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Argentina

Law 25,563 came into force on February 14 2002 and amends the Bankruptcy Law. The amendments are a reaction to the current Argentine economic crisis, and include the extension of the exclusivity period in which a restructuring agreement can be reached and the reduction of litigation expense for restructuring proceedings.

Australia

In January 2010 the government announced it would legislate to abolish the general principle confirmed by the High Court that shareholder claims for compensation are not subordinate to the claims of ordinary unsecured creditors. The amending legislation has now been introduced into the Commonwealth Parliament and has been considered without comment by the Senate Economics Legislative Committee.

The High Court of Australia recently published its reasons for dismissing the appeals of Lehman Brothers Holdings Inc and Lehman Brothers Asia Holdings Limited against orders made by the Federal Court that had declared void deeds of company arrangement that Lehman Brothers Australia Limited had entered into with its creditors and an order that Lehman Australia be wound up.

Lenders and other third parties dealing with companies in distress are often concerned that by exercising legitimate legal rights they can become shadow directors, especially when the directors allege that they have no choice but to do what the lender wants because receivership is the only alternative. In a recent case the Supreme Court of New South Wales gave important guidance on where the limits really lie.

Section 553C(2) of the Corporations Act provides that a person is not entitled to claim the benefit of a set-off if, at the time of giving credit to the company or receiving credit from the company, the person had notice of the fact that the company was insolvent. In a recent case the Victorian Court of Appeal considered a creditor's right to claim the benefit of a set-off in the liquidation of a company.

The government has released a discussion paper outlining proposals for the reform of Australia's insolvent trading laws designed to ensure that the insolvency laws complement and assist the conduct of workouts. The paper seeks submissions on issues that arise for directors from operation of the insolvent trading laws, particularly in the context of attempts at business rescue outside formal insolvency administrations.

In a recent case liquidators brought proceedings against 16 defendants challenging transactions whereby investors that had received payments in what was effectively a Ponzi scheme were ordered to repay them as uncommercial transactions under Section 558FB of the Corporations Act. The judge found that in the majority of cases the defendants could not discharge the onus of showing that they had acted in good faith.

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Austria

For a successful rescue to take place, the business premises must remain available for the continued operation of the company. Consequently, Section 12c of the Insolvency Code protects the debtor from eviction in rescue proceedings. However, the Supreme Court recently confirmed that a landlord may proceed with eviction proceedings if the tenant fails to meet certain obligations.

A recent judgment of the Supreme Court made clear that future damage of an unknown amount arising from an event that occurred before the opening of insolvency proceedings may be asserted only as a bankruptcy claim in the insolvency proceedings. The estimated amount of damage must be disclosed when the claim is asserted against the bankrupt company.

A new real estate income tax was recently introduced in Austria. When land encumbered by liens is now sold in the course of insolvencies, the question arises as to whether this new tax qualifies as special estate costs. The Supreme Court is yet to clarify the matter; therefore, until this happens, creditors should note that reduced amounts will be attributed to them from the proceeds from the sale of collateral.

In 2009 the Austrian legislature abolished free legal aid for legal entities, and thus also for insolvency estates without assets, although free legal aid had previously been granted only under very restricted conditions. However, a recent ruling of the Constitutional Court held that the abolition of the entitlement to free legal aid for legal entities (ie, also for insolvency estates) was incompatible with constitutional law.

The Supreme Court recently clarified its position on whether injured persons could also join criminal proceedings as private parties if the offender has filed for insolvency. It ruled that creditors may join criminal proceedings as private parties in such cases only if the claims result from the prosecuted criminal action, arose after insolvency proceedings were opened and are not affected by the effects of the insolvency proceedings.

Company pension commitments to employees should be secured in case of the employer's insolvency. If (contrary to legal requirements) such pension securities are not held separately from the employer's other securities, the statutory pledge for securing company pensions cannot fulfil the hedging purpose prescribed by law. Therefore, if the employer acts unlawfully, the security mechanism prescribed by law is to no avail.

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Bahamas

In a recent landmark insolvency decision, the Supreme Court applied the modern approach to the determination of an application by joint liquidators for the production of documents and the oral examination of the named partners of former auditors of a company in voluntary liquidation. The court held that the liquidators had been unreasonable and that their application was oppressive.

Belgium

Positive results for the industrial sector and among cooperative companies are the exception in the statistics on bankruptcies in Belgium in the second quarter of 2010. The effects of the economic downturn continue to be particularly strongly felt in certain areas, with the number of declarations of bankruptcy among construction sector companies rising by over one-fifth in comparison with the same period in 2009.

The president of the Brussels Commercial Court has ruled that in the context of a company's judicial reorganization, a creditor that holds a cash-flow pledge cannot obtain collateral security on that basis. This contradicts legislation that guarantees the right to realize a pledge, even if insolvency proceedings have begun.

The Law on Business Continuity favours divestments, as companies in difficulty are better protected against their creditors. However, it also gives competitors the conditional right to trigger a court-supervised reorganization by mandatory transfer of a near-bankrupt company's assets. The planned winding-up of car manufacturer Opel's Belgian production plant promises to test the operation of the law in an international context.

The new Law on Business Continuity makes fundamental changes to the Belgian legislation on company reorganization (similar to Chapter 11 proceedings in the United States). The process has been simplified and streamlined, with the aim of creating conditions that favour saving the company as a going concern.

Directors may be held liable in the event of their company going bankrupt if it can be established that they committed a serious and indisputable fault which directly contributed to the bankruptcy. A finding of liability on these grounds will allow claims to be brought against the directors to cover the company’s debts.

The national statistics for the number of bankruptcies between September and November 2006 show a slight downward trend in comparison with the figures for the same period in 2005. However, the Brussels-Capital region has seen a sharp rise, with the number of bankruptcies increasing by almost 18%.

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British Virgin Islands

A recent court of appeal decision provided an important ruling on the question of where investors stand in the 'waterfall' of distributions in the liquidation of investment funds under BVI law. The court affirmed the widely held industry view that debts owed to former members for redemption proceeds confer on them deferred creditor status. The decision brings certainty and will be welcomed by investors and insolvency practitioners.

A recent appeal court decision has important implications for insolvency law within the British Virgin Islands. Trade and Commerce Bank served a statutory demand on Island Point Properties SA, which failed to make an application to set it aside within the prescribed time. The debt went unpaid, resulting in the bank's application to liquidate Island Point based on Section 162(1)(a) of the Insolvency Act.

The Commercial Court has handed down a key decision on the status of a redeemed shareholder and the application of Section 197 of the Insolvency Act 2003 to an investor's status. It held that a redeemed shareholder was to be viewed as an unsecured creditor and, as such, could petition for the liquidation of the company in which it was previously a shareholder and should rank alongside other third-party unsecured creditors.

