Corporate Rehabilitation in Greece – Complete FAQ Guide

The rehabilitation procedure, under Law 4738/2020, constitutes a collective pre-insolvency proceeding aimed at the preservation, utilisation, restructuring, and restoration of the enterprise through court confirmation of the relevant agreement, without prejudicing the collective satisfaction of creditors. Under the applicable legislative provisions, the enterprise to be rehabilitated may agree with its creditors on any restructuring of its assets and liabilities, depending on the rescue strategy it chooses to pursue, subject to compliance with the no-worse-off principle and the equal treatment of creditors.
Read more: The Mosaic of the Debtor’s Options

The condition is that the person carrying on a business activity is in a state of present or threatened inability to perform due obligations, or at least there is a likelihood of insolvency, and it is principally probable that the rehabilitation agreement establishes a reasonable prospect of securing the viability of the enterprise as restructured under the agreement. For the agreement to be confirmed on the debtor’s initiative, consent must be provided by creditors representing more than 50% of claims with special privilege (primarily mortgage, pre-notation, and pledge) and more than 50% of the remaining claims, or alternatively by creditors representing more than 60% of all claims and more than 50% of claims with special privilege.
Read more: Corporate Rehabilitation with Writeoff of State/EFKA Debts

Under the new law, writeoff of debts owed to the State is possible — not merely of interest and penalties but of the principal debt itself. By contrast, the out-of-court restructuring mechanism expressly prohibits the writeoff of principal debt arising from withheld and pass-through taxes and social security contributions (Article 22). However, the fundamental condition for the writeoff to be admissible is that the State must not be placed in a worse position regarding its assessed claims than it would be in the event of bankruptcy (no-worse-off principle). As the courts have declared: “Given the socio-economic crisis, the viability of the enterprise takes precedence, and before the prospect of its survival, the claims of the Greek State yield” (Multi-Member Court of Athens 233/2019 — writeoff of 78.5%).
Read more: The Possibility of Writing Off Debts to the State in Rehabilitation: 7 Q&As

The consent of public bodies is deemed given once the conditions of Article 37(2) are met. Specifically, the deemed consent applies when: (a) the principal debt owed to the relevant public body does not exceed €15 million, (b) the Expert’s report confirms that the no-worse-off principle is satisfied, and (c) the total amount owed to public bodies is lower than the total amount owed to private creditors, as shown in the Expert’s report. Where these conditions are met, the claims of public bodies are aggregated with those of the consenting creditors.
Read more: The Possibility of Writing Off Debts to the State in Rehabilitation: 7 Q&As

The no-worse-off principle means that a creditor cannot be placed in a worse position than that in which it would find itself were it to initiate enforcement proceedings and, in the specific context of rehabilitation, than that in which it would find itself in the event of the debtor’s insolvency. Under the liquidation distribution rules applicable in insolvency, a creditor holding a security right (mortgage, pre-notation, or pledge) would receive 65%, a creditor with a general privilege (including the State and Social Security Bodies) would receive 25%, and the remaining creditors would receive the balance of 10% of the liquidation proceeds.
Read more: Corporate Debt Restructuring — No-Worse-Off Principle

Under Article 54(3) of Law 4738/2020, the court confirms the rehabilitation agreement when, among other conditions, the agreement treats creditors in the same class on the basis of the principle of equal treatment. The law itself expressly provides that deviations from equal treatment are permitted for a significant business or social reason to be specifically stated in the court’s judgment, or if the affected creditor consents to the deviation — for example, employment claims may be granted preferential treatment. Illustratively, the Court of Appeal of Athens 5177/2017 held that a term providing for interest-bearing repayment to banks and interest-free repayment to State/EFKA did not violate the principle, as the banks “are secured by pre-notations of mortgage on the hotel complex.”
Read more: Possibility of Restructuring and Writeoff — Equal Treatment of Creditors

In rehabilitation, unlike the out-of-court mechanism, there is no statutory cap on the number of instalments, nor is a specific interest rate prescribed. Thus, in Multi-Member Court of Kalamata, debts both to the State and to EFKA were restructured in 240 interest-free instalments (20 years), with the first instalment payable within 90 working days of publication of the confirmation decision. By contrast, under the out-of-court restructuring mechanism — the most widely used debt restructuring tool — State and EFKA debts may be restructured in up to 240 instalments but at an interest rate of 3%; whereas in rehabilitation, the number of instalments and any interest-free arrangement are freely agreed in the agreement, without a statutory upper limit.
Read more: Decision of Multi-Member Court of Kalamata 11/2023 — Confirmation of Rehabilitation Agreement

