26.03.2025

Practical considerations on the legality review of the insolvency report

The key activities of the insolvency practitioner once appointed in insolvency proceedings include examining the economic situation of the insolvent debtor and all the documents submitted by the debtor in order to establish the causes of the insolvency and the persons who could be held liable in this respect. Following this analysis, the insolvency administrator/court-appointed liquidator draws up and submits to the liquidator a report on the causes and circumstances that led to the debtor's insolvency (Art. 97 of Law no. 85/2014 on insolvency prevention and insolvency proceedings).

The period within which this report may be drawn up may not exceed 40 days from the date of appointment. This time limit may be extended in cases of high complexity, for a maximum period of 40 days, at the reasoned request of the insolvency practitioner to the liquidator.

Being an important procedural document, in order to give creditors the opportunity to become acquainted with its contents, the insolvency administrator/ liquidator is required ensure that the report is available for inspection at his premises, with a copy being filed with the court registry and the trade register or, where applicable, the register in which the debtor is registered.

From the perspective of its content, the legislator establishes that the report must contain information relating, in essence, to (a) a detailed analysis of the causes and circumstances that led to the emergence of the debtor's insolvency, (b) the persons to whom this state of insolvency is attributable, with the possible indications or preliminary elements and (c) whether there is a real possibility of effective reorganisation of the debtor's activity or, where appropriate, the reasons that do not allow reorganisation with the proposal to file for bankruptcy.

The quality of the conclusions on the issues to be dealt with in the report on the insolvency proceedings is of particular importance, given that the subsequent course of the proceedings depends on them, both in terms of the possibility of following the reorganisation or bankruptcy route, and in terms of the possible filing of an action for the purpose of attracting the pecuniary liability of the persons who contributed to the insolvency.

Although the report on the cases is highly relevant (being a procedural document capable of leading to the obtaining of additional sums necessary to cover the claims of the creditors registered in the creditor's estate), the legislator does not expressly regulate any way in which creditors can invoke irregularities with regard to the content or the manner in which it was drawn up

In this respect, the case law has established a challenge against the insolvency report is inadmissible.[1] Thus, it has been held that the report does not contain any measure of the insolvency practitioner, but presents his professional point of view, without it being possible to impute to him the inclusion in the report of aspects, points of view, opinions or findings that he does not recognise.

However, first of all, the insolvency judge is required to play an active role from this perspective, since, in reviewing the legality of the procedural acts drawn up by the insolvency practitioner, he must analyse whether the report on the insolvency proceedings is drawn up in accordance with the legal provisions, therefore, including in terms of the minimum mandatory content imposed by the legislator.

In analysing the legality of the report, the liquidator may put any irregularities or any observations made by the creditors regarding the illegality of the report to the interested parties, and may finally order that the report be redrafted or completed if it is deemed to be illegally drawn up.

Secondly, we consider that creditors also have the possibility to formulate observations or objections to the report on the cases, in which they can present to the syndic judge the specific aspects considered unlawful or incomplete, the latter being obliged to take them into account when analysing the legality of the procedural acts.

Case law has held that in this case it is even more obvious that the court has the power to order the reworking or completion of the report on the cases, given that "this is the only way to interpret the intention of the legislator who, in para. 2, sentence I of Article 45 of the Law, established that the powers of the syndic judge are limited to the judicial control of the activity of the receiver and/or liquidator and to the judicial proceedings and claims related to the insolvency proceedings".[2]

In practice, the situation arises where creditors criticise the report on insolvency proceedings by submitting a request to the liquidator to supplement such report. It should be noted that, in this case, the request must be rigorously drafted and supported, as there is a risk that it could be considered as a challenge to the report on the insolvency proceedings which could be dismissed as inadmissible, as mentioned above. 

Last but not least, creditors could make a direct request to the insolvency administrator/judicial liquidator to supplement or amend the case report. However, we point out that an unfavourable response or even the lack thereof could be considered as a measure taken by the insolvency practitioner, which may be challenged by the creditor or any other interested person within 7 days from the publication in the BPI of the extract of the monthly report containing the description of the manner in which the practitioner has performed his duties, pursuant to Article 59 of Law no. 85/2014.

We consider that all these steps mentioned are relevant because the report on the insolvency proceedings and the manner in which it is drawn up impacts the real possibility of obtaining additional sums of money in the proceedings, necessary to cover the liabilities, by filing an action on the liability for insolvency, regulated by Article 169 et seq. of Law no. 85/2014.

This is because, on the one hand, the insolvency report is an essential piece of evidence in such an action, which will be based on the analysis carried out by the insolvency practitioner.

On the other hand, the limitation period of the substantive right to bring an action is closely linked to the drawing up of the report on the case. Pursuant to Article 170 of Law no. 85/2014, the action for liability for insolvency is time-barred within 3 years, which term starts to run from the date on which the person who contributed to the insolvency was known or should have been known, but not later than the date of publication in the BPI of the report of the judicial administrator/judicial liquidator provided for by Article 58 para. (1) letter b) or, as the case may be, Article 64 letter a) of the same Law.

Please note that this article was amended by Government Emergency Ordinance no. 88/2018 amending and supplementing some normative acts in the field of insolvency and other normative acts, in force as of 2 October 2018, the previous form providing for another objective time-limit for the start of the limitation period, namely "no later than 2 years from the date of the court decision opening the insolvency proceedings", as was also regulated by Law no. 85/2006.

Under the current rules, if the report on the cases is not drawn up, or if it is not in accordance with the law, and, for example, the insolvency practitioner does not properly indicate any person to whom the debtor company's entry into insolvency is attributable and does not even present elements for identifying such responsible persons, in practice, the question may arise whether the limitation period would start to run from the date of publication of the report on the cases in the BPI (not in accordance with the law) or from a later point in time.

In case-law, there are opinions according to which "the limitation period for bringing an action for financial liability starts to run against the proprietors of the action, irrespective of the information contained in the case report, from the date of publication of that report[3]

It is also noted that this interpretation is valid only if the administrator/judicial liquidator complies with the 40-day deadline for drawing up the report, in accordance with Article 58 para. (1) lit. b, respectively Art. 64 lit. a of Law No 85/2014. If this deadline has been exceeded, it is considered that "the interpretation of the text must be nuanced in order to avoid a situation in which the holder of the action himself, by his culpable conduct, would constitute a right (nemo auditur propriam turpitudinem allegans)"[4]and thus, if the holder of the action is the receiver/judicial liquidator himself, the limitation period would start to run from the expiry of the deadline for the report to be drawn up. We consider that this interpretation is questionable, given that the 40-day time limit within which the report on the case can be drawn up is a time limit for recommendations.

In conclusion, we emphasise the importance of the insolvency case report and the manner in which it is drafted, since even if control over it appears to be largely in the hands of the liquidator (in terms of legality), there are steps available for participating creditors to take to increase their chances of success by being proactive in protecting their interests. Thus, the timely and accurate preparation of the case report by the appointed insolvency practitioner is essential, including to ensure the efficiency of the insolvency proceedings and its mechanisms

An article signed by Carmen-Alexandra Mureșan, Managing Associate -cmuresan@stoica-asociatii.ro - and Corina-Ioana Șerbănescu, Associate -cserbanescu@stoica-asociatii.ro -  STOICA & ASOCIAȚII.