New ground was broken in December 2009 with the completion of what is believed to be the first scheme of arrangement procedure under the Business Companies Act 2004. Schemes of arrangement are an efficient way of concluding a takeover without the added complications of statutory rights for dissenters, which may apply to a takeover structured by way of a statutory merger or court-approved plan of arrangement.

In a recent case the High Court took the view that because of a particular definition in the Insolvency Act, a company which had not applied to set aside a statutory demand within 14 days of service was precluded from making submissions about the validity of the demand at a subsequent application to appoint a liquidator. This had the practical effect of limiting the defences available to a company at the trial stage.

The liquidity crisis continues to have an impact on corporates in several sectors worldwide and refinancings and waiver requests are on the increase. As the financial crisis continues and corporates run out of cash, they will begin to look for new loan capital or seek to raise fresh equity. Thus, financial distress is inevitable for several corporates and directors must be cognizant of their potential exposure.

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Bulgaria

In certain circumstances the courts will order the termination of business activities performed by an insolvent merchant upon the institution of bankruptcy proceedings. This update identifies these cases, and examines whether creditors or major shareholders can halt the commercial activities of an insolvent company.

Canada

The Supreme Court of Canada recently released its much-anticipated decision in the Indalex Limited proceedings under the Companies' Creditors Arrangement Act. The decision is important for secured lenders, both in the context of an insolvency proceeding (ie, debtor-in-possession lenders) and outside such proceedings (ie, secured lenders).

The Supreme Court of Canada recently considered the difficult intersection of Canada's federal insolvency regime with provincial environmental protection laws. Lower courts administering Companies' Creditors Arrangement Act proceedings have observed that Canada's insolvency statutes and environmental legislation do not mesh very well; the Supreme Court's decision attempts to strike a balance between the two regimes.

A recent decision of the Ontario Superior Court of Justice refined the factors to be considered when determining the centre of main interests (COMI) of debtor companies which are part of a larger corporate group. The court identified three principal factors which, considered as a whole, will indicate whether the location in which the proceeding has been filed is the debtor's COMI.

The Ontario Superior Court of Justice recently considered the evidence required when seeking the appointment of a receiver and the approval of a 'quick-flip' sale of a debtor company's assets in circumstances where the debtor, secured party and proposed purchaser are related parties. If privately appointing a receiver appears to be viable, the applicant must show sufficient grounds for the court to intervene.

The Alberta Court of Appeal recently released the first Canadian appellate court decision interpreting a bankruptcy trustee's rights to assign a franchise agreement of a bankrupt franchisee over the franchisor's objections. Permission was granted pursuant to Section 84.1 of the Bankruptcy and Insolvency Act – a relatively new provision which was introduced into the act in 2009.

Recently, the Supreme Court of Canada granted leave to appeal the Ontario Court of Appeal's decision in Indalex Limited (Re). The appeal court's decision has potentially far-reaching implications for lending transactions and has also created uncertainty with respect to the extent of an employer's fiduciary obligations in its role as pension plan administrator.

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Cayman Islands

The Court Fees Rules 2009 were amended by the Court Fees (Amendment) Rules 2009. As recent court practice illustrates, the amendment to the rules has provided a welcome and attractive addition to the procedure of the court in its supervision of compulsory winding up, enabling the court to weigh the interests of creditors and the interests of justice against the broad public interest taken as a whole.

Three new sets of rules and an amendment to the Grand Court Rules were published in a special issue of the Cayman Islands Gazette, establishing a new insolvency regime. Amendments to the Companies Law that were enacted in 2007 but not brought into force pending the preparation of the rules will now enter into effect at the same time as the new rules on March 1 2009.

The US District Court for the Southern District of New York has upheld the rejection of a petition by liquidators of the Bear Stearns High Grade Structured Credit funds for recognition of their liquidation proceedings in the Cayman Islands. Although this confirms the challenges for many distressed hedge funds that are considering bankruptcy, there may be solutions which allow for a successful Chapter 15 filing.

The Companies (Amendment) Law 2007 will, when brought into force, repeal and replace the existing provisions dealing with the winding-up of companies, simplifying and updating the law in line with modern international standards, while maintaining its 'creditor-friendly' character.

Recent New York Bankruptcy Court decisions have created an impression of judicial xenophobia towards the Cayman insolvency regime. The rulings could disqualify any offshore fund incorporated as an exempted company from being subject to a 'foreign non-main proceeding'. Fund promoters should therefore give consideration to improving their prospects of identifying Cayman as their centre of main interests.

Two recent cases have brought further clarity to the issue of what a creditor must prove in order to petition for the winding-up of a company. It is now clear that the Cayman courts will not entertain a fanciful petition to place a company into liquidation where the amount of the petition debt has not yet been properly determined.

Chile

A recent bankruptcy case is significant because it resolves an issue that had not been judged before, namely the connection of obligations to be set-off as required by Article 69 of the Law on Bankruptcy.

The Court of Appeals of Santiago has decided an important case concerning whether a trustee in bankruptcy is authorized to seize assets stored in a storage warehouse. The court considered a recent amendment to the Bankruptcy Act and concluded that such property is not subject to attachment.

Colombia

In general, private debt restructuring is viable where major creditors have the corporate and regulatory ability, as well as the financial capacity, to extend the payment terms of obligations in their favour. However, debtor companies often have to negotiate with the social security authorities, which are not allowed to settle the terms of obligations in their favour.

The government recently submitted to Congress a bill proposing amendments to the insolvency regime. The proposal outlines a single regime for debt restructuring, bankruptcy and liquidation proceedings for companies and individuals. While overall the proposed bill appears beneficial, a number of areas of concern must be resolved before it is finally approved.

Colombian companies have begun to use the US Chapter 11 proceedings as an alternative to Colombian proceedings. However, procedural problems and legal questions exist as to the enforceability and binding effect in Colombia - or other jurisdictions in which a Colombian company has creditors, assets or payment obligations to fulfil - of decisions handed down in the US courts.

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Cyprus

Under Cyprus law the liquidation or winding-up of a company can be carried out either through the court by a compulsory liquidation or on a voluntary basis by the shareholders or creditors of the company or under court supervision. Liquidation orders have a number of fixed consequences, affecting disposal of company property, the powers of directors and the position of employees, among other things.

Chapter 113 of the Companies Act provides for two alternative methods by which the capital structure of a company may be reorganized. One method is by way of a compromise or arrangement with creditors as provided under Section 198, and the other is by way of amalgamation or reconstruction as provided under Section 270.

