Romanian Institutions With Overdue Debts For More Than 90 Days To Enter Insolvency

Insolvency procedures will also set off if the institution can no longer pay salaries for more than 90 days from the falling date, according to a draft act approved by the Romanian Government in its weekly meeting Wednesday.

The act, which sets the general framework and procedures needed to cover the liabilities of administrative-territorial units undergoing insolvency or facing financial deadlock, was sent to Parliament to be debated with urgency.

Under the act, within five working days from adopting the decision declaring state of insolvency, „a committee for financial crisis situations” will be set up, through order of the prefect, and the management of the institution undergoing insolvency will no longer be entitled to make any decision that may increase financial dues, to hire extra staff and borrow money, except re-financing loans.

Interior Minister Vasile Blaga said the law will come into effect through legislative procedure, stressing it has not been approved yet on lack of political will, given that 2009 was an electoral year.

Blaga said there are 3,227 administrative- territorial units in Romania and underscored that most of them, namely over 2,400 units, don’t pay their staff from local taxes.

The financial deadlock ceases when there are no more financial problems during a period of 180 calendar days.

The state of insolvency is presumed in case of failure to pay debts overdue by more than 120 days, which exceed 50% of the annual local budget of the respective unit, and failure to pay salary rights for more than 120 days from the falling date. Under these circumstances, the insolvency procedure can be set off by any creditor or group of creditors, mayor or the county council head. Institutions facing commercial litigation are not included in this category.

Once the insolvency procedure sets off, all judicial or extrajudicial actions to recover receivables from the respective unit are suspended, as well as any prescription terms that resume their normal course after 30 days from terminating the insolvency procedure.