{"id":6021,"date":"2024-06-04T08:14:00","date_gmt":"2024-06-04T06:14:00","guid":{"rendered":"https:\/\/pmrsa.pl\/?p=1505"},"modified":"2025-03-14T18:05:03","modified_gmt":"2025-03-14T18:05:03","slug":"leases-in-restructuring-proceedings-problem-or-source-of-settlement-financing","status":"publish","type":"post","link":"https:\/\/pmrsa.pl\/en\/leases-in-restructuring-proceedings-problem-or-source-of-settlement-financing\/","title":{"rendered":"Lease agreements in restructuring proceedings- a problem or a source of financing for the arrangement?"},"content":{"rendered":"<p class=\"wp-block-paragraph\"><strong>Leasing is one of the key sources of business financing in Poland, which is steadily gaining in popularity. According to data presented in a report prepared by the Association of Polish Leasing and EY-Parthenon, the Polish leasing sector is the fastest-growing market in the European Union, having grown sixfold over the past 18 years, and its current growth rate exceeds 10% per year.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>In 2023, the barrier of PLN 100 billion has been broken through<\/strong> investments financed by leasing in one year, <strong>which ranks Poland as the 5th largest market in Europe<\/strong> and the PLN 200 billion barrier in terms of the value of assets in use by leasing company customers. According to the cited report, as much as <strong>62% of SME companies identify leasing as a key source of finance,<\/strong> resulting in a noticeably higher share of leases in the debt structures involved in restructuring proceedings.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<h4 class=\"wp-block-heading has-text-align-center\">A few words about the article - Listen<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<figure class=\"wp-block-audio\"><audio controls src=\"https:\/\/pmrsa.pl\/wp-content\/uploads\/2024\/06\/Umowy-leasingu-w-postepowaniu-restrukturyzacyjnym\u2013.mp3\"><\/audio><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The main breakdown includes operating and finance leases<\/strong> based on the option of ownership and the distinction of which party to the contract is entitled to make depreciation deductions from the leased property. <strong>It should be emphasised, however, that the classification of a contract for both tax and <a href=\"https:\/\/pmrsa.pl\/en\/when-should-a-company-initiate-restructuring-proceedings\/\" title=\"\">restructuring proceedings<\/a> is not decided by its name, but by the conditions it provides for.<\/strong> In Polish law, leasing has been defined on the basis of various acts - the Civil Code, the VAT Act, the PIT and CIT Acts or the Accounting Act, each of which represents its own and not always convergent qualification criteria. Without going into the meanders of individual definitions and their differences on the grounds of the aforementioned acts, it should be pointed out that they result in, <strong>that the same lease can meet the conditions of an operating lease for tax purposes and a finance lease for balance sheet purposes.<\/strong> The Restructuring Law also provides for different effects with regard to leasing claims depending on their terms and conditions, limiting, however, the division criterion to the inclusion of the leased item in the fixed assets of the beneficiary debtor within the meaning of the PIT and CIT Act.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>In the first case, i.e. if the leased object constitutes a fixed asset at the lessee entrepreneur within the meaning of the PIT and CIT Acts, the entire claim is subject to restructuring proceedings<\/strong>, whereby, for the purposes of calculating the creditor's voting power in the proceedings, the unmatured portion of the claim included in the list of claims shall be reduced by statutory interest, <strong>but not higher than 6% per year,<\/strong> for the period from the day of opening the proceedings until the day of due date of each future benefit, however, for a maximum of two years. In this case, it is possible <a href=\"https:\/\/pmrsa.pl\/en\/what-is-debt-restructuring\/\" data-wpil-monitor-id=\"1251\">restructuring of all debt<\/a> arising from the contract.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>If, on the other hand, the leased asset does not constitute a fixed asset for the lessee<\/strong> within the meaning of the PIT and CIT Act, only that part of the receivables which relates to periods prior to the date on which the proceedings were opened is subject to restructuring proceedings (<em>in the case of accelerated arrangement, composition and sanctioning proceedings<\/em>) or the date of arrangement (<em>in the case of proceedings for the approval of an arrangement<\/em>). <strong>Claims arising in subsequent periods are treated as current, not under investigation.<\/strong> If the arrangement date or the date of the resolution falls during the settlement period, e.g. a month, the claim for that period is divided proportionally by operation of law. <a href=\"https:\/\/pmrsa.pl\/en\/variation-proceedings-part-2\/\" data-wpil-monitor-id=\"63\">the part treated as covered by the proceedings<\/a> and a part treated as a current receivable. In this case, it is possible to restructure only a part of the due receivables.