Czech Republic

This update looks at recent decisions reached by the Constitutional Court and the insolvency court when deciding on a nullity plea in insolvency proceedings. These decisions could have a significant effect on the overall outcome of insolvency proceedings, and the reasoning behind them could be applied in future proceedings.

In the Czech Republic, insolvency proceedings are open to misuse through objectionable and rather unethical anti-competitive means. An insolvency petition submitted at an opportune moment can have serious consequences for competitors. Therefore, the Ministry of Justice has announced plans to introduce fees for filing insolvency petitions and other measures designed to prevent anti-competitive behaviour.

The latest amendment to the Act on Court Executors and Execution Activities was necessitated by the prevailing situation regarding the enforcement of obligations and debts. The changes aim to regulate the activity of court executors and improve supervision. Most of the changes favour debtors, but creditors should also be pleased with the efforts to make the execution process more transparent.

The new Insolvency Act recently became effective in the Czech Republic. The new act recognizes the main types of creditor, which are (in order of priority): priority creditors; unsecured creditors; subordinated creditors; and creditors whose claims are excluded. This update focuses on various classes of priority creditor under the new act and their status in insolvency proceedings.

The purpose of resolving an insolvency by way of a discharge of debt is to give the debtor an opportunity for a fresh start. The new Insolvency Act seeks to achieve this by providing a legal framework for, among other things, the consolidation of all the debtor's debts and the full satisfaction of the claims of secured creditors.

From January 1 2008, for a certain period bankruptcy will be regulated by both the current Act on Bankruptcy and Composition and the new Insolvency Act. The approach to bankruptcy under the Insolvency Act is essentially based on the existing legal framework and incorporates judicial standpoints that have already been handed down by the courts.

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Estonia

Estonian bankruptcy law gives pledge creditors several advantages over other creditors in bankruptcy proceedings, including the priority to satisfy their claims out of the money received from the sale of the pledged asset in the first ranking of claims. However, uncertainty arises regarding the division of expenses between pledge creditors in cases where a pledged asset has been encumbered with several rights of security.

The Bankruptcy Act allows for a prohibition on business for the duration of bankruptcy proceedings regarding both natural and legal persons. However, since the act is broadly worded and it is unclear for what purpose a prohibition on business may be applied with respect to a board member, and what restrictions limit the application of such prohibition, the Supreme Court has attempted to fill the legal gap.

If a company becomes permanently insolvent, the management board must promptly submit a bankruptcy petition for the company to a court. If the bankruptcy petition is not submitted on time, company board members risk both civil and criminal liability. Thus, to ensure all obligations have been met and board member liability is excluded, the main issue is how to determine whether a company is permanently insolvent.

The nature of the liability of a company board member in situations relating to insolvency is complex. Filing a bankruptcy petition in a situation where a company could still be saved may make the board member liable to the company; however, if the board member fails to file a bankruptcy petition on time, he or she could be liable to the company, as well as its creditors. The Supreme Court recently set out its position on the matter.

The Debt Restructuring and Debt Protection Act aims to help natural persons who are experiencing financial difficulties. The act complements the Reorganisation Act, which fulfils a similar function for businesses. Since the acts entered into force, other legal policy measures have been suggested for the swift non-judicial reorganisation of businesses facing financial problems.

Estonian bankruptcy law, in line with that of many other countries, offers greater protection and rights to creditors whose claims are secured by a pledge. In bankruptcy cases involving pledged creditors, concern often arises in relation to the circumstances under which a pledgee may contest the final report on the bankruptcy proceedings. The Civil Chamber of the Supreme Court has analysed this issue in a recent ruling.

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Finland

Overseas companies often use branch offices to expand into new markets due to their relative simplicity and cost efficiency. The role of branch offices in potential insolvency situations is a significant issue for the creditors of such companies. In the event of Finnish bankruptcy proceedings involving a branch office of a foreign company, the Bankruptcy Act regulates the opening of proceedings.

According to the Supreme Court, a debtor's obligation to cooperate and disclose information is remarkably wide in its scope. Therefore, it is necessary that this obligation is specified in detail when a threat of enforcement measures is imposed. Fulfilment of the obligation should be possible with reasonable efforts.

Under the Bankruptcy Act, the bankruptcy estate must liquidate the assets of the estate in the manner most advantageous to the estate. The bankruptcy estate has the right to sell the collateral belonging to the estate only with the secured creditor's consent or, in the case of disagreement regarding the liquidation, if a court grants its permission.

Section 6 of the Act on the Recovery of Assets to a Bankruptcy Estate sets out the rules regarding the setting aside of gifts or gift-like transactions. This provision can have a significant impact on transactions that take place within a corporate group, or that are otherwise affiliated with a corporate group.

The opening of a secondary proceeding changes the lex concursus with regard to the assets which are within the scope of territorial secondary proceedings. This update introduces the key issues relating to the provisions in applicable Finnish legislation which regulate the priority of claims and the setting aside of transactions, which should be considered when a request for the opening of a secondary proceeding in Finland seems appropriate.

A Finnish debtor declared bankrupt in Finland may have foreign creditors and business partners. It is not uncommon that a transaction between an insolvent Finnish debtor and a foreign counterpart may give rise to a claim for recovery of assets. In such cases, the forum for handling the recovery claim will have a significant impact on both the bankruptcy estate as the claimant and the foreign counterpart as the defendant.

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France

In a liquidation case, the Court of Cassation has sent two interlocutory questions to the European Court of Justice. The case revolved around the principle of the intermingling of assets, which provides that opened insolvency proceedings may be extended to other parties if their assets are intermingled with those of the debtor.

The Cour de Cassation recently handed down its decision in the Coeur Défense case, which quashed last year's decision by the Paris Court of Appeal. The consequences of this decision are far-reaching. The position taken by the Cour de Cassation opens the floodgates for appeals by creditors against judgments on opening safeguard proceedings.

The recently published Banking and Financial Law changes French law with regard to insolvency proceedings. The reform will apply to voluntary arrangement, safeguard and judicial reorganisation proceedings. It represents real progress for companies in distress, allowing them to reach an agreement for financing their debts while maintaining supplier confidence.

A recent case shows that a pre-pack can be implemented under French law, but only under specific circumstances. More generally, it demonstrates that French law offers a wide range of possibilities which enable businesses to restructure and find their way back to solvency.

Since the fiducie was introduced, a number of amendments have altered the applicable legal framework, both for the fiducie in general and in respect of contracts for the fiducie as security. Certain changes apply, particularly in the context of insolvency proceedings.

In reaction to apparent failures and in light of the global economic crisis, the legislature and regulatory authorities have proposed further insolvency law reforms. It is hoped that companies will gradually gain confidence in the new procedures and avail themselves of the possibilities offered by the law with a view to the continuation of their business.

