Insolvency - a great deal for lawyers in times of crisis - Interview for Business24

Aug 22, 2012, Sursa
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The crisis has increased the number of insolvencies, but also increased the wealth for lawyers. Annually 22,000 companies announces its entry into insolvency, so Remus Borza, lawyer, said during the crisis, insolvency became the best deal.

Lawyers can make money in crisis from insolvency procedure, which was the" queen "in low in the last two years and will be in the next 3-5 years.

If we look at the Trade Registry, we see that annual 22,000 companies become insolvent. The insolvency itself has become a business.

“There are many benefits for both attorneys and companies. In terms of the insolvent company, the benefits are immeasurable, "said Remus Borza in an interview Business24.

Considering the pulse of the market law in 2011, which was the state of mind? Romanian lawyers made more money during the crisis?

Law firms’ services are conditioned by the economic situation. Of course law market is no longer at the level 2000-2008, when grown explosively, but in 2011 the situation has stabilized after two years of decline.

From our perspective, we have consolidated our business; we had the best turnover of previous years because we developed a division of insolvency.

We are active in the market with two specialized companies for judicial reorganization, both active with over 1 billion euros in portfolio. From this point of view, was an exceptional year, we had several of assets’ value operations. Overall, at group level, year 2011 was as 2010 and 2009 together. This happened on the segment dedicated insolvency consulting services.

In the 90s, the first money in law firms was made from adoptions. It was a boom in adoptions in 90-93, many lawyers have hit it big. Then, for about ten years, lawyers have made a career on refunds estate market and real estate claims. Now insolvency is trendy.

The best buying opportunity of a stock is in crisis because shareholder value is at a historic minimum price and it is very tempting to buy. During the boom, they are all overvalued. Lawyers can make money in crisis from insolvency procedure, which was the" queen "in low in the last two years and will be in the next 3-5 years. If we look at the Trade Registry, we see that annual 22,000 companies become insolvent.

The insolvency itself has become a business. There are many benefits for both attorneys and companies. In terms of the insolvent company, the benefits are immeasurable. First of all no one can execute your property, any legal action started against you is suspended by law and in addition you have much more opportunities on hand to restructure your debt.

How did the mergers and acquisitions in 2011? The crisis has not brought many mergers as it was estimated in previous years ...

Were years during the economic boom that has made ​​money in mergers and acquisitions, and again will return to fashion this segment. In 2011, the crisis has not brought many mergers and acquisitions because all players are held strong whether we talk about banks or service area.

Across Europe we can already talk about a return of the crisis on the background of the sovereign debt and delay of public debt restructuring measures.

Following a survey conducted in early December, it turns out that 31% of managers are considering entering into insolvency or restructuring activity in 2012. Why do you think that managers of companies from Romania are watching the year 2012 with reluctance, some being convinced that it will be the hardest year of the three years of crisis?

This is about international economic context. Throughout Europe are elections, even in the U.S.. In an election year you can’t make economic performance, which is available in any market economy.

Some large companies in Romania, which have been the subject of a insolvency procedure and subsequent file of a reorganization plan now have came out exonerated from debt, embellish, with other indicators and able to cope much better the current context.

I give you an example. We manage Plafar, which is a state owned company, 51% owned by the Ministry of Economy and 49% by Fondul Proprietatea. We took Plafar on 17 March 2009 with 70 billion loss in 2008.

After 16 consecutive years of losses, Plafar ended 2011 on profit. It is the first plan of reorganization in which all claims have been paid in full and at the nominal value. At the end of February 2012, Plafar will come out of insolvency procedure.

If in 2009, Plafar was not listed in any supermarket, at this moment there is no such store which does not have Plafar products. I have took over five productive branches, each of them was making chamomile tea and had 250 employees.

At this moment, there are 87 employees and a single productive unit. With a third of the number of employees and one manufacturing unit we performed seven times the turnover of 2008.

Only in insolvency I could take such restructuring measures for personnel, operations redesign, rehabilitation of buildings, rebranding, listing products, promotion and innovation.

Many of the managers from the private sector see a rescue in insolvency. Of insolvency procedure you can get out well and reinforced.

Can we talk about lowering in social contributions this year when the state needs money?

If we refer to last year direct foreign investments we did not excelled at this chapter. Bad signs also have 2012. The government is counting on the 2-3 billion which might take them from European funds. Unlikely to succeed, considering that the average absorption of European funds in 2007 so far was around 5%.

