Preventive Restructuring Frameworks in Greece

Preventive restructuring frameworks in Greece give financially distressed businesses a formal path to reorganise their debts before insolvency becomes unavoidable. The Greek insolvency system, modernised through the Insolvency Code (Law 4738/2020), places early intervention at its centre, offering debtors and creditors structured tools to negotiate, agree and implement a rescue plan under judicial supervision. This guide covers eligibility criteria, the main procedures available, creditor and debtor rights, practical timelines, common pitfalls, and what businesses operating in Greece should prepare before entering the process.

Preventive restructuring is a collective term for mechanisms that allow a viable but financially stressed business to restructure its liabilities without first being declared insolvent. In Greece, the primary vehicle is the restructuring plan procedure under Law 4738/2020, which replaced the earlier Bankruptcy Code and aligned Greek law with the EU Directive on Preventive Restructuring Frameworks (Directive 2019/1023). The law applies to natural persons and legal entities engaged in commercial activity, provided they meet the eligibility threshold of being "likely to become insolvent" rather than already insolvent.

The framework distinguishes between two broad situations. First, a debtor who is not yet insolvent but faces a probable inability to meet obligations within the foreseeable future. Second, a debtor who is already in default but whose business remains economically viable if the debt burden is reduced. Both situations can, in principle, be addressed through the restructuring plan procedure, though the procedural requirements differ in detail.

The competent court for restructuring matters is the Multi-Member Court of First Instance (Polymeles Protodikeio) of the debtor';s registered seat. The court does not manage the restructuring itself; it confirms the plan, grants stays, and resolves disputes. Day-to-day negotiations happen between the debtor and its creditors, often with the assistance of a court-appointed insolvency practitioner.

A key feature of the Greek framework is the "best interest of creditors" test. Any restructuring plan must offer each creditor at least as much as they would receive in a hypothetical liquidation. This test is applied by the court when confirming the plan and is frequently the subject of expert evidence.

Not every distressed business qualifies for the preventive restructuring procedure. Law 4738/2020 sets out specific eligibility conditions that must be satisfied before a debtor can file an application.

The debtor must be engaged in commercial activity - sole traders, partnerships, limited liability companies and sociétés anonymes all qualify. Certain regulated entities, such as credit institutions and insurance companies, are excluded and follow separate regimes. The debtor must demonstrate that insolvency is "probable" rather than certain or already existing, though in practice the boundary is assessed case by case.

Greece has also introduced early warning tools as required by the EU Directive. These include:

• Access to up-to-date information on available restructuring procedures through official channels.
• Incentives for debtors to seek advice at an early stage, before financial difficulties become acute.
• Confidential pre-insolvency advisory services available through the Special Secretariat for Private Debt Management (Eidiki Grammateia Diacheirisis Idiotikoy Chreoys - EGDIX), which operates under the Ministry of Finance.

EGDIX plays a significant role in the Greek framework. It provides mediation services, facilitates out-of-court workouts, and maintains the electronic platform through which many restructuring applications are filed. For smaller debtors - particularly those with predominantly consumer or SME debt - the out-of-court workout mechanism (extrajudicial mechanism, or "exodikastitikos mechanismos") offers a faster, less costly alternative to full court proceedings.

A common mistake made by foreign-owned businesses operating in Greece is waiting too long before engaging the framework. Greek law rewards early action: a debtor who files while still solvent has more procedural options, greater negotiating leverage, and access to a broader range of protective measures than one who files after default has already occurred.

The restructuring plan procedure under Law 4738/2020 follows a defined sequence. Understanding each stage helps debtors and creditors plan their strategy and allocate resources appropriately.

Filing the application. The debtor submits an application to the competent Multi-Member Court of First Instance. The application must include a restructuring plan proposal, a list of all creditors with the amounts owed, a description of the debtor';s assets and liabilities, and a viability assessment. The electronic filing platform administered by EGDIX is used for most cases. Filing triggers a preliminary review by the court.

Appointment of an insolvency practitioner. The court may appoint an insolvency practitioner (diacheiristis aferentotitas) to assist with the process. The practitioner';s role is to facilitate negotiations, verify the debtor';s financial position, and report to the court. The practitioner does not take over management of the debtor';s business; the debtor retains control during the restructuring period.

Creditor classification and voting. Creditors are divided into classes based on the nature and priority of their claims - secured creditors, unsecured creditors, and subordinated creditors typically form separate classes. Each class votes on the plan. The plan is approved if a majority representing at least 60% of the total claims in each class votes in favour. In some circumstances, a cross-class cram-down allows the court to confirm a plan even if one or more classes vote against it, provided certain conditions are met.

