Payment of the fixed fee to administrator/liquidator and reimbursement of the related expenses jointly transferred under the obligation of the governing bodies of the debtor

Judgement no. 16 of 09.06.2020 on the exception of unconstitutionality of Article 70 paras. (3) and (13) of Insolvency Law no. 149 of 29 June 2012

On 9 June 2020, the Court delivered a Judgment on the exception of unconstitutionality of the texts “shall be borne jointly by the members of the governing bodies and the associates, the shareholders or the members of the debtor” of Article 32 para. (2) and “under the obligation of the governing bodies” of Article 70 para. (13)^[1].

The Court held that the expressions “shall be jointly transferred by court order under the obligation of the governing bodies” of Article 70 para. (13) and “shall be borne jointly by the members of the governing bodies and the associates, the shareholders or the members of the debtor” of Article 32 para. (2) lead to the conclusion that the obligation to pay the fixed fee and the actual expenses is incurred by natural persons. The obligation to pay does not imply the existence of prejudicial acts from the persons to whom the payment is imposed, nor their subsequent compensation. The persons referred to will be compelled to pay the insolvency administrator's fee and to reimburse the expenses incurred by him/her whenever the insolvent debtor does not have sufficient goods. The only reason why these persons bear the patrimonial burden is that they have held a position in the governing bodies of the insolvent debtor in the last 24 months prior to the insolvency proceedings or that they hold the status of associates, shareholders or members of the insolvent legal entity.

It follows from these legal provisions that the persons mentioned above were obliged to pay the fixed fee and the expenses incurred by the administrator/liquidator in the insolvency proceedings even if they were not guilty.

The Court found an interference with the right to property of the above-mentioned persons.

The Court noted that the general purpose of the Insolvency Law was to satisfy creditors' claims on the debtor's assets by applying the restructuring or bankruptcy proceedings to it and by distributing the final product. This general aim was to ensure stability and financial discipline in the market economy. The Court also established that the legislature pursued the specific purpose of protecting the right to property of the administrator, and the sums of money forming his fee constituting goods. The specific purpose of the Law contributes both to the achievement of its general purpose and to the achievement of the constitutional goals of economic welfare and the protection of the rights and freedoms of others. The mentioned legal purposes fell within the legitimate aims allowed by Article 54 of the Constitution.

The Court also examined whether there were less intrusive alternative measures and whether the legislature could adopt them in order to equally achieve the legitimate aim(s) pursued and to limit less the protected fundamental right, compared to the impugned measures. The Court held that it did not possess the necessary expertise to exactly determine whether the practices identified in other States, for example, would achieve the legitimate aims pursued more effectively than the impugned measures.

At the same time, the Court noted that, from the perspective of Article 54 of the Constitution, there was a conflict of principles in this case. One of the principles was the right to property of the members of the governing bodies. The other principles, on the other side of the conflict, were the right to property of the insolvency administrator/liquidator, which sought to pay the fee and expenses related to the insolvency proceedings, the right to property of creditors and the interest of the country's economic well-being.

The Insolvency Law established a presumption of guilt of the members of the governing bodies, given their obligation to cover the remuneration of the insolvency administrator or the liquidator and the expenses of these subjects in connection with the insolvency and liquidation proceedings. That presumption could be rebutted, as it was clear from the legal texts examined by the Court.

The Court held that the balance between principles should not presuppose the existence of an individual and excessive burden on a person. A person must have effective and adequate safeguards in the event of abuse (e.g., some members of the managership bodies should not be held liable to cover the administrator's and liquidator's fees and expenses when insolvency has been caused by other members of the managership bodies). Even if the affected persons, i.e. the members of the managership bodies and the associates, the shareholders or the members of the debtor, would have had the possibility to prove the absence of their guilt in eventual judicial proceedings, the impugned provisions did not absolve them from the obligation to pay the fee and related expenses. The Court emphasized that such rigid measures clearly disadvantaged the right to property of the persons in question. From this point of view, their right to property was not sufficiently guaranteed.

The Court noted that the category of members of the debtor's governing bodies was a broad category, but not all functions listed in the Insolvency Law and included in the category of members of the debtor's governing bodies had an equal and decisive role in the management of a company. Therefore, the impugned rules had negative consequences for the members of the governing bodies of the insolvent company, which compelled them to pay the fixed fee of the insolvency administrator/liquidator, as well as the expenses incurred by him/her, even if they were not guilty in any way.

The Court noted that Article 248 para. (1) of the Insolvency Law established that “if in the course of the proceedings persons to whom the occurrence of the insolvency status of the debtor is attributable are identified, at the request of the insolvency administrator/liquidator the insolvency court may order that part of the insolvent debtor's debts be borne by the members of its governing bodies”. The Court considered that the principle of fair balance required that the standard of guilt of the members of the governing bodies in the occurrence of the debtor's insolvency established by Article 248 of the Law, applicable to the general purpose of the Insolvency Law, be applicable to the specific purpose of payment of the administrator's/liquidator's fee.

The Court found the texts “shall be borne jointly by the members of the governing bodies and the associates, the shareholders or the members of the debtor” of Article 32 para. (2) and “under the obligation of the governing bodies” of Article 70 para. (13) of the Insolvency Law no. 149 of 29 June 2012 constitutional, insofar as they are proven guilty in the event of insolvency.