The new Greek Bankruptcy Code (Law 4738/2020), entitled “Debt Settlement and Provision of a Second Chance and Other Provisions,” which has been in force for the past few years and constitutes the incorporation into Greek law of Directive 1023/2019, provides the possibility not only for legal entities, as was the case under the previous law, but also for natural persons who do not engage in commercial activity, to settle or, under certain conditions, be discharged from their debts.
In particular, regarding small-scale bankruptcy proceedings, which constitute the overwhelming majority of cases involving natural persons, sole proprietorships, and corporate entities, the new law provides for a different, simplified, and expedited bankruptcy procedure. This procedure is considered of minor economic significance due to the relatively low value of the debtor’s assets and is exempt from several time-consuming procedural requirements that are otherwise necessary in ordinary bankruptcy proceedings.
This simplified procedure is described in Articles 172–178 of Law 4738/2020.
For natural persons, the criterion for qualification as a small-scale bankruptcy is the value of the individual’s assets. It should be noted that the value of the assets of natural persons must not exceed EUR 350,000. More specifically, the value of real estate property is calculated on the basis of the taxable value used for the calculation of ENFIA (Unified Property Ownership Tax).
For legal entities, small-scale bankruptcy proceedings are defined as those in which the debtor (legal entity) meets at least one of the criteria for classification as a “very small entity” under Article 2 of Law 4308/2014, namely:
- a) Total assets: EUR 350,000,
b) Net turnover: EUR 700,000, and
c) Average number of employees during the financial year: 10 persons.
A prerequisite for the declaration of bankruptcy is the cessation of payments, which is presumed when the debtor fails to pay overdue obligations owed to the State, Social Security Institutions, or credit or financial institutions amounting to at least 60% of their total overdue liabilities for a period of at least six (6) months, provided that the unpaid obligation exceeds EUR 30,000.
The bankruptcy petition is filed electronically through the Electronic Solvency Register either by any creditor or by the debtor and is published for a period of thirty (30) days.
If, within thirty (30) days from the publication of the bankruptcy petition, no intervention is filed against it, or if any intervention concerns only the appointment of the bankruptcy trustee, the petition is accepted by the bankruptcy court solely upon verification that the above time period has elapsed.
Together with the petition, the debtor is required to electronically submit their financial statements, the latest income tax return, and the real estate declaration. The petition must also be accompanied by a list of all creditors and a certificate issued by the competent tax authority regarding debts owed to the State.
If the petition is filed by the debtor, the debtor must also submit an original deposit receipt from the Consignment Deposits and Loans Fund for the amount of EUR 250 to cover the initial expenses of the bankruptcy proceedings, except in cases where:
a) the debtor owns unsecured assets of low value, and
b) the debtor’s annual income does not exceed reasonable living expenses.
The principal advantage of this procedure, for those who meet the eligibility requirements and seek discharge from their debts in order to make a fresh start, is the faster resolution compared to the lengthy procedures of ordinary bankruptcy proceedings.
In any event, it is important for a debtor wishing to be included in the small-scale bankruptcy procedure to make the relevant decision in a timely manner and provide instructions to their legal counsel accordingly, in order to avoid the risk of their petition being dismissed as abusive, either following intervention by a creditor or ex officio by the court.
For any further information, please contact us in order to receive specialized legal advice.
Kostas Makrygiannis (kostas@makrispartners.com)