Protective stay. Once the application is filed, the debtor may request a temporary stay of individual enforcement actions. The stay prevents creditors from seizing assets or initiating new enforcement proceedings while negotiations proceed. The initial stay lasts up to four months and can be extended, but the total duration is capped under the law to prevent indefinite suspension of creditor rights.

Court confirmation. After the creditor vote, the court examines whether the plan meets the statutory requirements - including the best interest of creditors test, the feasibility of the plan, and compliance with mandatory provisions. If satisfied, the court issues a confirmation order. The confirmed plan binds all creditors in the relevant classes, including those who voted against it.

Implementation. Once confirmed, the plan is implemented according to its terms. This may involve debt write-downs, extended repayment schedules, conversion of debt to equity, or a combination. The insolvency practitioner may be retained to monitor implementation.

Realistic timelines vary. A straightforward case with cooperative creditors can move from filing to confirmation in three to six months. Complex cases involving multiple creditor classes, disputed valuations or cross-border elements routinely take longer. Delays at the court confirmation stage are common, partly because the Greek courts handling these matters carry significant caseloads.

In practice, founders and managers should consider preparing the restructuring plan and creditor negotiations in parallel with the formal filing, rather than waiting for the court to set procedural deadlines. Early engagement with major creditors - particularly banks and tax authorities - significantly improves the prospects of plan approval.

If your business is considering a restructuring filing in Greece, we can help structure the setup correctly the first time. Contact us at info@vlolawfirm.com for a preliminary assessment.

Creditors in a Greek preventive restructuring procedure retain significant rights, and understanding these rights is essential for both domestic and foreign creditors with exposure to a Greek debtor.

Right to information. Creditors are entitled to receive the restructuring plan, the debtor';s financial statements, and the insolvency practitioner';s report before voting. The law requires that this information be sufficient for creditors to make an informed decision. In practice, the quality and completeness of information provided by debtors varies, and creditors should be prepared to request additional disclosure.

Voting rights. Each creditor votes within its class. The classification of creditors is a frequent source of dispute: a creditor who believes it has been placed in an unfavourable class can challenge the classification before the court. Secured creditors generally vote as a separate class and have stronger protections than unsecured creditors.

Challenge to the plan. A creditor who votes against the plan, or who believes the plan does not satisfy the best interest of creditors test, can challenge the court confirmation. The challenge must be filed within a short period after the confirmation hearing. Greek courts have developed a body of case law on what constitutes an adequate liquidation value for the purposes of the best interest test, though this area remains contested.

Cross-class cram-down and its limits. The cram-down mechanism - which allows a plan to be imposed on a dissenting class - is subject to strict conditions. The dissenting class must receive treatment that is at least as favourable as any junior class, and the plan must not unfairly prejudice the dissenting creditors. Foreign creditors, particularly those accustomed to Anglo-American restructuring practice, sometimes underestimate the procedural requirements for a successful cram-down in Greece.

Tax and social security creditors. The Greek state - through the Independent Authority for Public Revenue (AADE) and the Social Insurance Fund (EFKA) - is typically a significant creditor in restructuring cases. Greek law allows tax and social security debts to be restructured as part of a plan, subject to specific rules on minimum recovery and instalment arrangements. Negotiations with AADE and EFKA often run on a parallel track to the main creditor negotiations and require specialist handling.

A non-obvious requirement is that certain categories of creditor - including employees with wage claims - enjoy special protections and cannot have their claims reduced below statutory minimums through a restructuring plan. Foreign investors acquiring distressed Greek businesses should map these protected claims early in their due diligence.

For many SMEs and smaller businesses, the out-of-court workout mechanism (extrajudicial mechanism) introduced by Law 4738/2020 offers a more accessible route than the full court-based restructuring procedure.

The mechanism is administered through the EGDIX electronic platform. A debtor submits an application online, providing financial data and a proposed restructuring offer. Creditors - including banks, tax authorities and social security funds - are invited to participate and vote on the proposal. The process is designed to be completed within a defined period, typically around three months from the date the application is declared complete.

The out-of-court mechanism is available to debtors with total debt above a minimum threshold and requires the participation of financial institution creditors. If the required majority of creditors accepts the proposal, the agreement is ratified and becomes binding. If the proposal fails, the debtor can proceed to the court-based restructuring procedure or, if already insolvent, to formal bankruptcy.

Two practical scenarios illustrate the choice between mechanisms. A medium-sized Greek manufacturing company with bank debt, tax arrears and trade creditor obligations - but a viable core business - is a natural candidate for the out-of-court mechanism if its creditor base is manageable and the debt quantum falls within the platform';s parameters. By contrast, a larger group with complex secured debt structures, cross-border creditors and disputed asset valuations will typically require the full court-based procedure, where the court';s confirmation powers and the cram-down mechanism provide greater certainty.

