Debt Collection in Greece

• In Greece late payments are quite frequent and, despite regular improvements, the average DSO remains high compared to other EU markets–on average, 100 days. This is not entirely surprising, as the legislation has flexibly implemented EU late payment rules.

• While the courts are fairly reliable, the legal process remains sluggish, despite recent legislative changes aimed at satisfying EU standards to streamline the process. Enforcement can also be challenging, since debtors are often well aware of system loopholes.

• Insolvency law offers a debt-renegotiation process, while raising money remains a major problem at this point.

1. Summary

1.1. General financial information

1.1.1. While it is usually possible to obtain financial information on domestic companies, consideration must be taken of the legal status of the operators. Listed companies have publishing responsibilities while SA and Limited Firms should report their financials to the trade register, but in reality delays can occur. Nevertheless, associations and single proprietorship owners do not have any of those responsibilities. The accuracy of their financials would therefore continue to be rather unpredictable, and although private channels can help to collect reputational details, it is highly recommended that specialist data providers be made available.

1.2. Key legal structures

1.2.1. Corporate debt responsibility is defined by legal structures, listed as follows:

• Businesses that do not need a corporate entity may be run by one private individual known as a sole trader. By Partnerships (Omórithmi Etería, OE), two or more parties may also decide to share rights and liabilities, in which case the partners are collectively and separately liable for the actions of the other partners (while raising funding capacity). Additionally, restricted collaborations (Eterórithmi Etería, EE) can provide some of the participants with limited liability.

• They may also depend on incorporated bodies. Limited Liability Companies (Etairia periorismenis efthinis, EPE) are common because creditors are only responsible to the obligations of the corporation in relation to their capital investment. The minimum equity fund of EUR 4,500 is no longer mandatory since 2013. Also adopted in 2012 (Law 4072/2012) was a more inclusive type of Limited Company (Idiotiki Kefalaiouchiki Etería, IKE), having a minimum capital of EUR 1 and providing for greater flexibility of shareholding and decision making.

• Larger firms may tend to be formed by Joint-Stock Corporations or Public Limited Firms (Anónimi Etería, AE), for which a minimum capital requirement of EUR 60,000 is needed. The creditors are only responsible for the interest of their equity in this form of company, although losses can only be collected on the properties of the business.

• Foreign investors frequently decide to settle in Greece through a Regional body based on the parent company even though it is controlled by a single and severally liable local representative. In this case the parent company may be held liable for the actions of the branch; therefore it is often common to create branches by separate EPE systems.

1.3. Regulatory framework

1.3.1. Greece has a form of civil law influenced by the legal framework of both France and Germany. Accordingly, the statute is mostly codified, and the courts are not constrained by precedents, while specific rulings continue to be used for guidelines. Since a restructuring undertaken in 2012, cases below EUR 20,000 come under the authority of Justices of the Peace Tribunals (Eirinodikeio), and allegations of up to EUR 250,000 are dealt with by the Monomeles Protodikeio (Single-Member Courts of First Instance). Claims exceeding this amount are dealt with by the Polymeles Protodikeio (Multi-Member Courts of First Instance). For force from 1 January 2016, additional amendments seek to simplify the processes of civil courts to reduce delays.

2. Receiving payments

2.1. DSO - Days Sales Outstanding

2.1.1. Late payments are common in Greece, and bills were paid on average in 100 days in 2015 relative to 106 days in 2014, reflecting a slowly improving pattern. Much higher than in other EU countries, though.

2.2. Late interests

2.2.1. The issuer may be paid late payment interest on the first day due. Recast Directive 2011/7/EU, which provides for payments to be made in the EU within 60 days, was transposed into domestic law through Law 4152/2013 (which entered into force retroactively on 16 March 2013). Unlike the laws laid down in most EU Member States, Greece's late payment guidelines are very detailed in that, as a general rule, payment terms in business-to-business contracts must not extend 60 calendar days, unless otherwise decided by arrangement and given that the delays are not grossly unfair to the borrower. Interest may be due beyond this point as negotiated by the parties, but in any case the law allows creditors to charge an automatic interest rate of around 7.3%.

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2.4. Protecting ownership

2.4.1. Title retention (RoT) provisions are considered pursuant to Article 532 of the Greek Civil Code, which allows the parties to retain ownership of the goods until full payment of the related invoice. Additionally, the Greek Civil Code provides compensation for the loss of ownership when the purchaser has transformed the goods and can no longer be identified.

