The restructuring process is an important tool for companies that find themselves in financial difficulties. In Poland, the law provides for several forms of restructuring proceedings, including rehabilitation proceedings and composition proceedings.
Arrangement proceedings or rehabilitation proceedings – which restructuring solution should you choose?
5 min.
26 March 2025
Arrangement proceedings or rehabilitation proceedings – which restructuring solution should you choose?
5 min.
26 March 2025
The restructuring process is an important tool for companies that find themselves in financial difficulties. In Poland, the law provides for several forms of restructuring proceedings, including rehabilitation proceedings and composition proceedings.
Each of them has different applications and legal consequences, so choosing the right solution requires thorough analysis. We will discuss the differences between these procedures, their advantages and disadvantages, and help you make the best decision.
How does rehabilitation differ from composition?
Rehabilitation and composition are restructuring tools provided for in the Restructuring Law. The significant difference between them lies in the degree of interference in the functioning of the enterprise. Composition is based on negotiations with creditors to reach an agreement on the repayment of liabilities.
The company can continue its operations and the management retains full control over the enterprise. In the case of rehabilitation proceedings, in addition to negotiations, there are remedial measures, which may include employment restructuring, withdrawal from unprofitable contracts or the sale of redundant assets. In rehabilitation, the management is taken over by the rehabilitation administrator, which means that the existing owners lose control of the company. The choice between these two procedures depends on the severity of the financial problems and the scale of the necessary changes in the company’s structure.
When is rehabilitation the best solution?
Rehabilitation is the best choice when a company is in serious financial crisis and requires comprehensive restructuring. It is a procedure that provides broad protection from creditors and allows for remedial measures that are not possible in other forms of restructuring. Companies threatened with bailiff enforcement, loss of important contracts or requiring profound operational changes often decide on rehabilitation as the only effective solution. The possibility of terminating unprofitable contracts or reducing employment costs are significant benefits that make rehabilitation a way to save a company from bankruptcy.
Advantages and disadvantages of reorganisation proceedings
The entrepreneur gains extensive restructuring options, but their implementation has significant consequences. The positive aspects of this procedure are primarily protection against enforcement and the possibility of implementing profound organisational and financial changes. The company can withdraw from unfavourable contracts, reduce operating costs and prepare a new strategy under the supervision of the rehabilitation administrator.
On the other hand, restructuring means losing control of the company, which may be difficult for many owners to accept. This procedure is also more complicated and time-consuming than arrangement proceedings, and its effectiveness depends on the effective implementation of remedial measures. In addition, its length and formality may affect the perception of the company by contractors and customers, which poses an additional challenge for the company.
In which cases is it better to choose arrangement proceedings?
Arrangement proceedings are more suitable for companies that have temporary liquidity problems but still have stable sources of income. They allow for negotiations with creditors and debt restructuring without the need to hand over management to a reorganisation administrator. This allows the company to retain control over its operations and focus on gradually regaining financial stability.
This is a good solution for companies that do not require radical operational changes but want to avoid bankruptcy by obtaining more favourable terms for the repayment of their liabilities. In practice, arrangement proceedings work well in cases where creditors are willing to cooperate and there is a chance of reaching a compromise quickly. The speed and lower costs of this procedure compared to rehabilitation make it a more effective method of restructuring for many companies. However, it is worth remembering that the success of an arrangement depends largely on the creditors’ openness to negotiation and realistic proposals for the repayment of liabilities.
What does the reorganisation process look like step by step?
The reorganisation process begins with the preparation of an application to the restructuring court. Once it has been accepted, an administrator is appointed to take control of the company and implement remedial measures. An important element of reorganisation is the preparation of a restructuring plan, which includes both financial and organisational changes. In the next stage, measures are introduced to improve the company’s situation, such as the sale of assets, negotiations with contractors and cost reduction. The final phase is to present settlement proposals to creditors and vote on the acceptance of the settlement, which, once approved by the court, enables the company to emerge from the crisis.
