Business Legal Updates — Issue 2 · September 2026

Corporate Financial Reorganisation

Many companies face financial challenges that cause defaults on their obligations. Even with high revenues, rising expenses can perpetuate distress until the company can no longer cover operating costs — forcing it to halt operations, lose staff, lose suppliers, and ultimately wind up. A company may, at a certain stage, ignore resorting to a financial reorganisation procedure to stop the bleeding, restructure operations, and manage expenses. Before initiating the procedure, several questions must be answered: Can the company keep operating? How long does it need to stop the losses and balance revenues against expenses? What amounts are expected to be collected? And would the company's future revenues suffice to repay its debts if they were rearranged? These questions precede any decision to file for financial reorganisation. The procedure aims to enable the debtor to reach an agreement with its creditors to reorganise its business under the trustee's supervision.

The Company's Plan

Preparing the plan begins with inventorying liquidity, obligations and their maturities, then building cash-flow projections based on collectible receipts and defensible expenses. The plan may reveal the need to shrink a loss-making line of business or renegotiate certain obligations. Management must document the reasons behind its decisions on the use of liquidity, because what it decides and commits determines its ability to meet obligations. Next comes a preliminary reorganisation concept: what operational change is required? What are the sources of repayment? How long do creditors need to recover their rights? This concept helps the company assess whether filing is viable.

The company must prepare the statutory requirements, including a statement of its financial position, financial statements for the last two fiscal years, up-to-date schedules of debts, creditors, guarantees and assets, and data on employees, lawsuits and judicial proceedings. It must also verify that the debtor has not been subject to a financial reorganisation or small-debtors procedure during the preceding twelve months. If the establishment is a regulated entity, the competent authority's approval of the filing must be considered under the law.

What Does the Court Examine, and How Long Does the Procedure Take?

The Bankruptcy Law permits filing for financial reorganisation where the debtor is insolvent or in financial distress, or where financial disturbance likely to lead to default is foreseeable. When examining the petition, the court verifies the debtor's financial position and the completeness of its documents, and whether the continuation of its activity and settlement of creditors' claims within a reasonable period are likely. It may reject the petition if requirements are unmet without acceptable justification, or if filed in bad faith or accompanied by criminal acts; it may also request additional information before ruling.

The court sets the hearing within (40) days of registration, and may adjourn it by no more than (21) days to complete the requested information. Critically for the company, registering the petition suspends claims — even before an opening judgment is issued. The original claims-suspension period is (180) days, extendable by the court by up to a further (180) days. This is the suspension period, not the full duration of the reorganisation procedure.

Running the Company and Building the Plan with Creditors

If the court opens the procedure, it appoints a trustee from the bankruptcy trustees' roster — though the company may propose one. The company continues to manage its business under the trustee's supervision: the trustee monitors financial operations, examines creditors' claims, assists in preparing the proposal and opines on its prospects of acceptance and feasibility. Certain significant dispositions — such as seeking financing or settling with a creditor — require the trustee's written approval under the law.

Does the Procedure Alone Cure the Company's Distress?

No — it is the right plan that cures the distress and sustains operations. The proposal therefore addresses, as applicable, the company's assets and guarantees, the classification of creditors and the treatment of their claims, proposed changes to the business, capital or debts, any new financing, repayment amounts and schedule, and the implementation timeline. If the plan assumes revenue growth, an asset sale, or new financing, its effect on repayment capacity must be shown clearly.

Creditor consent is not required to file for opening the procedure — their role emerges when voting on the proposal. Approval is calculated by creditor classes and the value of the voting creditors' debts, with special rules for related parties. If the proposal affects shareholders' rights, they are summoned to vote by the prescribed quorum. The system also allows the court to ratify the proposal under specific conditions even if not all classes approve; the judgment turns on the vote's outcome, fairness standards and creditors' interests — not on every individual creditor's consent.

Effect of the Procedure and Its End

Financial reorganisation gives the company a chance to address its debts while preserving a viable business, and lets creditors consider a clear collective plan instead of pursuing scattered claims. But the claims suspension does not erase debts, and opening the procedure does not relieve management of its duties. After court ratification, the plan becomes binding under the law and supervision of its implementation continues. The debtor submits a quarterly report to the trustee showing what has been achieved and the obstacles faced.

Here a distinction is required between the opening petition and the procedure itself: consideration of the petition ends with an opening or rejection judgment, while the procedure continues after ratification of the plan until it is implemented and a termination judgment is issued. It may end before completion — for example where voting or implementation proves impossible, ratification is refused, or material violations occur. In cases defined by law, termination may be followed by the opening of a liquidation procedure where its conditions are met.

The first test of a reorganisation's viability therefore lies inside the company, before filing: does management know where the liquidity is going, what will keep the business alive, and how it will honour what it puts to creditors? The more documented and measurable the answers, the more likely a plan deserves to be voted on — and implemented.