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Qualification of a lease agreement in restructuring proceedings<\/strong> also translates into the ability to withhold payment of liabilities and their volume, which, as the experience of PMR Restructuring S.A.'s law firm shows, in many cases is itself an important tool for recovering liquidity. <strong>In the accelerated arrangement, composition and sanctioning proceedings, a prohibition is introduced by law against the debtor or the administrator or supervisor fulfilling the benefits of claims that are by law covered by the arrangement as an impermissible action.<\/strong> However, in proceedings for the approval of an arrangement, despite the lack of implementation of an analogous prohibition under restructuring law, one should always bear in mind the provisions of the Criminal Code according to which \"<em>who, in the event of imminent insolvency or bankruptcy, being unable to satisfy all his creditors, pays or secures only some of them, and thereby acts to the detriment of the others, shall be subject to a fine, the penalty of restriction of liberty or the penalty of deprivation of liberty for up to 2 years<\/em>\". An example can be used to illustrate the effects of including or not including a leased asset in fixed assets in the context of ongoing liquidity during the proceedings:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">- Entrepreneur X has a lease liability where the monthly instalment is PLN 2 thousand, and as at the date of opening the proceedings, he is in arrears with payment of instalments totalling PLN 6 thousand and 10 instalments not yet due totalling PLN 20 thousand. In the event that the object of the lease is included in fixed assets, entrepreneur X has the option to restructure the entire amount of the liability, i.e. PLN 26 thousand, and repayment is suspended (<em>from the date of the opening of the procedure\/arrangement date<\/em>), however, if the leasing item is not included in the fixed assets under the procedure <a href=\"https:\/\/pmrsa.pl\/en\/restructuring-companies-through-the-eyes-of-entrepreneurs\/\" data-wpil-monitor-id=\"1388\">the entrepreneur has the possibility of restructuring<\/a> only the due part of the obligation, i.e. PLN 6,000, and in the course of the proceedings he will be obliged to pay on time instalments in the amount of PLN 2,000 per month.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">K<strong>he ability to protect business-critical contracts is another extremely important issue,<\/strong> including leases against termination, with the extent of protection also depending on the terms of the contract. <strong>Indeed, the law provides for the termination of key contracts in three cases:<\/strong> if the creditors&#039; council agrees to terminate the contract in a situation where the entrepreneur fails to fulfill the obligations <a href=\"https:\/\/pmrsa.pl\/en\/variation-proceedings-part-3\/\" data-wpil-monitor-id=\"12\">part not covered by the system<\/a> or as a result of another circumstance recorded in the agreement, if it occurred after the date of opening the proceedings. In the event of including the leased item in fixed assets, the entire receivable is covered by the arrangement, in light of which there is no premise of non-performance of current liabilities, and protection is significantly broader.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>A separate issue is the possibility of buying back the leased asset, which is not clearly regulated by law. <\/strong>Most leases provide for the option to buy out\/transfer ownership of the leased asset only after all agreed instalments have been paid. <strong>This represents a significant complication in the event that the contract is terminated before the agreement is approved,<\/strong> which covers only a part of the contractual claim, as the trader has no possibility of repaying it, and it is only the final agreement which modifies the existing contractual relationship of the parties in a manner different to that regulated by the contract. <strong>This often leads, in practice, to the financier refusing the possibility of redemption.<\/strong> Where a modification of the repayment terms under a final agreement occurs before the end of the lease (<em>This is the case when only part of the debt is covered by the arrangement<\/em>) and the entrepreneur fulfils the agreed terms of the arrangement, the position is that the lessor has no grounds to refuse to sell\/transfer the leased property.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The role of the leased object in the implementation of the arrangement is underestimated.<\/strong> It should be noted that it is often the case that it represents a higher value than the amount of the outstanding liability and can be an important source of financing for the arrangement. Restructuring proceedings provide protection of the lease agreement against termination and its adverse consequences, subject to the exclusions outlined above, and provide a tool to secure a demand for transfer of ownership if provided for in the agreement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>In this respect, the example of a client of the law firm PMR Restrukturyzacje S.A. should be cited. - Mogado Sp. z o.o., once one of the largest wholesale distributors of IT equipment and cosmetics.