What types of restructuring are there?

Restructuring sounds like a major decision, often linked to a crisis or a change of direction for a company. But in practice, it does not always mean “saving oneself from collapse”. It is also a conscious management of change – financial, organisational, operational. Polish law and business practice distinguish various forms of restructuring, each serving a different purpose and based on different mechanisms. For entrepreneurs, advisors and also employees – understanding these differences is important.

What is restructuring?

Restructuring is a process of changing the structure of a company in order to improve its economic, legal or operational situation. In the Polish legal system, formal restructuring is regulated by the Act of 15 May 2015. – Restructuring Law (Journal of Laws 2022 item 2309). The Act introduces four main restructuring procedures for companies at risk of insolvency or already insolvent.

However, in addition to these procedures, informal actions – carried out internally by the board of directors, without the involvement of the court – are also distinguished.

Formal types of restructuring

The Restructuring Law provides for four main forms of proceedings, which differ in the level of court involvement, the extent of protection from creditors and the entrepreneur’s capacity to act. The choice of a particular route depends on the scale of the financial problems, the type of claims and the willingness to cooperate with the creditor party.

1. Proceedings for approval of an arrangement

This is the simplest and fastest form of restructuring, which allows the entrepreneur to negotiate with creditors on his or her own. In this model, the court’s role is limited only to approving the agreement, provided that all formal requirements are met.

The key role here is played by a restructuring advisor, who acts as a supervisor of the arrangement, monitoring the process from the perspective of compliance with regulations.

The advantage of this procedure is its short duration and the possibility to quickly obtain protection against enforcement – as soon as the announcement is made in the Monitor Sądowy i Gospodarczy. For many companies, this is an effective way to regain liquidity without having to involve the court at an early stage.

2. Accelerated arrangement procedure

This is an intermediate solution between the simple arrangement approval procedure and the more formal arrangement procedure. It works well when the share of disputed debts does not exceed 15%.

The procedure already involves the court, but is simplified: the court opens the procedure, supervises it and approves the arrangement, but the whole process is relatively quick and can be completed within a few months.

This solution is ideal for companies that need legal protection but whose situation is not yet extremely difficult.

3. Arrangement procedure

For companies with a more complex debt structure and a high proportion of disputed debts, an arrangement procedure is the appropriate form. This procedure requires greater court involvement and the appointment of a court supervisor who oversees the entire process and has influence over key decisions.

Arrangement proceedings make it possible to obtain protection from creditors and to put the company’s financial situation in order, but they take longer than the previous forms. Due to its complexity, it is often used in medium-sized and large companies that need more time to prepare arrangement proposals and collect votes.

4. Sanctioning proceedings

The most far-reaching form of restructuring is the sanctioning procedure, which, in addition to concluding an agreement with creditors, also includes corrective actions, often interfering with the structure and functioning of the company. The aim of these proceedings is not just to conclude an agreement, but to deeply restructure the company to enable it to continue operating in the future.

In the course of rehabilitation, the management of the company is taken over by a court administrator, who can, for example, cancel unprofitable contracts, sell assets or reduce the workforce. For this reason, it is usually used in situations of extreme crisis – when other methods do not work.

For many companies, it is the last chance to recover and continue operating, but it requires full openness to change and a willingness to hand over control of the company to an external manager.

Informal forms of restructuring

Not every company transformation has to take place with the involvement of a court. In many cases, entrepreneurs opt for internal measures – faster, less costly and often sufficient to improve the financial or organisational situation.

• Operational restructuring – involves a change in the company’s operating model – it may be a shift from production to distribution, automation of processes or transferring some tasks to external contractors. It often involves reducing the number of departments, eliminating unprofitable products or implementing new technologies. The aim is to simplify the structure and improve the efficiency of day-to-day operations.
• Financial restructuring – focuses on how the business is financed and how liabilities are managed. Entrepreneurs can renegotiate loan repayment terms, raise new capital by issuing shares or bonds, or reduce fixed costs by changing contracts with suppliers. These actions are intended to improve liquidity and increase the company’s security.
• Organisational restructuring – involves changes in the management structure to lead to better supervision and faster decision-making. This often involves reducing managerial positions, simplifying hierarchies or switching from central management to a more distributed model.

When is it worth taking restructuring action?

Various factors can signal the need for change. It is not always about debt – just as often restructuring concerns companies that:

• are experiencing a decline in profitability despite high revenues,
• are entering new markets or want to change their operating model,
• want to increase the scale of operations and need a new organisational structure,
• need to adapt to new regulations (e.g. ESG).

Data from the Central Economic Information Centre shows that more than 2,000 restructuring proceedings were initiated in 2023 – most of them accelerated. The increased interest in these forms demonstrates their growing importance in business management.

The types of restructuring vary in scale, purpose and involvement of public institutions. From internal operational changes to formal sanctioning proceedings, the choice of the appropriate path should result from an informed analysis of the financial situation, the market environment and the company’s negotiating capacity. It is not always a fight for survival – it is often a decision for a new beginning.

 

Sources

1. Ustawa z dnia 15 maja 2015 r. – Prawo restrukturyzacyjne (Dz.U. 2022 poz. 2309)
2. Centralny Ośrodek Informacji Gospodarczej – „Statystyki postępowań gospodarczych 2023”.
3. M. Wyrzykowski (red.), Restrukturyzacja przedsiębiorstw w teorii i praktyce, Warszawa: PWE, 2020.
4. Ministerstwo Sprawiedliwości – materiały edukacyjne o restrukturyzacji: https://www.gov.pl/web/sprawiedliwosc.
5. P. Zimmerman, Prawo upadłościowe i restrukturyzacyjne. Komentarz, C.H. Beck, 2023.