2.4.2. Creditors can sign RoT agreements with a special registry (Statute 2844/2000), even though this is not necessary. RoT provisions are uncommon in law and compliance procedures are prolonged but these would also require a borrower to reclaim property as part of the pre-legal or trial action process.

2.5. Payments

2.5.1. Sepa bank transfers are among the most common means of payment, since they are quick, safe and supported internationally and domestically by an increasingly integrated banking network.

2.5.2. Furthermore, Standby Letters of Credit (a bank guarantees the credit quality and repayment capabilities of the debtor) are increasingly being used as they represent reliable guarantees.

2.5.3. Certain payment methods used for domestic and international transfers may be checks that represent fascinating promises, because bad skipping can contribute to criminal prosecution, but also trade bills. Promissory letters (hyposhetiki epistoli) are similarly used as debt recognition documents that come from the debtor's bank and claim they are committed to paying the debt in time. In general terms, the bank incentives stay costly. Hence it is best to apply for down payments.

2.5.4. Since June 2015 the Greek Government has implemented capital controls. According to this judgment, all payments guided abroad are subject to a particular procedure and are regulated by the finance minister and representative bank. The distribution of payments has maintained a steady pattern without any disturbance after the initial adjustment. Many measures have been taken since then to alleviate the original restrictions and they are still advancing. Despite capital controls that are still currently in force, new transfers overseas are not impacted or burdened by this restriction.

3. Collecting payments

3.1. Amicable action

Secure mediation options (including alternate dispute resolution methods) should always be viewed as a strong alternative to traditional litigation because domestic courts appear to be sluggish despite being open and relatively accurate. When launching legal proceedings against a debtor, asset appraisal is critical as it requires assurance of whether the business is still operating and whether chances of recovery are at best. Therefore, it is important to be mindful of the solvency condition of the debtor: once insolvency proceedings have been started, payment of a loan will indeed become unlikely.

3.2. Legal proceedings

3.2.1. Ordinary proceedings. Judicial dunning starts with a recorded Demand Letter advising the claimant of their obligation to pay the principal and the penalty on late payment (as negotiated in principle or as relation to a court rate). If the debtor fails to pay and the claim is uncontested, the creditor may apply for a Payment Order (Diataghi Pliromis) before the First Instance Court or with the Peace Justices. The existence of the debtor is not required but for consideration all records must be translated into Greek. The court may agree to issue the requested Payment Order after consideration of the request. The claimant is granted three days to pay the debt (the payment request will then be enforceable immediately) or to lodge an appeal (the challenge has no suspense impact on the contract), in which case it becomes appropriate to take ordinary legal action.

3.2.2. The date for submitting a defense is 15 working days, if the payment order was issued against a debtor whose residence or registered office is in Greece, and 30 days if the debtor's residence or registered office is overseas, or if their stay is undisclosed. The fast-track procedure for the payment order usually takes three to four months, depending on the workload of the courts, and remains the best tool for debt collection. Such proceedings may also be initiated by bounced checks (the judgment would be obtained within three to five months). A European payment order mechanism (facilitating the recovery of undisputed debts according to Regulation EC No 1896/2006) may then be activated when the debtor has properties in other EU Member States. In this situation, the borrower can order a domestic court to issue an Order to Pay which would then be enforceable without exequatur proceedings in all EU countries (except Denmark).

3.2.3. Ordinary legal action (agogi) would usually start when friendly collection fails and it is not possible to issue a payment order. Important amendments to the provisions of the Hellenic Civil Procedural Code have come into force pursuant to Law 4335/2015 from 1 January 2016. The related reforms span practically the entire breadth of the Civil Procedural Code, so as to represent a radical reform of the procedural system aimed at speeding up the administration of justice on the basis of the economic principle of the proceedings. Two major changes can be illustrated in this context:

1. The partly oral trial before the Courts of First Instance conducted in ordinary trials is supplemented by a formal process. Witness tests are only required in exceptional cases.
2. Clear timelines are laid down for the end of the trial from the registration of the complaint to the presentation of the briefs and all the necessary facts (maximum 145 days) and the close of the case to the hearing (45 days). The case will therefore be discussed within a maximum period of 6 months from the filing of the lawsuit, which is a considerable improvement compared to the previous practice in which it was quite common for the hearing to take place one year and a half to two years after the filing of the lawsuit. The old practice is still valid for the cases that were brought before that year. In any case, it is important to be served by a local attorney.