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Germany

The Federal Supreme Court recently underlined the importance of commercial considerations in the context of insolvency avoidance rules regarding the repayment of shareholder loans. The court explicitly outlined that a commercial approach is required in order to prevent any potential strategies to structure around the German principles of equitable subordination.

The Federal Supreme Court recently ruled that a termination clause was invalid pursuant to Section 119 of the Insolvency Code, as it was based on an insolvency-related termination event which limited the insolvency administrator's right to choose whether to perform the supply contract in accordance with the code. The court's judgment is likely to cause suppliers to monitor the financial situation of their customers more carefully.

When a company is in financial distress, the shareholders and management must decide to what extent they will subordinate their own interests to the company's interest in survival. It is vital for them to know whether they can rely on advice given by company advisers. A recent Federal Supreme Court judgment provides insight to advisers and stakeholders on how best to protect their interests in a distressed situation.

Subordination agreements between a debtor and its shareholders are a frequently used restructuring tool for German companies. A Federal Finance Court decision has highlighted that the decisive factor in the treatment of debt is the wording of the relevant subordination provision and, in particular, the circumstances under which the debtor must repay the subordinated claim.

The German Federal Court of Justice has refused to recognise an English scheme of arrangement in relation to the German branch of an insurance company, finding that such recognition would be contrary to EU Regulation 44/2001. The judgment was based on specific insurance-related provisions of the Judgment Regulation, suggesting that outside the scope of these specific provisions, schemes will be recognised in Germany.

The Federal Court of Justice has clarified that a former shareholder will be subordinated to its claim under a loan only for a one-year period. The ruling has been widely accepted by German legal scholars and practitioners. However, some legal authors have criticised the ruling, since they think that it could create questionable incentives for delays in filings for insolvency in order to overcome the one-year period of subordination.

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Gibraltar

In a landmark ruling the Supreme Court of Gibraltar has confirmed that the appointment of provisional liquidators of an insurance undertaking based and regulated in Gibraltar constitutes the opening of winding-up proceedings for the purposes of Directive 2001/17/EC on the Reorganization and Winding-Up of Insurance Undertakings.

Greece

The much-anticipated amendment to the Bankruptcy Code was introduced as a proposed bill in Spring 2011, but underwent a series of deliberations before being voted on by the legislature. The new law has now finally been enacted, broadly amending pre-bankruptcy proceedings by abolishing the conciliation procedure and adopting the new recovery procedure. At the last minute, it also introduced the special liquidation procedure.

The Greek Bankruptcy Code currently provides for two restructuring mechanisms: the conciliation procedure and the reorganisation plan. However, the Ministry of Regional Development recently introduced a proposed new bill that transforms the conciliation procedure into a rescue procedure.

Until recently, Greece was one of only a few European jurisdictions to have no insolvency proceedings for non-merchants. However, the need for such protection became apparent. New Law 3,869/2010 sets down debt settlement and debt cancellation procedures for individuals who are not merchants. Such persons may use such procedures if they are permanently unable to meet their financial obligations.

Parliament is shortly due to adopt the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency. This will make Greece one of several EU member states to have amended national insolvency rules in line with the model rules, thereby creating a set of rules that will complement the provisions of the EU Insolvency Regulation.

Α sea-farming company listed on the Athens Stock Exchange may become the first Greek company successfully to implement the newly adopted pre-bankruptcy procedure, known as a conciliation procedure. The company is looking to restructure its obligations to escape the spectre of insolvency, preserve the integrity of its operations and focus on its fish rather than on seeking to protect itself from its creditors.

Parliament has implemented the new Bankruptcy Code under Law 3588/2007. It is the country's first bankruptcy code and its implementation was necessary to regulate a field in need of redefinition and modernization in order to follow developments in other legal systems and to protect and secure economic growth and public interest.

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Hong Kong

The winding-up orders granted in 2008 against Oasis Hong Kong Airlines Limited and Oasis Growth and Income Investments Limited marked the end of the short-lived budget airline, but the size and complexity of the liquidation mean that key issues are still being resolved. A recent judgment clarifies the position of parties which provide services to an airline that goes into liquidation.

A public consultation and its conclusions offer valuable clues as to what insolvency and restructuring practitioners may expect if a statutory corporate rescue mechanism is finally enacted in Hong Kong. Other potential changes in approach - as well as future possibilities, such as the introduction of a debtor-in-possession regime - may also merit attention.

Hong Kong has lagged behind other jurisdictions in the development of litigation funding. However, a recent Court of First Instance decision offers the first explicit and publicly available endorsement of the lawfulness of third-party litigation funding in the context of claims by insolvent companies. Although key questions remain, the decision offers guidance on the lawfulness of a liquidator accepting funding.

Recent cases - including one arising from the winding-up of eight companies in the Lehman Brothers group - have clarified the statutory structure applying to a provisional liquidator's remuneration. In particular, the cases illustrate the proper construction of Sections 194 and 196 of the Companies Ordinance and demonstrate how their application has evolved.

The High Court has introduced significant reforms of its civil procedure that emphasize the court's case management role. Despite the laudable aims of the rule changes, a more front-loaded case management process presents difficulties for liquidators and may make it harder for them to prosecute good claims against delinquent directors or others who have contributed to, or benefited unfairly from, corporate collapses.

In an insolvent winding-up in Hong Kong, the liquidator will review past conduct, decisions and actions in relation to the company's operation and the management of its affairs. However, his or her avoidance powers are often difficult to exercise. Two cases in relation to unfair preference and fraudulent conveyance shed light on the extent to which a liquidator can overturn past transactions involving a debtor's property.

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Hungary

Although Hungary's bankruptcy procedure is well established in legislation, it largely failed when the country was badly hit by the global economic downturn. Recent reforms aim to make bankruptcy proceedings attractive to both debtors and creditors and to provide an alternative to liquidation proceedings. The changes are particularly relevant to banks and credit institutions.

Indonesia

Indonesia is home to a significant number of local subsidiaries of foreign conglomerates. As the financial crisis has hit these conglomerates in their jurisdictions of establishment, companies should be aware of how a foreign insolvency could affect Indonesian companies and how Indonesian assets of the corporate group could be included in a global restructuring.

Indonesia's new bankruptcy legislation came into force in October 2004. The previous bankruptcy regime was based in part on the Bankruptcy Ordinance 1906, which was drafted in Dutch and had no official Indonesian translation. The latest law is a new piece of legislation, written in Indonesian, that replaces the previous laws in their entirety.