What are the most common mistakes when choosing a form of restructuring?
One of the most common mistakes is to decide on restructuring too late. Many companies wait until their financial situation is already extremely difficult, which significantly limits their options. Another mistake is misjudging the condition of the company and choosing reorganisation instead of a simpler type of procedure, or vice versa. Failure to reach an agreement with the main creditors and insufficient preparation of settlement proposals are further pitfalls that can lead to the failure of restructuring.
Cooperation with restructuring advisers is also important, as it can determine the success of the entire process. If there is a lack of clear communication, the strategy is imprecise, and the adviser is not fully involved in analysing the company’s situation, procedural errors arise which not only prolong the restructuring but may also weaken the company’s negotiating position.
How to make the best decision?
The decision to choose the right form of restructuring requires a thorough analysis of the financial situation and consultation with experts. Reorganisation is a solution for companies that need profound changes and protection from enforcement, while composition proceedings are more suitable when the problem is only excessive debt. Every company is unique, so there is no one-size-fits-all solution – it is important to tailor the restructuring strategy to the actual needs and long-term goals of the company. The support of experienced specialists is invaluable in such decisions. At RBBC, we help entrepreneurs go through the restructuring process efficiently and effectively, offering comprehensive assistance at every stage of the change. The right approach and swift action can not only protect the company from bankruptcy, but also create a solid foundation for its further development.
Related entries
Suspension of enforcement without court proceedings, i.e. ‘Anti-Crisis Shield 4.0’ and new simplified proceedings for approval of an arrangement
In response to the effects of the epidemic and in order to create another tool to help entrepreneurs, the legislator has introduced a new simplified restructuring procedure based on the existing arrangement approval procedure.
5 min.
19 July 2020
Arrangement approval proceedings – how can an entrepreneur quickly regain control over their finances?
The arrangement approval procedure is one of the most important restructuring tools, allowing entrepreneurs in financial difficulties to conclude favourable arrangements with their creditors.
6 min.
12 January 2025
Bankruptcies and Restructuring – summary of the first quarter of 2020.
Data on insolvency and restructuring from the first quarter of 2020 compared to the same period last year show a stabilisation in the number of restructuring proceedings and a slight increase in the number of insolvency proceedings, both among companies and consumers.
2 min.
22 April 2020
How to effectively prepare a company for restructuring?
Company restructuring sounds like a challenge that only affects those who find themselves in crisis. But the truth is that every organisation, regardless of its current situation, may one day face the need to take corrective action.
10 min.
29 November 2024
Restructuring adviser – what exactly are their powers?
Restructuring is one of the most important legal tools that the legislator has provided for entrepreneurs in financial difficulties. For this process to be effective, it is necessary to engage a specialist with the appropriate qualifications, experience and statutory powers – a restructuring adviser.
7 min.
23 April 2025
Reorganisation proceedings – what do you need to know to successfully restructure your company?
Reorganisation proceedings are one of the most effective restructuring tools, allowing entrepreneurs to protect themselves from creditors and implement corrective measures. Thanks to this, a company can avoid bankruptcy and gain time to implement a strategy to improve its financial situation. What does this process look like and how can you increase its chances of success?
4 min.
11 February 2025
Amendment to the restructuring law – what will change in 2025?
On 23 August 2025, an amendment to the restructuring law came into force, implementing the so-called ‘Second Chance Directive’. The new regulations are intended to harmonise the rules for restructuring companies across the European Union and increase the effectiveness of bankruptcy prevention proceedings.
8 min.
04 November 2025
Arrangement proceedings – how to reach an agreement with creditors and save your company?
Increasing debt, liquidity problems and mounting creditor claims can threaten the functioning of even prosperous companies. Many entrepreneurs in such a situation face a dilemma: is bankruptcy the only solution?
5 min.
05 February 2025