3.2.4. Required documents. The new procedure for ordinary legal action is based solely on the evidence given according to the latest amendments described; thus, it is important to provide full documentation supporting the claim as soon as possible. All documents have to be submitted in their original form (or an official copy), and documents must be accompanied by an official translation in a foreign language.

3.2.5. The required documentation are as follows:

• Original outstanding invoices or unpaid bill of exchange or unpaid checks (or certified copies)
• Original payment notices (CMR, Bill of Lading...) properly signed by the seller or certified copies
• Instructions sent by the purchaser
• A certified copy of the pages of the accounting book of the borrower where due invoices (or bills of exchange or checks) are mentioned.

3.2.6. In the event that the claimant lives overseas, the process for obtaining the affidavit shall take place at the correct consulate, observing certain valid protocols and requirements for advertising. It's highly recommended to be advised by a local lawyer.

3.2.7. Time limits. Legal lawsuits must be made within five years from the original due date. Unfair challenges of advantage must be made within a year and a half, beginning from the event's awareness. In fact, reimbursement for illegal actions, beginning from the criminal case, can be sought within five years. Legal action may not be issued beyond those time limitations.

3.2.8. Provisional measures that help to protect the rights of the borrower awaiting a final and enforceable judgment. The courts will help prevent irreparable harm (freezing injunctions, preventive injunctions, mandatory injunctions, asset-preservation orders etc.). The court may also impose interim steps ex parte (without both parties being present) in the case of a real emergency. Requesting these sanctions is perceived to be very coercive in action, and would put strong pressure on the claimant, contributing to a resolution.

3.2.9. Appeal lodging. The parties have the ability, by statute, to lodge an appeal without having any court authorisation, thus appeals are almost routine. Of course, interests are calculated in the meantime so that the creditor would ultimately be entitled to a larger amount, but this nonetheless furthers procedural delays and costs. Appeals must be filed within thirty days of the parties being notified. The courts will then reconsider, on factual and legal grounds, the decision taken at first instance.

3.2.10. While this is rare in relation to commercial debt disputes, the defeated party is entitled to appeal to the Supreme Court in case of a dispute over a legal issue. If the appeal is rejected, the Supreme Court will require the matter to be put before the Court of Appeal again for reconsideration. In fact both sides settle the issue appropriately without further hesitation after the Supreme Court Judgement.

3.2.11. Awards enforcement. Once a judgment becomes definitive, compliance can proceed (i.e. if no appeal is lodged within one month). If the debtor fails to satisfy the decision, the judgment can be applied immediately by adding the debtor's properties.

3.2.12. Even though compliance may be instant, the procedure may be expensive and time consuming based on whether the properties of the defendant can be found. In fact, if the appeal hearings are ineffective or the validity of the allegation is supposedly incorrect, the claimant may refer to the prosecution proceedings, which may cause more delays. Therefore, it is preferred to choose garnishment procedures especially on debtor's bank accounts as this action is less costly and more effective.

3.2.13. Duration of legal action. The timetable for securing a court ruling differs and relies on the process, the tribunal and the case history. It may take three to five months to get a fast-track Payment Order. Ordinary legal proceedings take much longer–although the time scale has been significantly reduced since the changes to the Code of Civil Procedure–with the current time required to receive a verdict of the first instance about one year. Domestic courts would not otherwise accept cases concerning a foreign entity than those involving domestic parties. Nevertheless, certain delays can be anticipated when including a foreign group, particularly when the documents have to be translated.

3.2.14. Costs of legal action. The courts usually assign damages to the losing side, stating the exact amount in the decision. Value assessments are left to the discretion of the judge, but are not dependent on forecasts of the invoices or the effective team. Price incentives are not standardized, and they are usually refused by the courts when it is considered valid and appropriate to use the judicial structures.

3.2.15. The claimant would be paid court fees but their cost would rely on the process and the nature of the lawsuit. All forms of deals are used in action, for example: a defendant would cover all judicial expenses and obtain a share of the reward for performance (usually 20 percent of the amount), another would sue for the judicial costs and some fixed payments regardless of the final outcome of the case, another could request compensation per hour of work (depending on his age), etc.

