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Out-of-court settlement for companies with state arrears and bank loans

The long-anticipated out-of-court settlement allowing the restructuring of arrears owed by private sector companies to the Greek state and to banks goes into effect as of 3. August 2017, when the electronic platform opens for submissions.

A total of 300,000 companies have the chance to solve their financial indebtedness.

The out-of-court settlement mechanism is the considered to be the most powerful tool to deal with ‘read loans’ and arrears to the state.

It is estimated that 150,000 companies have loans to banks and another 150,000 companies have arrears to the tax office and the social security funds. Big, medium, small and ‘private’ enterprises are called to fully open their assets towards their creditors and show that they are willing to settle their debts based on their real financial situation. These businesses will distance themselves from the notorious and ‘strategic dead beat’ for whom there will be no tolerance whatsoever.

Among others, the framework includes

  • The company request for out-of-court settlement must include real estate, deposits and other assets of the business, of the owner and of owner relatives (capital.gr).
  • A full commercial assessment of the value of real estate held by the debtor, otherwise the value of property will be assessed through objective tax criteria – the regime used by the tax bureau to impose annual property tax fees.”
  • All of private entity’s other assets must be assessed, such as securities, deposits, shares and arrears owed to the business by third parties.

For arrears to the state, there is a 120-month installment plan.

“Arrears to the state that are not included in the new out-of-court settlement framework will also be eligible for payment in the 120-month installment plan, with the lowest monthly payment being 50 euros.”

Following the commencement of a restructuring plan for a given business, any arrears by the state to the latter will be offset by its verified debts to the state.

Debts to banks

According to media, it will take another three months until the banks are ready with the full automation of the procedures, because the banks have not been able to prepare automated business sustainability analyzes, which will be integrated into the system gradually.

Banks are expected to finalize the settlement packages within the current week, a ministerial decision is expected by the end of the month.

According to information obtained by financial news website Capital.gr, the settlement packages prepared by the banks are:

  • debts up to €3,000: 36-month installment plan
  • debts €3,001 – €20,000: 120-month installment plan
  • debts €20,001 – €50,000: “haircut in compound interest, and if the company has arrears to the state also “haircut” of fines and surcharges. 120-month installment plan for the remaining amount.
  • debts over €50,0001: sustainability analysis will be also necessary either automatized for debts €50,001 – €300,000 or by independent companies for debts over €2,000,000. Depending on the debt amount, approval by banks in local, regional or central level will be needed as wells as approval by the tax office, if also arrears to the state.

Debtors and private ‘creditors’

Affected by the out of court settlement are not only the debtors but also their private ‘creditors’ like suppliers, unpaid workers, and others to whom the debtor owes outstanding payments.

  • The debtor (company, self-employed) applying for the settlement will also have to submit the tax number (AFM) of all his creditors.
  • The system will automatically inform the creditors per e-mail that the debtor is ready to go to out-of-court settlement.
  • If the debtor ‘forgets’ some of his creditors, they may not be able to demand outstanding payments. (protothema.gr)

The specific law for the arrears to the state, 4469/2017, was signed by the relevant deputy economy minister and published in the July 14, 2017 edition of the government gazette, after being signed two days earlier.

Inclusion in the out-of-court settlement framework for arrears to the state must be approved by the tax bureau.

KTG understands that out-of-court settlement for business bank loans will be also handled through the automatic system of the state platform.

PS as the topic is total ‘foreign’ to KTG, I hope I could compile a useful summary of the framework. At the same time, it should be noted that more and more details come out on a dialy basis. Therefore: Always ask your accountant about details of the issue.

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2 comments

  1. This is good news because many people and companies couldn’t afford the 12 settlements with no discount on the fines so were really stuck as their bank accounts were frozen!

    So yes, whoever is affected by this either go speak with the accountant, or if you cannot afford one, walk into the tax office/social security fund office and arrange the settlement if you are not good with computers and cannot do it online!

  2. keeptalkinggreece

    only online possible