Improving enforcement of claims against debtors with deficient representative bodies

Changes to enforcement proceedings against a legal person

One of the proposed amendment provides for the introduction of the provision of Article 818(1) to the Code of Civil Procedure, according to which deficiencies in the composition of the bodies of an organisational unit that is the debtor will no longer constitute grounds for suspension of enforcement proceedings.

In the current legal state, the enforcement authority suspends enforcement proceedings ex officio if it turns out that the debtor does not have the capacity to sue or does not have a statutory representative (in fact, the provision is also applied to legal persons with deficiencies in their representation).

In addition, under the current state of law, at the request of the creditor, or in the case where enforcement has been initiated ex officio without such a request, the court appoints a guardian for a debtor lacking capacity for the duration of the appointment of the statutory representative (however, the procedure for the appointment of the guardian is itself time-consuming and requires, inter alia, the determination of the amount of the advance on his remuneration, which the creditor is obliged to pay).

It should be noted that many debtors in practice, in connection with the current wording of the legislation, have led to the paralysis of enforcement by resigning or dismissing board members in the course of enforcement. Such a situation, although not the same as a loss of judicial or procedural capacity, significantly affected the possibility of further enforcement. Moreover, after the time-consuming procedure for the appointment of a guardian, the debtor often reappointed new board members, thus removing the basis for appointing a guardian and, if necessary, then resigned them again, repeating this mechanism without consequence.

The proposed solution in the new Article 818 (1) CCP is aimed at counteracting such abuses and irregularities on the part of debtors who, before or during the enforcement proceedings, make changes to the composition of the bodies, which impedes the course of the enforcement proceedings and the possibility to enforce claims quickly and effectively.

The draft under discussion assumes that deficiencies in the composition of organs of a debtor organisational unit will not constitute grounds for suspension of enforcement proceedings, nor will they constitute automatic grounds for appointment of a guardian for such an entity.

If it is found that further action by the debtor is not possible due to deficiencies in the composition of its organs (which is often a deliberate and conscious effort by the debtor), the bailiff is to inform the competent court of this circumstance, at the same time handing over the case file to it. The court will then only appoint a guardian for the debtor if this is necessary to protect the debtor’s interests and the debtor’s assets are sufficient to cover the costs involved. This means that, if the amendments enter into force as proposed, the costs of appointing a guardian will be borne by the debtor and the advance payment of the guardian’s remuneration will be paid by the court and not, as before, by the creditor.

Moreover, if the service of the letter on the guardian takes place before the lapse of 2 weeks from the day on which the enforcement body receives information on the completion of deficiencies in the organisational unit authorities being the debtor, the service will be effective against the debtor.

The legislature has also included in the draft a proposal that in the event of the need to re-establish a guardian in the same case due to deficiencies preventing the debtor from acting, the court should – as far as possible – appoint the same person as previously appointed as guardian.

Summary

 The scope of the proposed amendment outlined above should be assessed positively. There is no denying the fact that the changes are against unreliable debtors who, through deliberate changes to their authorities and instrumental use of the provisions, made enforcement proceedings impossible. The amendment should make it easier for creditors to pursue claims in such situations.

The drafter rightly perceived that the state is obliged to provide the creditor in possession of an enforceable title with as much support as possible in order to enable him to realise the rights established by such title.

The draft is still under consideration and amendments to it have now been proposed by the Senate. However, these amendments do not relate to the provision in question.

Importantly, if the bill under discussion enters into force, according to the intertemporal provisions, Article 818(1) of the CCP will apply to cases already initiated and not yet concluded.