3.3. Alternatives to legal action

3.3.1. Alternative Dispute Resolution Procedures (ADR). Arbitration is an Alternative Dispute Resolution Process very popular in Greece when it is not possible to obtain a court order due to the argument being contested, particularly when a case involves technological disagreements or broad and delicate transactions because arbitration offers secrecy. Nevertheless, it should be remembered that an arbitration clause must be very comprehensive, so that the losing party does not have the right to circumvent the arbitration judgment by civil proceedings.

3.3.2. On the other hand, Law 3898/2010 on Mediation in Civil and Commercial Disputes (which transposed Directive 2008/52/EC) allows the parties at any stage to decide to use mediation, but that method is still not commonly used. Hence, it is important to seek legal advice on these matters.

3.3.2. Foreign forums. Alternatively, obtaining and enforcing a foreign decision may be a viable alternative (although it is rarely used in relation to debt collection) when obtaining a payment order and provided the case is complex and significant amounts are at stake. This is because Greece is a signatory to the Rome I Regulation on the law applicable to contractual obligations, which stipulates that the contracting parties may, by mutual agreement, select the law applicable to this contract, and select the court which will have jurisdiction over conflicts. Therefore, since Greek courts generally impose international jurisdiction arrangements, the parties can instead decide to settle their legal conflicts in a foreign venue (i.e. under foreign law or before a foreign tribunal).

3.3.3. It is necessary that the arrangement be distinguished by an external relation (e.g. one individual has chosen domicile in another country, or the place of execution is situated abroad), and that a provision of jurisdiction be drawn up expressly for this.

3.3.4. Foreign awards enforcement. Different conditions can occur where a global decision is applied. On the one hand, decisions taken in an EU country would benefit from particularly advantageous conditions for enforcement. Apart from EU enforcement judgments which are usually enforceable immediately in domestic courts, the two primary ways of imposing an EU judgment in Greece include the use of a European Compliance Order (EEO, pursuant to Regulation EC No 805/2004) where the allegation is unchallenged or the declaration of the judgment according to the terms of Brussels I (44/2001).

3.3.5. If the judgment applies as an uncontested assertion, it can be freely implemented (i.e. without registration) through the use of an EEO given the debtor has established properties in the region. Similarly, a European Small Claims Procedure (Regulation EC 861/2007) which aims to eliminate intermediate steps can be relied on while enforcing decisions up to EUR 2000.

3.3.6. The process for filing an EU decision with domestic courts is relatively simple, if the argument is contested. To order for the judgment to be recorded, the judgment holder will appeal to the court involved and provide the court with, among other records, a signed copy of the judgment, a verified transcript of the judgment and, if interest is asserted, a notice stating the amount and interest rate at the time of the application and forwards. Once the judgment has been published, it can be applied as if it were given by domestic courts (such an exequatur process is no longer required from January 2015, according to Recast Regulation EC 1215/2012).

3.3.7. On the other hand, decisions handed down outside the EU in foreign countries would be immediately acknowledged and applied under mutual cooperation treaties. In the absence of similar provisions, there would be exequatur hearings (Article 323, 780 of the Code of Civil Procedure): the court must check whether I the international decision is final and enforceable in the granting jurisdiction and that it does not violate a judgment previously issued by a Greek tribunal, (ii) the losing group has gained from due process of law, and (iii) the ju

3.3.8. Petition to impose international decisions must be taken before the Single Member Court of First Instance, which may accept only part of a decision and change harm awards on certain instances. Greece is a signatory to the 1958 New York Convention on the Recognition and Compliance of International Arbitral Awards and its national courts should therefore accept and uphold awards given by international arbitration proceedings.

4. Managing insolvent debtors

4.1. Insolvency in Greece

4.1.1. The treatment of insolvent debtors In Europe, insolvency is a question of cash flow: a debtor is declared to be insolvent once he is completely unable to pay his debts as they become due. The Greek Bankruptcy Code (Law 3588/2007, as revised in 2010, 2011, 2012, 2015 and most recently in December 2016) was adopted in 2007 to harmonize a fractured legal framework. This implemented a debt reorganization mechanism as a means of preventing the systemic liquidation in acute financial difficulty of successful businesses. However, the most recent changes to the legislation is aimed at reducing penalties and guaranteeing that debtors would no longer be able to use insolvency proceedings to further postpone payments. Nonetheless it is very difficult to collect funds from insolvency proceedings.