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International

The 2012 Nairobi INSOL Africa Roundtable confirmed that legislative reform is not an agenda for the government or private sector alone, but rather must involve a cooperative effort. The roundtable's success proves that African governments, financial institutions, policy makers and the private sector are now more actively engaged in modernising the insolvency framework on the continent.

The United Nations Commission on International Trade Law adopted the Model Law on Cross-Border Insolvency in 1997 to provide an interface between the insolvency laws of different countries, focusing on the four key areas of access, recognition, assistance and cooperation. Since then, familiarity with its scope and key provisions is becoming increasingly important.

Ireland

A recent High Court decision allowed the application of the plaintiff to lift a stay placed on proceedings against the Irish Bank Resolution Corporation Limited which were ongoing at the time that the Irish Bank Resolution Corporation Act 2013 was enacted. It remains to be seen on what terms future applications for a lift of the statutory stay on proceedings will be granted.

The bill to overhaul personal insolvency has been passed as the Personal Insolvency Act 2012. The act provides for discharge from bankruptcy after three years subject to a possible bankruptcy payments order that payments be made from income and assets for up to a further five years. The act also takes the opportunity to legislate in respect of the treatment of pensions in bankruptcy.

The courts recently considered the issue of enforceability in Ireland of an order if made by Swiss courts in Swiss liquidation proceedings. The order would require the return of monies paid – at a disadvantage to creditors – to Irish company Flightlease which had since been liquidated in Ireland.

The function of the Office of the Director of Corporate Enforcement (ODCE) is to encourage and enforce compliance with the Companies Acts and to investigate breaches of those acts. Every liquidator of an Irish company must provide the ODCE with a Section 56 report on the conduct of the directors of the company in liquidation. An ODCE review of these reports determines whether the liquidator must bring High Court proceedings.

The High Court has held that the National Asset Management Agency (NAMA), a statutory body which has acquired eligible bank assets from participating Irish banks of systemic importance, should have afforded a borrower (the Treasury) an opportunity to be heard prior to taking a decision to enforce. The court held that NAMA had failed to consider certain relevant matters.

The Irish government has published in draft form its Personal Insolvency Bill, to which it gave a commitment under the EU/International Monetary Fund Programme of Financial Support for Ireland. The bill is to modernise the bankruptcy of individuals and to provide for non-judicial debt settlement systems. The final form of much-needed legislation for indebted individuals is awaited.

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Isle of Man

In a recent decision the High Court considered the application of the principles of forum non conveniens (ie, that proceedings should be conducted in the most convenient or natural forum) and universalism in cross-border insolvency matters. The ruling is another example of the Isle of Man court's determination to take a global view in accordance with the principles of comity.

The liquidators of the insolvent bank Kaupthing Singer & Friedlander (Isle of Man) Limited (in liquidation) have won an important victory in the Isle of Man Appeal Court, overturning a first instance judgment which was delivered in favour of Australian supermodel Elle Macpherson. Macpherson had previously won a landmark victory in the Isle of Man High Court in a case in which the court cited an equitable principle dating back to 1675.

Australian supermodel Elle Macpherson recently won a landmark victory in a High Court insolvency case by citing an equitable principle dating back to 1675. The case highlights that insolvency and banking practitioners should think twice before entering into lending arrangements with individuals which interpose companies that belong to those individuals.

In recent times it has become increasingly common to consider taking action to wind up a debtor company. However, initiating this procedure on the Isle of Man must be given plenty of thought. The process can be time consuming and costly if it is not approached in the right way, and it is essential to be as prepared as possible before embarking on such action.

In difficult economic times, fear of the effects of a downturn in the economy and the prospect of business failure may lead some to consider transferring property and assets in an attempt to place them beyond the reach of claims of creditors, a trustee in bankruptcy or a liquidator. Isle of Man law provides that transactions undertaken with fraudulent or improper intentions may be set aside.

Israel

The Tel Aviv District Court recently handed down rulings concerning class actions against companies in liquidation, bankruptcy proceedings against non-Israeli residents and restitution of insolvency fund monies.

Italy

In addition to amendments to the composition procedure, the Decree-Law on Urgent Measures for the Country's Growth introduced new provisions applying to debt restructuring agreements pursuant to Article 182bis of the Insolvency Act, as well as some crossover provisions applicable to both composition with creditors and debt restructuring agreements.

In order to foster economic growth, Parliament has amended the Insolvency Act. The changes are intended to allow businesses in financial difficulties to have faster and simpler access to insolvency procedures by affording them an opportunity to apply for new loans and to rely on legal protection at an early stage in preliminary negotiations with creditors.

New legislation allows a person who is ineligible for bankruptcy proceedings to discharge his or her indebtedness through a procedure that involves all of his or her creditors, even if only some of them participate in the agreement. However, will the benefits to creditors of accepting such a proposal be sufficient to dissuade them from seeking individual enforcement actions?

Before the reform of Italian insolvency law, the mainstream view was that no limitations should be placed on a court's power to test the debtor's compliance with the objective and subjective conditions for admission to the composition procedure. However, a greater emphasis on the private autonomy of the parties has led to new approaches to a judge's review of composition proposals and their accompanying plans.

Bankruptcy is increasingly regarded as a last resort for a struggling company. Changes to the composition procedure promote the parties' shared interest in negotiating a solution to the debtor's difficulties. The result is a legislative framework that is better suited to a commercial environment in which competitiveness, reactivity and flexibility are key requirements.

Recent modifications to the composition procedure under Italian law were intended to give debtors greater latitude in structuring the content and terms of the composition proposal. Although the stages of the procedure are well established, questions still arise as to when, and to what extent, a proposal for composition can be amended.

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Japan

Overview
Including: Bankruptcy Procedure; Special Liquidation Procedure; Corporate Reorganization Procedure; Civil Rehabilitation Procedure; Corporate Arrangement Procedure.

Under the Companies Act, a company split is often used when reorganising a company in Japan. However, in recent years, abusive use of the company split has been problematic. The Supreme Court handed down its first judgment in this area of law, indicating that an obligee may demand the court to rescind a company split regarding the transfer of rights in accordance with the Civil Code.

The Supreme Court has ruled on the actions that a bank may take where it has both a claim against a company and a right of retention with regard to the company under the Commercial Code over a promissory note that the company has entrusted to the bank to collect, and where an order has been issued for the commencement of civil rehabilitation proceedings in respect of the company.

A Supreme Court decision clarifies the treatment of a claim for reimbursement in respect of a salary payment made by a third party before the commencement of bankruptcy proceedings. The court ruled that a third party which makes salary payments to employees of a bankrupt debtor may enjoy priority in respect of its reimbursement claim in subsequent proceedings.

