Scheme of Arrangement in Greece

A scheme of arrangement in Greece is a court-supervised restructuring mechanism that allows a financially distressed company to reach a binding agreement with its creditors, avoiding formal liquidation. Greek law has substantially modernised its insolvency toolkit in recent years, aligning it more closely with EU standards. This guide covers the legal framework, eligible entities, procedural steps, creditor rights, costs, and practical considerations for both debtors and creditors navigating a Greek restructuring.

The term "scheme of arrangement" does not appear verbatim in Greek legislation, but the concept maps directly onto several restructuring tools introduced or reformed under the Greek Insolvency Code (Ptocheftikos Kodikas), which consolidated and modernised the country';s insolvency law. The Code provides for pre-insolvency and insolvency-stage procedures that allow a debtor to propose a restructuring plan binding on dissenting creditors once statutory voting thresholds are met.

The most relevant mechanism is the restructuring plan (sxedio anadiarthroseos), which operates as Greece';s primary scheme-equivalent. It can be proposed by the debtor, a creditor, or - in certain circumstances - the insolvency administrator. Once confirmed by the court, the plan binds all creditors in the affected classes, including those who voted against it, provided the plan satisfies the best-interest-of-creditors test and the absolute priority rule as required by the EU Directive on Restructuring and Insolvency (Directive 2019/1023), transposed into Greek law.

A second tool is the out-of-court workout mechanism (exdikastikos mehanismos rythmisis ofeilon), which targets smaller and medium-sized debtors and operates through a digital platform administered by the Special Secretariat for Private Debt Management. This mechanism is faster and less formal but is limited in scope and does not produce a court-confirmed plan with the same binding force as the restructuring plan.

Key features of the restructuring plan include:

• Creditors are grouped into classes with similar legal interests.
• A plan is approved if a majority in value within each class votes in favour.
• Cross-class cram-down allows confirmation even if one or more classes dissent, subject to court scrutiny.
• New financing provided during the restructuring period enjoys super-priority protection under the Code.

Greece transposed the EU Restructuring and Insolvency Directive into national law through amendments to the Greek Insolvency Code. This transposition introduced the preventive restructuring framework as a distinct pre-insolvency stage, available to debtors who are likely to become insolvent but have not yet reached the point of actual insolvency.

The Code distinguishes between three broad stages. First, the pre-insolvency stage, where the debtor retains management control and can negotiate with creditors under a moratorium. Second, the formal insolvency stage, triggered by a court declaration of insolvency (ptochefsi), which appoints an insolvency administrator and suspends individual enforcement. Third, the liquidation stage, which follows if no viable restructuring plan is confirmed.

The competent court for restructuring proceedings is the Multi-Member Court of First Instance (Polymeles Protodikeio) of the debtor';s registered seat. For large or complex cases, the Athens court handles the majority of significant proceedings. The court';s role is supervisory: it confirms or rejects the plan, rules on creditor objections, and applies the best-interest and absolute-priority tests.

The Special Secretariat for Private Debt Management (Eidiki Grammateia Diaheiriisis Idiotikis Ofeilou) plays a central administrative role, particularly in the out-of-court mechanism. For court-based restructurings, the insolvency administrator (sindikos) is appointed from a certified register and oversees the process on behalf of all stakeholders.

A non-obvious requirement for foreign creditors is that Greek proceedings are governed by the EU Insolvency Regulation (Recast) where the debtor';s centre of main interests (COMI) is in Greece. Creditors based outside Greece must file claims in Greek and comply with local procedural rules, which can create practical delays if not anticipated early.

The restructuring plan under the Greek Insolvency Code is available to legal entities and natural persons engaged in commercial activity. Purely consumer debtors follow a separate over-indebtedness regime. The debtor must demonstrate either actual insolvency or a likelihood of insolvency - meaning it is probable that the debtor will be unable to meet its obligations as they fall due within a defined forward-looking period.

Eligibility conditions include:

• The debtor must have its COMI in Greece, or at least an establishment there for secondary proceedings.
• The debtor must not be subject to an active liquidation order at the time of filing.
• The debtor must provide a restructuring plan or a credible outline of one at the time of application.
• Certain regulated entities - such as credit institutions and insurance companies - are excluded from the general insolvency framework and follow sector-specific resolution regimes.

In practice, the restructuring plan is most commonly used by mid-sized to large commercial enterprises with complex creditor structures, including bank debt, trade creditors, and bond debt. Smaller businesses more frequently use the out-of-court mechanism, which involves less procedural complexity and lower professional fees.

A common mistake made by foreign founders or investors is assuming that a Greek subsidiary can be restructured through a foreign scheme - for example, an English scheme of arrangement - if the subsidiary';s COMI is in Greece. Following Brexit and the EU Insolvency Regulation';s exclusion of the UK, English schemes no longer bind Greek creditors automatically. A Greek domestic procedure is required for Greek-COMI entities.

