New Kid in Town: the Corporate Restructuring Mediator Catarina Serra Introduces Us to the New Player in the Portuguese Restructuring Arena

PorTUGAL New kid in town: The corporate restructuring mediator Catarina Serra introduces us to the new player in the Portuguese restructuring arena hen the Eagles enter into negotiations with their the insolvency administrator/ wrote the song creditors in order to reach an out practitioner. “New kid in town” W of court restructuring agreement. for their famous album The only requirement for the What are the duties of a “Hotel California” released appointment of a CRM is that corporate restructuring in 1977, they were not the company should aim at obviously thinking of the mediator? restructuring: the economic and professional Portuguese financial situation of the The CRM has four core duties: restructuring player just company (pre-insolvency or to assess the company’s economic introduced, which goes by insolvency) seems to be and financial situation, to assess, the name of “corporate 3 completely irrelevant . Despite together with the company’s restructuring mediator” the reference to the out of court directors, the company’s CATArINA SErrA (hereinafter: CRM). Justice of the Portuguese nature of the restructuring, the prospects of restructuring; to Supreme Court Nevertheless, the metaphor legal instrument chosen to carry assist the company on the draft may be helpful to understand the out the restructuring (out of of a restructuring agreement expectations created by the court restructuring arrangements and, finally, to help the company introduction of a new player on or formal restructuring in the negotiations with its the field and the contradictions proceedings) seems equally creditors. involved in the general rules indecisive, since the only way an In particular, in the new applying to the CRM. insolvent company may achieve regime of out of court corporate restructuring is through formal restructuring, the CRM is Where does the (insolvency) proceedings 4. This expected to help the company to corporate restructuring may lead to practical problems draw up a financial and mediator play? (of overlapping), considering that economic assessment, which is these proceedings revolve around meant to provide the elements Given the synchrony between the a concurrent professional – necessary for the creditors to CRM and the new regime of out of court corporate restructuring 1 it was only natural to assume that he or she would be a core player in this regime and an exclusive player of this regime 2. But such “ an assumption would be THE ONLY misleading: not only the appointment of a CRM in the REQUIREMENT regime of out of court corporate restructuring is optional but also FOR THE his/her appointment can APPOINTMENT concern other settings (i.e. other restructuring arrangements or OF A CRM IS THAT proceedings). It is possible to say THE COMPANY that at most the CRM is a natural participant in out of SHOULD AIM AT court arrangements. RESTRUCTURING The law defines the CRM as the person who provides assistance to companies which find themselves either in economic distress or in actual ” insolvency and which plan to 36 | Autumn 2018 PorTUGAL contemplate the restructuring. exceptional cases, the ISSME the third instalment will never be There is only one provision may “bend” the rule and appoint paid when the CMR is appointed concerning his/her role in the a different CRM if it presumes outside formal or hybrid pre-insolvency proceedings, that the CRM who follows on the proceedings (since there may not according to which the CRM is list lacks the skills and the be a restructuring plan, strictly “ assigned the task of providing experience required. speaking, but only a restructuring IT IS ARGUABLE assistance to the company in the In any case – and this is agreement). THAT, DESPITE negotiations. indeed the point to be stressed – As previously mentioned, the Weighing all this, it is the company does not have a payment of the CRM’s HIS NOMEN JURIS , arguable that, despite his nomen saying on the appointment of the remuneration, as well as the juris , the CRM is not a genuine CRM. reimbursement of all the THE CRM IS NOT mediator but rather some kind of Now, a crucial factor for the expenses incurred is usually A GENUINE advisor or consultant, acting company when requesting the borne by the company, with the (more) on behalf of the company appointment of a CRM is the ISSME ensuring only the MEDIATOR BUT and lacking the typical features expectation that there will be, at payment of the first instalment RATHER SOME (independence, impartiality, its side and on its side, someone of the basic remuneration. neutrality) that characterise the endowed with the expertise to KIND OF mediator. As a matter of fact, this carry out the restructuring but, 5. Global assessment ADVISOR OR is not surprising considering a most of all, someone who is As a conclusive remark, it is substantial part of his reliable and trustworthy. If the CONSULTANT submitted considered that the remuneration is borne by the company is not given any chance CRM emerges as a useful company. to choose or contribute to the professional, though – let it be choice of “its” CRM, it is very clear – he/she is not a mediator How and by whom is the unlikely that it will be motivated and the law failed to provide the corporate restructuring to request this appointment. most appropriate setting to foster mediator appointed? the request for his/her ” How and by whom is the Although the initiative belongs to corporate restructuring appointment by the company. But it is still early to predict the company only, the entity with mediator remunerated? the power to appoint the CRM is the outcome of a new player on the so-called Institute for the The CRM’s remuneration the field; so, for now, we should Support of Small and Medium consists of a basic remuneration rather sing: “There’s talk on the street; Enterprises (hereinafter: ISSME). plus a remuneration to be paid in it sounds so familiar. The CRM must have his/her case of a successful conclusion of Great expectations, name registered on an official list the restructuring agreement – a everybody’s watching you. and the rule is that the kind of success fee. (…) appointment respects the The payment of the basic There’s talk on the street; sequential order, i.e., follow the remuneration is split into 3 it’s there to remind you criterion “first in, first out”. In instalments: the first to be paid It doesn’t really matter after the appointment of the which side you’re on” I CRM; the second to be paid after . the drawing up of the Footnotes: “restructuring plan” and the 1 The CRM was introduced by Law Nº 6/2018, of 22nd February, and the regime third after the closure of the of out of court corporate restructuring was negotiations. It follows that only created by Law Nº 8/2018, of 2nd March. 2 This regime is absolutely out of court and the first instalment is completely unfolds into two sub-regimes: the first is sure, the latter depending on the designed to help the company to reach a restructuring agreement with its creditors fulfilment of certain conditions. (negotiation regime) and the second is The rules on remuneration designed to help the company carry out a previously negotiated restructuring are not the clearest and should, agreement (agreement regime). On the therefore, be carefully read. Read topic, see Catarina Serra, “Recent amendments to the Portuguese Insolvency in such a way as to ensure that Law – The forces that determine the the reference to the success of restructuring tools”, in: E urofenix “restructuring plan” stands for a – The Journal of INSOL Europe , 2018, 70, 38 draft ff. reference to the “ of the 3 Furthermore, it is not necessary for the agreement company to enter into negotiations with the restructuring ”. creditors or to intend to do it, for that Otherwise the second instalment matter. 4 When the company is insolvent, the term to will be either paid after the third file for insolvency is of 30 days, at the risk or – what is worse – not paid at of severe consequences for the company’s all (since the final version of the directors if they fail to fulfil this duty. restructuring agreement may only come out of and after the negotiations) and the second and Autumn 2018 | 37.

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