A Tokyo District Court decision is a useful example of the application of the avoidance rules in the context of group company financing. In this case, a debtor company had settled a mortgage for a financing company as the real gurantor of its parent company, and the parent company had provided no consideration to the debtor company in the settlement.

The Tokyo District Court has issued an order for the avoidance of a business transfer that was made by a bankrupt company before its filing. The transferee was ordered to restore the transferred assets that could still be identified and make payment for those that could not; the fact that it had jointly assumed part of the company's debts and had paid some of the debt did not affect the restoration or payment.

A lawyer who represents a debtor in the latter's petition for bankruptcy and has notified such representation to the creditors must not only file the petition as soon as possible, but also take necessary measures to prevent the dispersal or loss of the debtor's assets before the trustee assumes control. Failure to do so may make the lawyer liable in tort for damages to the bankruptcy estate.

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Jersey

At the end of a financial year, there is likely to be an increase in the number of businesses becoming insolvent, some of which may have an interest in Jersey property. Insolvency practitioners appointed outside Jersey in respect of an overseas person or company must be recognised in Jersey before they can deal with certain forms of Jersey property, as Jersey immovable property can be transacted only before the Royal Court.

The ability of the court to ensure that similarly ranked creditors of a debtor are treated equally before the commencement of any insolvency procedure, including a just and equitable winding-up application, was recently considered by the Royal Court. Following this ruling, the indications are that the court will consider making use of its inherent jurisdiction to ensure parity between creditors even where no statutory protection exists.

The credit crunch has put pressure on a wide range of structures - as a result, lenders, borrowers and other counterparties are looking more closely at the impact of possible insolvency proceedings. As Jersey companies have often been used in cross-border finance transactions, it is important to be aware of the differences between Jersey and English insolvency procedures for companies.

The Netting Law, which came into effect on August 12 2005, is a short law, expressed in seven articles, which gives statutory confirmation that netting, contractual subordination and non-petition provisions in agreements are enforceable in accordance with their terms before and after bankruptcy. This update summarizes its scope and impact since coming into effect.

Kazakhstan

Kazakhstan's biggest development in the field of restructuring in 2010 was undoubtedly the Special Financial Court of Almaty's decision to recognise a plan for BTA Bank. In part, the rescue was made possible by the provisions of the Restructuring Law, which is similar to UK and US corporate rescue regimes and is intended to allow bank restructurings to be recognised in London, New York and other leading financial centres.

Latvia

The Saeima has adopted a new draft Insolvency Law in the first reading. If its adoption goes smoothly it will be the third law to have been introduced regulating the insolvency of companies and individuals within two years. The draft law aims to speed up insolvency proceedings in many ways and establishes rights and obligations of involved parties in more detail and more accurately.

Amendments are planned to a number of laws relating to insolvency proceedings in order to improve the efficiency of insolvency procedures and support the rehabilitation of companies that are experiencing financial difficulties. To this end, amendments are planned to the Insolvency Law, the Civil Procedure Law and the Credit Institutions Law.

The Cabinet of Ministers has approved the draft amendments to the Insolvency Law, which aim to improve the regulation of restructuring procedures for companies which have temporary financial difficulties and are expected to develop a programme to restore their solvency in full. The amendments also reduce the administrator's monthly fee from three monthly minimum salaries to one.

Luxembourg

A bill has been introduced to Parliament that provides for a right to reclaim intangible and non-fungible movable assets from a bankrupt company. The bill is intended to allow for the recovery of data from a bankrupt provider of distance IT services or cloud computing solutions. The law will provide greater certainty as to the consequences of the bankruptcy of a cloud computing provider for the data in its possession.

Recent legislation has amended the Collateral Act. The act has always been a lender-friendly implementation of the EU Collateral Directive and, in general, it remains favourable to creditors in insolvency situations and other contexts. However, all stakeholders should be aware of the insolvency aspects of collateral arrangements, as well as the other mechanisms available for insolvency protection.

Including: Initiating bankruptcy; Directors' liability; Consequences; Suspect period; Effects on employment contracts; Preferred claims.

Malaysia

The Court of Appeal has held that the receiver/manager of a company in liquidation is not obliged to submit accounts, documents, monies or other movable assets to the liquidator. However, a definitive ruling as to the true powers of a receiver/manager in such cases is nonetheless required.

The recent case of Ban Hin Lee Bank Berhad v Applied Magnetics (M) Sdn Bhd (In Liquidation) illustrates how an amendment to the Employment Act 1955 works to the advantage of unpaid employees in liquidation proceedings.

The domestic courts recently handed down significant decisions on insolvency matters including the sale of land by private treaty, the power of the courts to grant costs in winding-up proceedings and the procedure for taking action against a court-appointed provisional liquidator.

The Federal Court recently held that a receiver who is an agent of the company in receivership, and who holds a valid power of attorney conferred under a debenture created by the company, can sell land secured under the debenture by private treaty provided that the company is not in liquidation.

Mauritius

The new Insolvency Act is intended to consolidate and modernise the legal framework for insolvency by updating and integrating it into a modern and comprehensive regime covering both individual and corporate insolvency. The act states that a company is unable to pay its debts if it fails to comply with a statutory demand within a period of one month after the last date for compliance with the demand.

The Supreme Court of Mauritius recently delivered an interlocutory judgment on the appointment of an administrator under the Insolvency Act 2009. The judgment is the first on this issue and provides a precedent as to the approach that the Supreme Court is likely to adopt in the future in similar matters.

Mexico

Where joint obligations exist between a holding company and its subsidiaries in respect of a third party, it is arguable that the subsidiaries may not vote on a bankruptcy or business reorganisation agreement if the holding company might benefit from reductions in its financial obligations or extensions of time. However, if no such obligation exists, it is necessary to analyse the origin of the claim.

The provisions in Title XIV of the Bankruptcy Code allow for submission of a business reorganization plan agreed between the debtor and creditors representing at least 40% of the total debt. Such pre-packs offer businesses in difficulty a more flexible form of proceeding that gives them an opportunity to resolve or at least mitigate their financial problems. However, further improvements are needed.

Until recently, directors of a company which was subject to a business reorganization process at the request of a merchant or creditor could be sentenced to house arrest by a federal judge. However, amendments to the Business Reorganization Law now restrict this right.

Article 24 of the Business Reorganization Law states that a person or entity filing a petition for business reorganization must demonstrate that it has access to an amount equivalent to 1,500 times the daily minimum wage in Mexico City (around $50,000). The article was ruled unconstitutional on the grounds that it limits the right to free access to justice guaranteed in the Constitution.

The Supreme Court has ruled that Article 49 of the Business Reorganization and Bankruptcy Law does not violate the constitutional right to trial established by Article 14 of the Constitution.