<\/strong> As a result of the withdrawal of one of its main customers, the company lost a significant part of its revenue overnight and was unable to service its running costs, of which leasing contracts accounted for a significant volume. Thanks to a professional analysis of the contracts and an appropriate restructuring strategy, it was possible to maintain and settle the key real estate lease contract and subsequently to transfer its ownership and sale.  The transaction price obtained as a result of the measures taken, which was several hundred per cent higher than the leasing liabilities, also made it possible to repay the company's other liabilities and execute the arrangement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Statement by the CEO of Mogado Ltd. Mr Jacek Mo\u0144ko:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>\"The restructuring proceedings allowed the company to be fully indebted and to satisfy its creditors to an extent not possible in bankruptcy proceedings <\/em><em>factors completely beyond the company&#039;s control caused it to find itself facing a serious threat of insolvency almost overnight, and thanks to effective actions and projections with the support of the supervisor <a href=\"https:\/\/pmrsa.pl\/en\/13-steps-to-successful-restructuring-why-13\/\" data-wpil-monitor-id=\"110\">system<\/a> PMR Restrukturyzacje SA managed to achieve stabilization faster than expected, which allows us to calmly, without the burden of due liabilities, attempt to search for alternative markets and start a new business. Many thanks to the entire team, thanks to whose work and commitment this has become possible.\u201d<\/em><\/p>","protected":false},"excerpt":{"rendered":"<p>Leasing is a key source of business financing in Poland, and it continues to gain popularity. According to data presented in a report prepared by the Polish Leasing Association and EY-Parthenon, the Polish leasing sector is the fastest-growing market in the European Union, having grown six-fold over the past 18 years, with its current growth rate exceeding PLN 10% annually. In 2023, the barrier of PLN 100 billion in investments financed through leasing in a single year will be broken, placing Poland as the 5th largest market in Europe, and the barrier of PLN 200 billion in the value of assets used by leasing company clients will be broken. According to the aforementioned report, as many as 62% companies in the SME sector identify leasing as a key source of financing, resulting in a significantly higher share of leasing in the receivables subject to restructuring proceedings. A few words about the article - Listen. The main division includes operating and financial leasing, based on ownership and the distinction between the parties to the agreement and the right to depreciate the leased asset. It should be emphasized, however, that the classification of the agreement for both tax and restructuring purposes is determined not by its name, but by the terms and conditions contained therein. In Polish law, leasing is defined under various acts \u2013 the Civil Code, the VAT Act, the Personal Income Tax (PIT) and Corporate Income Tax (CIT) Acts, and the Accounting Act, each of which presents its own and not always congruent qualification criteria. Without going into detail about the intricacies of the individual definitions and their differences within these acts, it should be noted that they mean that the same lease agreement can meet the criteria of an operating lease for tax purposes and a financial lease for balance sheet purposes. The Restructuring Law also provides for different consequences for lease receivables depending on its terms, limiting the classification criterion to the inclusion of the leased asset in the lessee&#039;s fixed assets within the meaning of the Personal Income Tax (PIT) and Corporate Income Tax (CIT) Acts. In the first case, i.e., if the leased asset constitutes a fixed asset for the lessee within the meaning of the Personal Income Tax (PIT) and Corporate Income Tax (CIT) Acts, the restructuring proceedings cover the entire receivable. For the purposes of calculating the creditor&#039;s voting power in the proceedings, the undue portion of the receivable, included in the list of receivables, is reduced by statutory interest, not exceeding PLN 61 TP3T per year, for the period from the date of opening of the proceedings to the due date of each future payment, but no longer than two years. In this case, restructuring of the entire debt arising from the agreement is possible. If, however, the leased asset does not constitute a fixed asset for the lessee within the meaning of the Personal Income Tax (PIT) and Corporate Income Tax (CIT) Acts, the restructuring proceedings cover only that portion of the receivable that relates to the periods preceding the date of opening of the proceedings (in the case of accelerated arrangement, arrangement, and remedial proceedings) or the arrangement date (in the case of arrangement approval proceedings). Receivables arising in subsequent periods are treated as current, not covered by the proceedings. If the arrangement date or the date of the resolution falls during a settlement period, e.g., a month, the receivable for that period is proportionally divided by operation of law into a portion treated as covered by the proceedings and a portion treated as a current receivable. In this case, restructuring is possible only for a portion of the outstanding receivables. The classification