For creditors, eligibility to vote depends on the class in which they are placed. Secured creditors, unsecured creditors, and subordinated creditors are typically placed in separate classes. Shareholders may also form a class if their interests are affected by the plan. The classification methodology is subject to court review and is a frequent source of dispute in contested proceedings.

The restructuring plan procedure follows a defined sequence under the Greek Insolvency Code. Understanding each stage helps both debtors and creditors plan their strategy and resources effectively.

Filing the application. The debtor files an application with the competent Multi-Member Court of First Instance. The application must include a description of the debtor';s financial position, a list of creditors and their claims, a draft restructuring plan or a statement of intent to submit one, and evidence of the likelihood of insolvency. The court examines the application and, if satisfied, opens the restructuring proceedings formally.

Moratorium on enforcement. Upon opening, the court may grant a stay of individual enforcement actions (anastoli atomikon dioxeon). The moratorium protects the debtor';s assets from creditor enforcement while negotiations proceed. The initial moratorium period is typically up to four months, extendable in certain circumstances. Secured creditors retain their security interests during the moratorium but cannot enforce them.

Creditor notification and claim verification. The insolvency administrator or the debtor notifies all known creditors of the proceedings. Creditors must file their claims within the period set by the court. The administrator verifies claims and prepares a list of admitted creditors, which forms the basis for voting.

Negotiation and plan drafting. The debtor negotiates the terms of the restructuring plan with creditors. This is the most commercially intensive phase. The plan must specify how each class of creditors will be treated, the new financing arrangements if any, any operational restructuring measures, and the timeline for implementation. Professional advisers - financial restructuring specialists, legal counsel, and often an independent expert - are engaged at this stage.

Voting on the plan. Creditors vote on the plan within their respective classes. Under the Greek Insolvency Code, approval requires a majority representing at least half of the total claims in each class (majority in value). If all classes approve, the court confirms the plan. If one or more classes dissent, the debtor may apply for cross-class cram-down.

Cross-class cram-down. The court may confirm a plan over the objection of a dissenting class if: the plan treats the dissenting class at least as well as it would be treated in liquidation (best-interest test); the plan respects the absolute priority rule, meaning senior classes are paid in full before junior classes receive any value; and at least one class that would receive a distribution in liquidation has voted in favour. This mechanism is one of the most significant innovations introduced through EU directive transposition.

Court confirmation. The court holds a confirmation hearing. Creditors may raise objections on grounds including procedural irregularities, incorrect class composition, or violation of the best-interest or absolute-priority tests. The court issues a confirmation decision, which is published and becomes binding on all creditors in the affected classes.

Implementation. Once confirmed, the plan is implemented under the supervision of the administrator or a plan monitor. Implementation timelines vary but typically span several months to a few years depending on the complexity of the restructuring measures.

In practice, the entire process from filing to court confirmation takes between six months and eighteen months for a moderately complex case. Highly contested proceedings involving multiple creditor classes and cram-down applications can take longer.

If you are advising a creditor or debtor at any stage of this process, reaching out early to experienced counsel makes a material difference to outcomes. Contact info@vlolawfirm.com - we can help structure the setup correctly the first time.

Creditors in a Greek restructuring have substantial procedural rights, and understanding them is essential for protecting value. The Greek Insolvency Code incorporates the EU directive';s creditor protection framework, which sets minimum standards that domestic law cannot undercut.

The best-interest-of-creditors test is the primary protection. It requires that no creditor receives less under the restructuring plan than it would receive in a hypothetical liquidation of the debtor at the time of the vote. The debtor must provide a liquidation valuation as part of the plan documentation. Creditors who believe the valuation is understated can challenge it before the court.

The absolute priority rule protects senior creditors from being crammed down in favour of junior creditors or shareholders. A dissenting senior class cannot be forced to accept a plan under which a junior class receives value unless the senior class is paid in full. In practice, this rule is the central battleground in contested Greek restructurings.

New financing (interim financing and new money) provided to the debtor during the restructuring period benefits from super-priority status. This means new lenders rank ahead of existing unsecured creditors in a subsequent liquidation. The Code also provides safe harbour protection for transactions carried out in the ordinary course of business during the moratorium, reducing the risk of avoidance actions.

Creditors have the right to:

• Inspect the restructuring plan and supporting documentation.
• File objections to claim verification decisions.
• Vote within their class and challenge the class composition.
• Raise objections at the confirmation hearing.
• Appeal the court';s confirmation decision within the statutory appeal period.

A practical scenario: a Greek manufacturing company with secured bank debt, trade creditor arrears, and a subordinated shareholder loan proposes a plan that writes down trade creditor claims by forty percent and converts the shareholder loan to equity. The bank, as secured creditor, is paid in full from asset proceeds. Trade creditors, as a class, vote against the plan. The debtor applies for cram-down. The court must verify that trade creditors receive at least as much as they would in liquidation - if the liquidation value of unencumbered assets exceeds the forty-percent recovery offered, the plan fails the best-interest test and cannot be confirmed.