The Supreme Court recently ruled that the domiciliary arrest of members of a bankrupt or reorganizing company's board of directors is constitutional and does not affect their right to freedom of transit, as long as they leave a legal representative responsible for complying with all legal obligations which the company might have.

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Netherlands

According to the Dutch Supreme Court, an English trustee in bankruptcy can rely on Article 25(1) of the EU Insolvency Regulation to obtain recognition and enforcement of a disclosure order obtained in the United Kingdom pursuant to the UK Insolvency Act 1986 in other EU member states, such as the Netherlands. The decision sets a precedent that will be helpful to trustees in bankruptcy and other office holders.

A bill submitted to Parliament in late 2011 proposed the extension of the Collective Settlement of Mass Claims Act to bankruptcy situations - a move influenced by the bankruptcy of DSB Bank and the possibility of tens of thousands of client claims arising from it. However, it is unclear whether the proposed change in legislation will actually expedite the handling of bankruptcy class actions.

Until recently it was unclear whether a director of a legal entity could incur director's liability under Dutch law when the director was a legal entity incorporated under the law of another country or a natural person acting as the director of such a foreign legal entity. A recent Supreme Court ruling in a bankruptcy case has provided clarity in this area.

A striking feature of Dutch insolvency law is the strong position of secured creditors. Proposed revisions to the Bankruptcy Act would have introduced less favourable treatment for secured creditors and made it easier to avoid fraudulent preferences; but as these revisions have since stalled, the position of secured creditors will remain unaffected – at least for the time being.

The restructuring practice often calls for creative solutions, especially when the stakes are high and the debtor is in serious financial distress. One possibility is for the debtor to transfer its assets to a creditor subject to the condition precedent of the debtor being declared bankrupt. However, under Dutch bankruptcy law, while each case must be reviewed on its own merits, any such action faces a high risk of being challenged.

The Amsterdam District Court has dismissed an application by the administrators of the Dutch branch of Landsbanki to extend the term of the emergency regulations that had been declared applicable to the branch by the court 18 months previously. The court concluded that it was not entitled to extend or redeclare the application of emergency regulations to the Dutch branch because Landsbanki was licensed in Iceland.

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Nigeria

The Asset Management Corporation of Nigeria (AMCON) was established to help resolve the banking crisis by assuming toxic bank assets and associated debt recovery. Thus far, however, it has found itself mired in court litigation. The chief judge of the Federal High Court has therefore issued a practice direction aimed at fast tracking claims brought by, on behalf or against AMCON involving recalcitrant and insolvent debtors.

Schemes of arrangement under the Companies and Allied Matters Act do not incorporate certain features found in other jurisdictions, but they can nonetheless be used to achieve an insolvency system with a greater emphasis on business rescue. Sufficient legal structures and expertise are already in place to guide companies towards the best option on a case-by-case basis.

A privately appointed receiver-manager may benefit from greater flexibility and a wider scope of powers, but may also face a conflict of interest, as he or she is expected to work for the principal, but also owes a fiduciary obligation to the debtor company under statute. Thus, a receiver-manager must walk a fine line in order to avert personal liability and post-receivership litigation from the debtor company.

The principal focus of modern insolvency legislation is no longer the liquidation and elimination of insolvent entities, but rather the remodelling of the financial and organisational structure of enterprises in financial distress to enable the rehabilitation and continuation of their business. In the right circumstances, the courts can proactively encourage business recovery using some well-established techniques.

The reforms and measures initiated by the government and the Central Bank of Nigeria in order to restructure the banking sector are having a major impact on corporate restructuring. The banks must now interpret and apply Section 539 of the Companies and Allied Matters Act 2004, which affects any compromise or arrangement between the members or creditors of a company.

In 2009 the impact of the global economic crisis in Nigeria shifted from the capital market to the banking sector. In terms of insolvency practice, a significant development arising from this situation has been the fact that statutory regulatory agencies involved with intervening in bank insolvency have resorted to criminal prosecution in managing bank insolvency, as opposed to using the civil aspects of insolvency law.

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Norway

In regard to most contractual relations, the estate may choose whether to assume the position of the debtor in non-performed contracts. This right to choose is limited to the estate and the co-contractor cannot reject the estate's performance of contracts. However, some agreements are of such nature that the estate cannot force the co-contractor to accept it as a contractual party.

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Pakistan

The Securities and Exchange Commission is consulting on the draft Corporate Rehabilitation Act 2004. The draft act aims to provide a mechanism for the revival and rehabilitation of insolvent companies, improving corporate governance and debt recovery, achieving a better balance between creditor and debtor rights and helping to prevent unnecessary corporate failures.

Poland

The Warsaw common court recently concluded its first successful recovery proceeding - an emerging trend in Polish bankruptcy and recovery judicial practice. A new approach to recovery proceedings by this court, which handles the largest number of insolvency cases in Poland, will improve the chances of successfully initiating and completing such proceedings.

A recent spate of bankruptcies among entrepreneurs has clogged the courts with mounting cases, forcing many businesses to look to alternative measures for debt rescue. Therefore, an increasing number of courts are announcing their first successfully conducted recovery proceedings. A debtor that is willing to take on the additional costs and effort required for recovery proceedings can reap the benefits.

The ministers for justice and economy recently announced plans for a radical reform of bankruptcy law, aiming to allow businesses on the verge of bankruptcy to return to stable economic relations more easily. If properly applied, the proposed amendments should result in the Polish legal environment, and bankruptcy law in particular, becoming more enterprise-friendly and business-oriented, offering a true boon for investors.

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Romania

Overview
Including: Main laws and regulations; Entities subject to insolvency procedure; Mandatory conditions for the commencement of the insolvency procedure; Procedures.

According to the Insolvency Law, the judicial administrators, liquidators or creditors' committee of a company subject to an insolvency procedure are entitled to claim the cancellation of certain transactions concluded before the opening of the insolvency procedure. The applicable period varies from 120 days to three years before the opening of the insolvency procedure, depending on the type of transaction in question.

Under Romanian corporate law, company directors are usually held liable to the company only with respect to acts performed in the name of or on behalf of the company. However, the situation might change when the company becomes subject to insolvency procedures. In case of bankruptcy, the creditors of the insolvent company may file a direct legal action against the company's directors.

Russia

Creditors have been given an effective legal tool to enforce the liability of shareholders and chief executive officers, including foreign companies and citizens, for a Russian debtor's bankruptcy. Creditors can now recover their debts from such parties' property if the debtor's property is insufficient to satisfy the debts. However, pursuing any claim requires an understanding of Russian bankruptcy proceedings.

