Legal Insight
December 2025
George Kefalas, LLM mult., MSc.
(republished from Capital.gr)
Summary: The out‑of‑court mechanism emerges as an important tool for businesses, especially in cases of debts to the State and to e‑EFKA. Indeed, the solutions that can result—beyond the other benefits they provide to the business (such as proof of tax and social insurance compliance, suspension of enforcement measures, and neutralization of third‑party seizures)—can have long durations and be accompanied by significant percentages of debt write‑offs.
In a previous article, we noted that the high approval rates of the out‑of‑court mechanism by servicers referenced by the General Secretariat for the Financial Sector and Private Debt Management (GSFS‑PDM) relate mainly to liabilities smaller than €250,000. These are primarily residential mortgages for individuals and business loans of very small enterprises. Indeed, as shown by the most recently published statistics from the GSFS‑PDM (June 2024 data), approval rates are very low regarding restructurings of loans for SMEs and nearly nonexistent for restructurings of large corporate loans.
However, the situation is different with respect to the restructuring of business debts to the State and to e‑EFKA. There, not only are the approval rates much higher, but the restructurings—depending on the case (in particular, the type of liability, the assets of the applicant (natural or legal person), and their financial data)—may be extremely favorable to the debtor.
As we have outlined in our previous writings, the basic rules for restructurings with the State and e‑EFKA through the out‑of‑court debt settlement mechanism under Law 4738/2020 are as follows:
The principal amount of withheld and attributed taxes and social insurance contributions is not eligible for write‑off.
Principal liabilities from other taxes can be written off up to 75%.
Liabilities from surcharges can be written off up to 85%.
Liabilities from penalties can be written off up to 95%, while standalone penalties imposed by the tax administration up to 75%.
The duration of the restructuring cannot exceed 240 monthly instalments (20 years). The number of instalments depends on the debtor’s repayment capacity.
Similarly, the extent of any write‑off (for liabilities eligible for it and up to the maximum percentages noted above) depends on the debtor’s repayment capacity based on their income or assets.
In all cases, the debtor must repay through the mechanism at least the value of their assets.
With the recent Joint Ministerial Decision No. 77129/7.5.2025, the presumption for calculating income based on a percentage of turnover for legal persons was decoupled from the duration of the restructuring. Therefore, even legal entities with very high turnover but low profits—or losses—can receive restructurings of their debts for up to 240 instalments.
Accordingly, since the degree of write‑off and the duration of the restructuring also depend on the value of the applicant’s assets, it is extremely important to correctly complete the out‑of‑court mechanism application—especially for legal entities that hold asset items such as equipment, inventories, receivables, etc.
Among the elements that a legal person must upload to the out‑of‑court mechanism platform are its financial statements for the last three years and a temporary trial balance of fourth‑level accounts from the general ledger within the three months preceding the application. Frequently, the Independent Authority for Public Revenue (AADE) requests corrections, asking for the inclusion in the application of asset values supported by the aforementioned corporate documents.
A corporation operating in the industrial sector accumulated significant debts, both from financing received for business expansion since the 1990s and to the State and e‑EFKA. The growth of its debts was significantly influenced by the economic crisis, the crisis caused later by the COVID‑19 pandemic, and ongoing litigation with its main lender—who even filed for the company’s bankruptcy.
However, after reaching a compromise and restructuring its debts to the lender, it became imperative to settle the company’s debts to the State and e‑EFKA, which had grown considerably and were also an obligation under the compromise agreement with the servicer.
Among the many potential solutions, the out‑of‑court mechanism was chosen, a process from which the financial institution—whose debts had already been restructured—could be excluded. At the time of application submission, the debt to e‑EFKA amounted to €5,056,421.65 and the corresponding debt to the State to €2,987,477.06.
AADE, in its effort to maximize the recoverable amount, requested that receivables and equipment items reported on the company’s balance sheet and trial balance be included and unified in the application. These, however, consisted of receivables from companies that were already bankrupt or long ceased operations without significant assets, as well as old, nonoperational equipment. To demonstrate this, valuation reports were prepared by an auditing firm and a certified appraiser certifying the current value of the receivables and equipment.
Thanks to the correct recording of the company’s assets on the out‑of‑court mechanism platform and, consequently, the correct evaluation by the computational tool of its repayment capacity, a viable debt restructuring solution emerged.
Specifically, through the out‑of‑court mechanism, a debt of €2,987,477.06 to the State and €5,056,421.65 to e‑EFKA—i.e., a total liability of €8,043,898.71—was restructured. In the course of the restructuring, a total write‑off of €3,931,596.81 was agreed (a write‑off of approximately 48.88%), while the remaining debt was scheduled over the maximum period allowed under the law for debts to the State and Social Insurance Institutions—240 monthly instalments (20 years)—with a fixed interest rate of 3%.
Meanwhile, until the computational tool’s proposal was issued, the company was able to operate uninterruptedly because public authorities could not take enforcement measures due to the automatic suspension under Article 18 of Law 4738/2020.
The benefits for the company can be summarized as follows:
Significant write‑off of approximately 48.88% of its liabilities to public authorities.
Restructuring of the remaining debt over 20 years with graduated payments during the first five years.
Interest rate of 3%, much lower than regular restructuring rates.
Ability to obtain proof of tax and insurance compliance, provided there are no other overdue liabilities.
Possibility—under the same conditions—of neutralizing future third‑party seizures.
The out‑of‑court mechanism may not be the most suitable tool for restructuring large corporate debts to banks and servicers. However, it emerges as an exceptionally important tool for restructuring debts to public authorities. Nonetheless, accurate completion of the application and correct representation of the company’s liabilities and assets remain of vital importance, so that the computational tool’s proposal reflects the true repayment capacity of the legal entity.
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