into force on 17.01.2018, there are no specific upcoming proposals for the reform of the corporate rescue and insolvency regime.
The authors would like to thank Messrs. Antonis Giannakodimos (Associate, LL.M.), George Vavatsioulas (Associate, LL.M.) and Magdalini Goulakou (Trainee Lawyer), of Zepos & Yannopoulos for their contributions to the chapter.

References: art. 99
 art. 98
 art. 98

Art. 41
 Art. 43
 Art. 44
 art. 154
 art. 1
 art. 2
 art. 1
 art. 3
 art. 107
 art. 40
 art. 975
 art. 976
 art. 156
 art. 156
 art. 154
 art. 133
 art. 31

Art. 34
 Art. 154

Art. 154
 Art. 4