4.2. Insolvency cases

4.2.1. Insolvency proceedings. Out-of-Court proceedings Every arrangement outside court needs approval by the trial, while consent can be appropriate before a Notary Public. Act 4469/2017, recently adopted by the Greek Parliament and issued on 3 May 2017, introduces a new mechanism for the resolution of extrajudicial debt for persons and legal entities under specific conditions and with conditional court approval. The process is undertaken through a debtor's submission, including a request to resolve their loans, which seeks to reach a debt settlement deal with a coordinator's mediation. The new law entered into force in August 2017 three months after its release, and will compensate debts that are unpaid as of 31 December 2016.

4.2.2. Debt restructuring: In the absence of specialist insolvency courts, insolvency has historically been handled by multi-member courts of first instance in the district where the debtor is domiciled, by pre-bankruptcy settlement processes that require debtors to negotiate contracts with creditors (business pre-packaging, asset sales, debt-equity exchanges, contract terms and conditions altera).

There is no necessary quorum for such settlements but a resolution with a vote of 60 percent of the total claims (40 percent of which must be secured) should be achieved in order to attach non-consenting creditors. During this process, all individual and collective enforcement actions by creditors are immediately held for a maximum of four months, subject to extend until the conclusion of the trial, in order to prevent the dissipation of firm interest and the hampering of the debtor's redemption prospects. Law 4446/2016 which amended the Bankruptcy Code implemented this mandatory stop.

4.2.3. As a key feature of the current insolvency code, Article 99 of the Code now provides for a recovery process which starts either at the request of the debtor or, in compliance with the latest amendments adopted in the last revision of the Bankruptcy Code, upon agreement between creditors without the involvement of the debtor, given that the debtor is already in a cessation state. The latest option expands the reach of pre-bankruptcy proceedings and seeks to compel hesitant debtors to seek recovery rather than declaration of bankruptcy. The reorganization process begins with the presentation of a plan made by experts (auditors, banks, etc.) to the court who performs a judicial review of the proposed plan while the interests of the creditors are determined by a court-appointed mediator. Only upon ratification from investors comprising 60 percent of the total liability can the program be approved.

4.2.4. Winding up proceedings. Liquidation begins with a petition for insolvency. As a general rule, insolvent companies are required to file a petition for bankruptcy within thirty days of termination of payments (voluntary liquidation), but creditors may also file a claim against the debtor (involuntary liquidation). The investors are then required within 30 days to lodge their lawsuits.

4.2.5. The proceedings can begin under an administrator's oversight as soon as the debts have been checked. In fact, the duty for managing the litigation would be assigned to a committee of shareholders (i.e. three representatives from each type of creditor), which would end once the proceeds from the sale of the business ' properties are dispersed.

4.2.6. Priority rules apply when the profits are assigned to investors. The Hellenic Civil Procedural Code lays out the framework of priority requirements which provides for different classes of creditors (secured creditors, preferred creditors, unsecured creditors and subordinated creditors).

4.2.7. RoT investors would not profit from a special preference over other shareholders, but products covered under the RoT would not be included in the liquidated properties and would be returned to the owner as soon as they can be found.

4.2.8. Cancelation of suspicious transactions. Administrators are able to investigate and terminate any legal action taken by the debtor during a' suspicious time' starting when the debtor finally stopped payments, up to five years before the insolvency declaration.

4.2.9. Transactions that favour one borrower over the others or reduce the value of the assets (fraudulent deeds, undervalued or gratuitous activities, etc.) may usually be invalid.

4.2.10. Duration of insolvency process. Insolvency cases will take years to complete. It is necessary, however, to highlight the efforts made by the Greek legislature, in line with the European Commission's Restructuring Recommendation released in 2014, to create a more successful Greek insolvency and restructuring law.

4.2.11. Required documents:

• A proxy approved by the borrower
• Original unpaid invoices or an unpaid bill of exchange or an outstanding audit (or certified copies)
• Original payment notices (CMR, Bill of Lading, etc.) properly signed by the seller or certified copies
• Instructions sent by the purchaser
• A verified copy of the accountancy book of the creditor in which the invoices due are mentioned (or bill of exchange or the check)
• Any other contract or essential communication between creditor and debtor.

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