This is the major practical problem. Under a circular (POL 1049/8.3.2018) applicable under the former insolvency code, confirmation of a rehabilitation agreement did not in principle affect the liability of jointly and severally liable persons, unless the agreement expressly provided otherwise. Moreover, Article 60(3) of Law 4738/2020 provides that the rights of creditors against guarantors and co-debtors of the debtor are limited to the same amount as the claim against the debtor only if the relevant creditor expressly consents. This is further confirmed by the recent Circular E.2117/2021. Consequently, the jointly liable director ideally should not hold assets in his own name, as otherwise there would be no incentive to agree to rehabilitation with a debt writeoff content.
Read more: The Mosaic of the Debtor’s Options

Claims that arose after the issuance of the confirmation decision are not covered by the agreement, in accordance with Article 60(2) of Law 4738/2020: “Creditors whose claims arose after the issuance of the decision confirming the rehabilitation agreement are not bound [by it]” (Single-Member Court of Athens 5052/2023). The same conclusion was reached by Multi-Member Court of Athens 796/2023.
Read more: Decision of Single-Member Court of Athens 5052/2023 — Non-Binding Effect on Post-Confirmation Creditors

The filing of an application for confirmation of a rehabilitation agreement entails an automatic stay of individual and collective enforcement measures, interim measures, and the like (Art. 50 of Law 4738/2020). Provisional measures may also be requested from the court before the application is filed, provided that creditors representing at least 20% of total liabilities consent. Moreover, even after confirmation, strict compliance with the agreement can support a finding of imminent danger in the event of enforcement by other creditors. Single-Member Court of Kalamata 230/2023 suspended enforcement proceedings initiated by the State against a company for approximately €200,000 based on an assessment decision, considering that an immediate danger to the company was probable, a significant element being that the company had recently been subject to rehabilitation proceedings whose terms it was strictly complying with.
Read more: Decision of Single-Member Court of Kalamata 230/2023 — Suspension of State Enforcement after Rehabilitation

The principal tax benefit under Article 170(3) of Law 4738/2020 is that profit from the transfer of the debtor’s assets pursuant to a rehabilitation agreement is exempt from income tax on both natural and legal persons. Moreover, under Article 170(4) of the same Law, every contract concluded and every act performed in the context of the rehabilitation agreement is exempt from stamp duty and any other indirect tax or levy (except VAT). In addition, the fees of notaries, lawyers, judicial bailiffs, and registry officers are capped at 30% (Article 171(1) of Law 4738/2020).
Read more: Rehabilitative Transfer of Real Property under Law 4738/2020 — Tax Exemptions and Relationship Framework

The solution to corporate over-indebtedness is never one-dimensional; it requires the design of the appropriate strategy at any given time from among the available statutory options so that the most advantageous one may be adopted based on each company’s profile. Rehabilitation is particularly appropriate in cases involving debts to private third-party creditors and significant debts to public bodies — unlike the out-of-court mechanism, rehabilitation permits writeoff of the principal debt even in the case of withheld/pass-through taxes and social security contributions, while the deemed State/EFKA consent is available for liabilities of up to €15 million separately.
Read more: Corporate Rehabilitation with Writeoff of State/EFKA Debts — Strategy and Outcome

In decision 11/2020 of the Multi-Member Court of Rethymno, 60% of the principal debt and 100% of surcharges, interest, fines, and other charges were written off, with the remaining debt payable in 180 equal interest-free monthly instalments. In the same decision, a term providing for repayment of bank claims over 10 years and of State and EFKA claims over 15 years was upheld as valid, “since there is no issue of unequal treatment between EFKA and the credit institutions, which are secured creditors” (Multi-Member Court of Rethymno 11/2020).
Read more: Possibility of Restructuring and Writeoff — Equal Treatment of Creditors

The role of the Expert in the rehabilitation procedure is pivotal. The mandatory content of the Expert’s report is prescribed by Joint Ministerial Decision 26400/2021. Deficiencies in the Expert’s report may even lead to the rejection of the rehabilitation application. The Expert certifies in the report that the conditions and requirements of the procedure are satisfied, and the report constitutes an important element for the court’s assessment, which is, however, free to decide differently.
Read more: Corporate Debt Restructuring — No-Worse-Off Principle

Under Article 60(6)(c) of Law 4738/2020: “Restructured debts to the State and Social Security Bodies become current subject to compliance with the rehabilitation agreement, and the competent authorities are obliged to issue the corresponding clearance certificates, in accordance with the provisions of the rehabilitation agreement.” The Administration is obliged to act in compliance with the confirmation decision and to apply the terms of the confirmed agreement, which prevails over the existing legislative and regulatory framework for the issuance of tax clearance certificates or debt confirmation statements (Legal Council of the State Opinion 55/2016, Dept. A). This is further confirmed by Circular E.2117/2021.
Read more: Rehabilitative Transfer of Real Property under Law 4738/2020 — Tax Exemptions and Relationship Framework