July 2025

Decision of the Multi-Member Court of First Instance of Athens Declaring the Bankruptcy of a Human Resources Services S.A. Due to Cessation of Payments Following a Commercial Mishap

A recent decision No. 252/2025 of the Multi-Member Court of First Instance of Athens was issued. By this decision, our client – a société anonyme (S.A.) providing human resource staffing services – was declared bankrupt due to debts exceeding €5,000,000. The court accepted that the company’s cessation of payments was the result of a “commercial mishap” and, consequently, unsuccessful business decisions – all being economic in nature. Thus, although the company had initially operated profitably during its first three years, it subsequently faced a 44% increase in labor costs for maintaining its workforce and a simultaneous loss of revenue due to the termination of a long-term subcontracting agreement with a cooperating company in the same industry. Efforts made by the applicant to independently secure new contracts through private tenders were unsuccessful, primarily due to more competitive bids from former partners and the applicant’s own financial difficulties. According to the findings of the decision, the company attempted to avoid cessation of payments by submitting an application under the out-of-court debt settlement mechanism. However, due to the obligation to maintain a workforce of nearly 250 employees in order to remain competitive, the applicant was unable to meet its financial obligations (notably to the EFKA – the national social security institution – and the tax authorities). Furthermore, the court accepted the petition on the grounds that the company possessed assets capable of immediate liquidation to cover the costs of bankruptcy proceedings (e.g. movable equipment, vehicle, etc.). The court set the date of cessation of payments as six months prior to the filing of the bankruptcy petition.

Key excerpts from the judgment read as follows: “Beyond the decline in commercial activity {...}, the 2022 fiscal year recorded a loss of €64,617.70 due to an increase in personnel to at least two hundred thirty (230) employees, compared to one hundred sixty-eight (168) employed in the previous year (2021), resulting in a 43% increase in labor costs, and a further 44% increase in 2023 {...}. In the subsequent fiscal year, the collaboration with the aforementioned company was not renewed, leading to the loss of approximately 90% of the applicant’s turnover.Although the applicant was, at the time, eligible to participate in private tenders, it failed to secure the aforementioned contract, as the former partner company submitted a more financially advantageous offer, while the applicant, due to its financial difficulties, was not competitive {...}.Moreover, the financial statements reveal debts to suppliers and other liabilities, no bank financing, a negative net position of €1,561,369.63, and a liquidity ratio of just 0.42. Therefore, based on common experience and logic, it is concluded that a general inability to fulfill the aforementioned obligations exists in this case.” 

Additionally, it should be noted that, pursuant to Article 195 of the Greek Bankruptcy Code, the legal representative of the company declared bankrupt – who is jointly and severally liable for debts owed to the State and social security institutions – will be discharged from such liabilities for the suspicious period (i.e., the time between the cessation of payments and the declaration of bankruptcy) and for the preceding three years, provided that no objection to such discharge is filed and two years have passed since the declaration of bankruptcy. For a more detailed legal commentary on the discharge of legal representatives of bankrupt legal entities, see our related article here.