of a leasing agreement as part of restructuring proceedings also translates into the possibility of suspending payments and their volume, which, as the experience of PMR Restrukturyzacje SA demonstrates, in many cases constitutes a significant tool for restoring liquidity. In expedited arrangement, composition, and rehabilitation proceedings, a law prohibits the debtor, administrator, or supervisor from fulfilling obligations arising from receivables that are legally covered by the arrangement as inadmissible conduct. However, in the proceedings for approval of an arrangement, despite the lack of implementation of a similar prohibition under restructuring law, one should always bear in mind the provisions of the Penal Code, according to which &quot;whoever, in the event of threatened insolvency or bankruptcy, is unable to satisfy all his creditors, repays or secures only some of them, thereby acting to the detriment of the others, shall be subject to a fine, restriction of liberty or imprisonment for up to 2 years.&quot; To illustrate the effects of including or not including the leased asset in fixed assets in the context of current liquidity during the proceedings, an example can be used: \u2013 Entrepreneur X has a lease liability where the monthly installment is PLN 2,000, and as of the date of opening of the proceedings, he is in arrears with the payment of installments for a total amount of PLN 6,000 and 10 not yet due installments for a total amount of PLN 20,000. If the leased asset were included in fixed assets, entrepreneur X has the option of restructuring the entire amount of the liability, i.e. PLN 26,000. PLN, and repayment is suspended (from the date of opening the proceedings\/arrangement date). However, if the leased asset is not included in the fixed assets under the proceedings, the entrepreneur has the option of restructuring only the due portion of the liability, i.e., PLN 6,000, and during the proceedings will be obligated to pay monthly installments of PLN 2,000 on time. Another crucial issue is the possibility of protecting contracts of key importance to the entrepreneur, including leasing agreements, against termination, with the scope of protection also depending on the terms of the agreement. The Act provides for the possibility of terminating key agreements in three cases: if the creditors&#039; committee consents to the termination, if the entrepreneur fails to perform obligations in the part not covered by the arrangement, or as a result of another circumstance specified in the agreement, if it occurred after the date of opening the proceedings. If the leased asset is included in the fixed assets, the entire receivable is covered by the arrangement, which means there is no premise for non-performance of current obligations, and the protection is significantly broader. A separate issue is the possibility of purchasing the leased asset, which has not been clearly regulated by law. Most leasing agreements provide for the option of purchase\/transfer of ownership of the leased asset only after all agreed installments have been paid. This poses a significant obstacle in the event of termination of the agreement before the approval of the arrangement, which covers only part of the receivables under the agreement. The entrepreneur is unable to repay it, and only a legally binding arrangement modifies the parties&#039; existing contractual obligations in a manner different from that regulated by the agreement. This often leads, in practice, to the financing party refusing to grant the purchase option. In a situation where the repayment terms are modified under the legally binding arrangement before the termination of the leasing agreement (this applies to situations where the arrangement covers only part of the receivables), and the entrepreneur fulfills the agreed terms of the arrangement, the lessor has no basis for refusing to sell\/transfer ownership of the leased asset. The role of the leased asset in the arrangement implementation process is underestimated. It should be noted that it often represents a higher value than the leased asset.<\/p>","protected":false},"author":14,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[19],"tags":[],"ppma_author":[33],"class_list":["post-6021","post","type-post","status-publish","format-standard","hentry","category-blog"],"authors":[{"term_id":33,"user_id":14,"is_guest":0,"slug":"m-zarownapmr-restructuring-pl","display_name":"Marta Zar\u00f3wna","avatar_url":{"url":"https:\/\/pmrsa.pl\/wp-content\/uploads\/2024\/09\/user03-1.jpg","url2x":"https:\/\/pmrsa.pl\/wp-content\/uploads\/2024\/09\/user03-1.jpg"},"0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/posts\/6021","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/users\/14"}],"replies":[{"embeddable":true,"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/comments?post=6021"}],"version-history":[{"count":0,"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/posts\/6021\/revisions"}],"wp:attachment":[{"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/media?parent=6021"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/categories?post=6021"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/tags?post=6021"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/pmrsa.pl\/en\/wp-json\/wp\/v2\/ppma_author?post=6021"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}