Restructuring does not apply to full amount of outstanding social insurance contributions

By November 2, 2016November 28th, 2016Restructuring

Debts of an entrepreneur, which have accrued prior to the opening of restructuring proceedings are commonly thought to be subject of restructuring.

Basically, it is true, however, there are a number of exceptions.

One of them are the employee social security contributions, which failed to be  paid by the entrepreneur (employer). It must be remembered that social security contributions are partly to be paid by the insured (the employee) and partly by the payer (the employer), it is, however, the duty of the employer to pay the entire amount of the social insurance contribution to the Social Insurance Company (ZUS).

Although debt claims arising under unpaid social security contributions are entered in the table of claims in their full amount, only the past and overdue contributions payable by the payer (the employer) are accounted for in the voting rights vested with ZUS– as a creditor – in voting over arrangement proceedings and only this part of outstanding contributions is covered by the arrangement.

What does this mean for the entrepreneur, e.g., in remedial proceedings?

Debts, which are to be restructured, i.e. covered by the arrangement, which set out the principles and dates of  repayments, can only be paid by the entrepreneur in the manner agreed in the arrangement. Whereas, until the arrangement is agreed, the entrepreneur is not to repay any debts, even if he has funds to do so (art. 252, section 1 in connection with art. 297 of the restructuring law).

On the other hand, since social security contributions in the part payable by the employee are excluded from the arrangement (art. 150, section 1 point 4 of the restructuring law), entrepreneurs can pay them as they deem proper.

The important fact for entrepreneurs in remedial proceedings is that after opening of remedial proceedings, their creditors cannot  open enforcement proceedings; and if the enforcement proceedings have been opened prior to the remedial proceedings, then the enforcement proceedings are suspended by virtue of the law until the remedial proceedings are ended or discontinued.

Therefore, part of outstanding social security contributions payable by the entrepreneur (employer) is covered by the arrangement and the entrepreneur cannot pay them at his/her discretion outside the arrangement but part of outstanding social security contributions payable by the employee – can be repaid by the entrepreneur as he/she deems proper. Nonetheless, ZUS cannot enforce the repayment of any of its debt claims within enforcement proceedings once arrangement proceedings have been opened.

Author: Karolina Pacholska, Lidia Wesołowska