A second scenario: a foreign private equity fund holds senior secured bonds issued by a Greek holding company. The debtor proposes a debt-for-equity swap that would dilute existing shareholders to near zero. The shareholder class votes against. The court can confirm the plan under cram-down if the absolute priority rule is satisfied - shareholders receive nothing only because they rank below the bondholders, who are paid in full in value terms through the equity they receive.

The cost of a Greek restructuring plan varies significantly depending on the size of the debtor, the number of creditor classes, and whether the proceedings are contested. Costs fall into several categories.

Court and administrative fees are set by statute and are relatively modest compared to professional fees. They are not the primary cost driver.

Legal and financial advisory fees are the dominant cost. For a mid-sized restructuring, legal fees across debtor and creditor advisers typically run from the low to mid hundreds of thousands of euros in aggregate. For large or complex proceedings, total professional fees can reach the low millions. Creditors with significant exposure typically engage their own Greek counsel, adding to the overall cost of the process.

Insolvency administrator fees are regulated and based on the size of the estate and the complexity of the work. They are paid from the debtor';s assets as a priority expense.

Independent expert fees arise where the court or the parties commission a valuation of the debtor';s assets for the best-interest test. These fees depend on the complexity of the business and the assets involved.

New financing costs - if the restructuring involves new money - include arrangement fees, interest margins, and security costs. Super-priority new financing in Greece tends to carry higher margins than conventional lending, reflecting the risk profile.

Many debtors underestimate the cost of creditor communication and data room management. In a contested restructuring, the debtor must provide detailed financial information to multiple creditor advisers, which requires dedicated management time and often a third-party data room provider.

Timeline expectations should be realistic. The moratorium period of up to four months is often insufficient for complex negotiations, and extensions require court approval. Debtors who file without a substantially agreed plan risk running out of moratorium protection before a vote can be held. The most successful Greek restructurings are those where the debtor has conducted pre-filing negotiations with key creditors - a so-called pre-packaged or pre-negotiated approach - so that the formal proceedings are used primarily to bind dissenting minorities.

A common mistake is treating the restructuring plan as a purely legal exercise. The commercial negotiation - determining what each creditor class will accept and structuring the plan to pass the best-interest and absolute-priority tests - is the critical path. Legal counsel and financial advisers must work in parallel from the outset.

What is the difference between the restructuring plan and the out-of-court workout in Greece?

The restructuring plan is a court-supervised procedure that produces a binding outcome for all creditors in the affected classes, including dissenters, once confirmed by the court. It is suitable for complex cases with multiple creditor classes and significant debt. The out-of-court workout is a faster, digitally administered mechanism aimed at smaller debtors with a more straightforward creditor structure. It requires higher creditor consent thresholds and does not produce a court-confirmed plan with cram-down capability. Debtors with secured bank debt and trade creditor arrears below certain thresholds often find the out-of-court route faster and cheaper, but they lose the ability to bind dissenting creditors through court confirmation. The choice between the two mechanisms depends on the debtor';s size, creditor composition, and the likelihood of reaching voluntary agreement.

How long does a Greek restructuring plan typically take, and what does it cost?

A straightforward, pre-negotiated restructuring plan can be completed in six to nine months from filing to court confirmation. Contested proceedings, particularly those involving cram-down applications and valuation disputes, can take twelve to eighteen months or longer. Professional fees for a mid-sized case typically start from the low hundreds of thousands of euros for the debtor';s advisers alone; creditor advisers add further cost. Court and administrator fees are a smaller component. Debtors should budget for the full cost of the process before filing, as running out of funds mid-restructuring is a significant practical risk. New financing arranged during the proceedings can help bridge the liquidity gap, and its super-priority status makes it more attractive to lenders.

Can foreign creditors participate in Greek restructuring proceedings, and how are cross-border claims handled?

Foreign creditors can participate fully in Greek restructuring proceedings. They must file their claims in Greek within the court-set deadline, which requires local legal representation or at minimum a Greek-speaking adviser. Claims denominated in foreign currencies are converted to euros for voting and distribution purposes. The EU Insolvency Regulation (Recast) governs recognition of Greek proceedings across EU member states automatically, meaning a confirmed Greek restructuring plan is recognised and enforceable in other EU jurisdictions without additional proceedings. For creditors or assets located outside the EU, recognition depends on the applicable private international law rules of the relevant jurisdiction. Foreign creditors holding security over Greek assets should verify that their security is properly registered in the relevant Greek registers before proceedings open, as unregistered security may not be recognised in the class composition.

The scheme of arrangement in Greece, implemented through the restructuring plan under the Greek Insolvency Code, offers a robust and EU-aligned mechanism for restructuring distressed businesses. The procedure provides meaningful protections for both debtors and creditors, including moratorium relief, super-priority new financing, and cross-class cram-down. Success depends on early preparation, realistic valuation, and creditor engagement well before the formal filing.

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