Many businesses underestimate the documentation burden of the EGDIX platform. The system requires detailed financial projections, asset valuations and creditor schedules in prescribed formats. Errors or omissions in the initial submission can cause significant delays, as the platform will not declare the application complete until all required data is provided.

Greece is a member of the European Union, and the EU Insolvency Regulation (Regulation 2015/848) governs jurisdiction and recognition of insolvency proceedings across EU member states. For businesses with operations or creditors in multiple EU countries, the location of the debtor';s Centre of Main Interests (COMI) determines which member state';s courts have primary jurisdiction.

COMI is presumed to be at the debtor';s registered office, but this presumption can be rebutted if the actual centre of administration and control is elsewhere. Foreign investors who have established Greek subsidiaries should be aware that the COMI of the subsidiary will normally be in Greece, meaning Greek courts and Greek law will govern any restructuring of that entity.

For non-EU creditors - including creditors from the United Kingdom, the United States or other third countries - the recognition of a Greek restructuring plan depends on the private international law rules of the creditor';s home jurisdiction. Greece is not a party to the UNCITRAL Model Law on Cross-Border Insolvency, so recognition in non-EU jurisdictions must be sought through local proceedings.

A common mistake made by foreign founders is assuming that a restructuring plan confirmed by a Greek court will automatically bind creditors in other jurisdictions. This is not the case outside the EU framework. Where a debtor has significant assets or creditors in non-EU countries, parallel proceedings or specific recognition steps may be necessary.

The Greek framework also contains provisions on the treatment of financial collateral arrangements and set-off rights, which are relevant for creditors holding security over Greek assets. These provisions largely follow EU financial collateral directives and provide stronger protections for secured financial creditors than the general restructuring rules.

If you are a foreign creditor or investor involved in a Greek restructuring, we can assist with documents, filings and strategy. Contact us at info@vlolawfirm.com.

What is the main practical risk for a debtor entering the Greek restructuring procedure?

The principal risk is that the debtor files too late, after insolvency has already occurred, which narrows the available options and may expose directors to liability for delayed filing. Under Law 4738/2020, directors of companies that become insolvent have obligations to act promptly, and failure to do so can result in personal liability claims. A second significant risk is that the restructuring plan fails to secure the required creditor majority, leaving the debtor in a worse negotiating position than before filing. Debtors should conduct a realistic creditor mapping exercise before filing to assess whether plan approval is achievable. Engaging key creditors informally before the formal process begins substantially reduces the risk of a failed vote.

How long does the process take and what does it cost?

Timelines depend heavily on the complexity of the case and the cooperation of creditors. The out-of-court mechanism is designed to conclude within approximately three months of a complete application, though delays on the EGDIX platform are common. The court-based restructuring procedure typically takes between three and twelve months from filing to confirmation, with complex cases taking longer. Professional fees - covering legal advisers, financial advisers and the insolvency practitioner - represent the main cost for most debtors. These fees vary significantly by case size and complexity; for mid-market cases, professional fees typically start from the low tens of thousands of euros. Court filing charges and practitioner remuneration are set by reference to statutory scales but can add meaningfully to the overall cost.

Can a Greek restructuring plan bind secured creditors who vote against it?

Yes, under certain conditions. The cross-class cram-down mechanism in Law 4738/2020 allows the court to confirm a plan over the objection of one or more creditor classes, including secured creditors, provided the plan satisfies the best interest of creditors test and meets the absolute priority rule - meaning no junior class receives value unless the dissenting class is paid in full or receives equivalent treatment. In practice, cram-down of secured creditors is contested and requires robust valuation evidence. Courts will scrutinise the liquidation value assumptions carefully. Secured creditors who believe their collateral is undervalued in the debtor';s plan should obtain independent valuations and be prepared to present expert evidence at the confirmation hearing.

Preventive restructuring frameworks in Greece offer a structured, legally recognised path for viable businesses to address financial distress before it becomes irreversible. Law 4738/2020 has modernised the framework significantly, introducing early warning tools, an accessible out-of-court mechanism, and court-based procedures with cram-down powers. The system rewards early action and penalises delay. Both debtors and creditors benefit from understanding the procedural sequence, the creditor classification rules, and the protections available at each stage.

VLO Law Firms advises international clients on bankruptcy and restructuring matters in Greece. We can assist with eligibility assessments, restructuring plan preparation, creditor negotiations, court filings, and cross-border recognition issues. To request a consultation, contact: info@vlolawfirm.com