Legal Insight
December 2025
George Kefalas, LLM mult., MSc.
Summary: The out‑of‑court settlement mechanism is a debt restructuring tool that, from its introduction in 2021 until today, has undergone successive amendments, particularly aimed at improving settlement terms for debtors with both public and financial creditors. However, with Decision No. 77522 ΕΞ dated 3.6.2024, changes were made to the calculation tool that significantly altered the resulting settlements with public authorities. The recent Joint Ministerial Decision (JMD) 77129/7.5.2025 has alleviated these burdens in settlements with public authorities.
As noted elsewhere (see here), the restructuring solutions under the out‑of‑court mechanism are generated through the use of a calculation tool (algorithm). The first calculation tool takes into account only the debtor’s income and assets to derive a settlement solution, whereas the second calculation tool—which is generally used when financial creditors are also involved—also considers the income and assets of co‑debtors (particularly guarantors).
Based on this information, the calculation tool first computes the Maximum Debt‑Repayment Capacity of the Debtor (MDC), which in no case can be less than the liquidation value of the debtor’s assets. In particular, Article 8A of JMD 67360/10.6.2021 provides that: "The repayment capacity, or the Maximum Debt‑Repayment Capacity of the Debtor (MDC), is the highest value among:
Before the amendment introduced by JMD 77522, the basis for calculating the debtor’s repayment capacity—where the debtor is a legal entity—based on its tax data was the field “Total profits” or “Loss balance” on the corporate tax return. It was also explicitly stated that: “In cases where the final income amount is negative due to losses, the income considered for the calculation of the NPV of the MDC of a legal entity based on tax data shall be zero.”
Accordingly, until June 2024, the calculation of a legal entity’s repayment capacity was based on the net profit for the year, and if the entity showed a loss in the latest year, a zero amount was taken into account. In that case, if the legal entity did not have significant bank deposits or other financial assets (e.g., shares, bonds, etc.), the repayment capacity would necessarily be calculated based on the value of its assets or on the monthly repayment capacity declared by the debtor.
However, JMD 77522 introduced a presumption regarding the available annual income of the legal entity. Specifically, it provided that: “If the above amount (i.e., the amount arising from the profits/losses of the legal entity after the corresponding adjustments) is less than 10 % of the turnover, then the available annual income is adjusted to that percentage.”
In other words, it is now presumed that the income of the legal entity available to service the settlement produced by the calculation tool amounts to at least 10 % of the turnover of the relevant year, regardless of the actual results of the year.
What did this change mean in practice, and how did it ultimately alter the settlement proposal that the debtor legal entity would receive? Consider the following example: A legal entity with total assets worth €200,000 and bank deposits of €10,000 shows losses over the past three years, while its turnover was €300,000, €350,000, and €400,000, respectively.
Before the above change, the calculation tool would take the legal entity’s losses as the basis for calculating its repayment capacity under tax data and would therefore treat the entity as having zero income. Consequently, the repayment capacity would be based on the marketable value of the assets, amounting to €210,000 (assets plus deposits), and this amount would then be spread over time to form the settlement proposal.
After the change, the calculation tool would no longer treat the legal entity as having zero income. Instead, under the presumption, it would consider that the income for each year was €30,000, €35,000, and €40,000, respectively. Therefore, the repayment capacity would be calculated based on the tax data using the relevant distinctions of paragraph 5 of Article 8A of JMD 67360/2021 (i.e., for the calculation of instalments in the first year, the tax data from the most recent year is used; for the 2nd to 4th year, the average of the two highest values of the last three years at 65 %; and for the 5th year and beyond, the average of the two highest of the last three years).
In practice, therefore, the amendment led to a significant increase in the annual repayment capacity in this example and, consequently, to a shorter duration of the settlement achieved through the out‑of‑court mechanism.
With the recent JMD No. 77129/7.5.2025, the operation of the first calculation tool has been aligned with that of the second calculation tool, with respect to which related changes took place a few months earlier (see here).
Thus, first, the above presumption is no longer applied to bilateral settlements entered into by large legal entities (a large legal entity being one with a turnover exceeding €2.5 million in at least one of the last three years, as shown on Form E3).
For small legal entities (those with turnover below €2.5 million in each of the last three years, as shown on Form E3), the above presumption continues to apply to the income available for servicing the settlement. However, it is now explicitly provided that “the maximum number of instalments per category of each creditor shall apply.” Consequently, although the presumption may still adversely affect the amount of debt write‑off for the debtor, it no longer affects the duration of the settlement.
The introduction of the presumption for calculating the income of a debtor legal entity adversely affected, initially, the settlements that legal entities obtained through the out‑of‑court mechanism—both in terms of the amount of write‑offs achievable and the duration of the settlement. However, with the recent JMD, these adverse effects are eliminated for large legal entities and significantly mitigated for small legal entities, as they no longer lead to a shortening of the settlement duration.
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