In terms of the employer the social contributions are indeed burdening. It should be taken a little burden of the employer shoulders because if we look at the 24% VAT in conjunction with tax labor and extra charges, we see that we have a problem.

It is unlikely to see reductions in social contributions because we have those budget constraints. In November 2011, Secretary of State in the Ministry of Finance, Bogdan Dragoi was in America and came with tail between legs. He went after 2 billion dollars and came with no dollar.

External financing costs are relatively high even macroeconomic indicators are unquestionably much better than other countries in Europe. Unfortunately, investors see European region as a unit.

Indirectly we pay costs of lack of reform in Europe. Unlikely to see reductions in social contributions even more because it's an election year.

There will be many electoral charities, probably they will increase pensions, but I do not think we will see a relaxation this fiscal year. Already we see repression in the street, many related to the crisis. After all, 2012 will be again a year dedicated to economic adjustments and not for stimulate the economy, as it was 2011?

Unfortunately, it wasn’t adjusted enough in 2011, it would be place in 2012. Unfortunately, there are other priorities and we talk about an election year in which the costs will be too big to still work on adjustments.

In reality, the public servants have gone too few, especially at the level of civils. From 4 million employees, one million are still in the public sector and the discrepancy is much higher at the salary fund. From 18 billion representing National Fund Salaries, 12 billion are allocated to one million a of servants. Here's how one third of the 4 million employees consume two-thirds of the National Salaries Fund.

This can be seen as social inequality. Those who give added value and create are those of the private sector. That growth in 2011 came from the private sector. If we look at salary level, we see that the 3 million employees in private sector are earning much worse than state employees.

The highest salaries about up to 5000 RON are in the budgetary area. Is still more room for reform because it's a over dimensioned state apparatus, but I do not think the current government can afford cuts in an election year.

What do you think about the latest economic developments in Europe, particularly for country ratings downgrade of France and Austria? How do you think this decision will reflect on the Romanian economy?

As a result of joining the EU, the effects will be felt directly and Romania in terms of the excessive cost of external financing. Even we have better outcomes than countries with a more developed economy in Europe, is not seen a differentiated approach regarding Romania.

Economic recession that is likely to enter Europe will have immediate and direct impact on Romania. Perhaps 2012 will be a year of severe restructurings across the EU, in all economies of the member countries, following that in 2013 we start to grow again.

As a lawyer, you are often confronted with with companies who are about to enter insolvency. Regarding state as a company, from where do you think it might make more savings? 2012 is seen as a difficult year ...

State could make savings from the reduction of another 100,000 servants jobs. Then, the state can bring money from arrears. There are 1025 companies state-owned in majority or minority which records at the level of consolidated state debt for over 16 billion lei, or 4 billion

These companies have no cash, but they have active. Why the state do not put them in insolvency or why not privatize? Is still is a fertile playground for "tick", for dedicated contracts. This is the real reason why those companies are still kept alive.

We are 20 years after changing economic and social model organization, but after 16 years since we have a law of insolvency, it is not yet applicable to state regies. The highest arrears are just on these regies. CFR is the champion with 13.300 billion RON debts to the state budget.

They are intangible because insolvency law is not applicable to these regies. Budget could take a lot of money out from there.

Then, the state would be able to get money from the adoption of a law on health. Every year they go "down the drain" 6 billion euros of which 4 billion to the National House of Health Insurance and other 2 billion to the Ministry of Health.

In the last 20 years were allocated 4 billion euros annually, which can not be seen. We do not have better medical services or more efficient equipment. There it was again a playground for dedicated contracts. 

Also, agriculture could make money, but it is circumstantial. Last year was an exceptional year with record production, which had a significant share in GDP.

I do not know if this year will repeat those performances because we are in a extensive drought. As long as the Romanian agriculture is not mechanized and irrigated, it can not make the performance. Under Ceausescu were 2.7 million hectares irrigated; now we only have 230,000 hectares. As long as the government has not assumed to introduce tax on agricultural land uncultivated, we have a problem. We have 9 million hectares, of which about four million are fallow.

Agriculture must be a priority, should be allocate more money for mechanization because the wars of this century will goes on the food resources and minerals. For Switzerland there's no shame to be an essentially agrarian country. Switzerland does not have industry, has little tourism, banking and much agriculture long rest. We always had the vocation for agricultural country, which unfortunately we abandoned it after 90.

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