Singapore

A recent situation involving a judicial manager and the fate of the employees of a company under judicial management has come to light. The issue was whether to adopt the existing contracts of employment or to terminate them and execute fresh contracts. The judicial manager's liability was also discussed.

A recent decision has important implications for the law governing commercial property and construction agreements, as well as insolvency law. It provides purchasers of property with greater financial protection against developers. It also clarifies a party's right of set-off in an insolvency situation for pre-liquidation debts where the liquidator performs an existing contract.

There have been several recent significant decisions relating to bankruptcy law and practice rendered by the courts. They include discussion of when a statutory demand can be said to have been satisfactorily served on a debtor, and on whom the onus rests when proving a debtor's inability to pay.

The enactment of Section 99 of the Bankruptcy Act introduced a significant change to insolvency law, as it allows for the voiding of certain transactions entered into by a company before liquidation, if the transactions constitute an unfair preference given to some creditors over other creditors. A recent case follows the English approach.

The Bankruptcy (Amendment) Act 1999 makes changes to various areas of bankruptcy law, in-line with the encouragement of technopreneurial initiatives and ideas.

South Africa

In an attempt to modernise its business law and avoid the deleterious consequences of liquidation, South Africa has adopted and developed a new business rescue regime. While the full effect of the new regime is yet to be tested, it is expected to have a substantial impact on corporate South Africa and provide a practical mechanism that has a significant chance of succeeding.

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South Korea

New legislation regulating corporate and individual insolvency proceedings (including both liquidation and rehabilitation) has come into force. The new Act on Rehabilitation and Bankruptcy of Debtors unifies and replaces four separate insolvency laws.

Spain

Since the economic crisis hit Spain, numerous property developers have filed for insolvency in the commercial courts. A key issue is the continuity of the contracts that were in the course of being performed at the time when the petition for insolvency was filed. The problem is particularly serious for property companies with houses or flats under construction for which they have signed contracts of sale with buyers.

The Cabinet has approved the draft bill reforming the Insolvency Act. The reforms will encourage banks to refinance debts and provide liquidity for businesses in difficulty so that they can avoid bankruptcy, thus reducing the workload of the commercial courts. The reforms also aim to streamline and improve procedures in order to reduce costs.

The Ministry of Justice recently drafted new legislation to amend the Insolvency Law. Although this reform bill is still at an early stage, if adopted the new legislation will introduce more flexibility in key areas of insolvency law and will modify provisions based on the experience developed by local courts.

The principal aim of the Insolvency Act is the survival of a company - although in 95% of cases this is not achieved. The only way for an insolvent company to continue in business is to come to an agreement with its creditors on the payment of its debts. This is known as a scheme of arrangement. If no arrangement can be agreed, the company must be wound up.

The financial crisis has resulted in new litigation involving derivatives, including a significant number of related issues arising in the context of Spanish insolvency proceedings. Derivatives products were sold widely by banks during the prolonged period of prosperity and highly leveraged companies were encouraged by banks to enter into swaps as part of the overall bank financing of their projects.

An important innovation of the Insolvency Act was to give commercial courts handling insolvency proceedings exclusive powers over employment matters to the exclusion of the social courts, which normally deal with such matters. One particular employment aspect which the act attributes to the insolvency courts relates to the suspension and termination of senior management contracts.

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Sweden

The Supreme Court recently found that Sweden has in accordance with the motive of the EU Insolvency Regulation. The court had to decide whether Sweden had jurisdiction over a recovery action involving a Norwegian defendant. It noted that a court in a member state where an insolvency proceeding has been opened also has jurisdiction over a recovery action against a defendant in another member state.

The Court of Appeal recently established that newly appointed directors were objectively liable for obligations which arose during a liability period. The court found that the directors had arranged an issue of new shares fully covering the company's equity shortage and had not acted negligently when the claim arose. The directors could therefore not be held personally liable and the claim was dismissed.

If a debtor is unable to pay its debts as they fall due, or will shortly become unable to do so, it may apply for company reorganisation, which grants undertakings with financial difficulties respite to take measures to improve their business and negotiate a judicial composition with creditors. The Wage Guarantee Act provides for a loan on a short-term basis that improves the debtor's possibilities to reorganise the business.

The Supreme Court recently clarified the interpretation of the rules on set-off in bankruptcy. The case concerned a creditor's right to offset a claim against the bankruptcy estate's claim of payment. The triable issue was whether the settlement agreement was to be considered as a substituted contract, meaning that the bankruptcy estate's claim had occurred after the date of bankruptcy.

The Supreme Court recently clarified the interpretation of the rules on lodging proof of debt in bankruptcy. The case initially concerned a situation where a creditor that had received an interim dividend failed to lodge its claim in the proof-of-claim procedure. Due to specific circumstances, the creditor was still entitled to a dividend. However, in different circumstances, the outcome could have been different.

The Companies Act states that directors can be held personally liable for all debts that arise after the equity of a company has fallen below 50% of the registered share capital. In such circumstances the board of directors has a duty to act in order to avoid personal liability. In a recent case the Court of Appeal had to consider how a new board of directors in a company with insufficient capital should act.

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Turkey

Recent economic downturns have affected many Turkish companies. Article 324 of the Commercial Code details the procedure to be followed by a company's board of directors if the company's net assets fall below a certain level.

Ukraine

Amendments to the Law on Restoring Debtor Solvency or Declaring a Debtor Bankrupt have recently come into effect. These amendments introduce several positive changes to bankruptcy proceedings in Ukraine, including provisions that allow for the customisation of court proceedings and which strengthen the status of secured creditors. However, it is yet to be seen how the courts will apply these amendments.

United Kingdom

Establishing a client money claim is crucial for former clients of a collapsed financial institution, as it determines whether moneys held by the institution were held on trust for their benefit. The High Court has provided further clarity on the valuation of client money claims related to positions on open trades that closed out following a financial institution's entry into special administration.

The Supreme Court recently handed down judgment in Rubin v Eurofinance. The court held that those parts of a US bankruptcy court decision that are comparable to UK avoidance provisions should not be automatically enforced under the common law or pursuant to the Cross-Border Insolvency Regulations 2006.

A Commercial Court decision has emphasised that a foreign restructuring or composition plan will not automatically discharge a debtor from liability under a contract governed by English law. In certain circumstances this may enable a subsequent purchaser of the distressed debt to enforce against the debtor and obtain a judgment for the full value of the debt plus interest.

The High Court recently considered applications to challenge jurisdiction and to stay or strike out English proceedings against a Dutch bankruptcy trustee of an insolvent company. It clarified the scope of the insolvency exception in the EU Insolvency Regulation and the EU Judgments Regulation, and provided guidance on determining whether there is a sufficiently close connection to the insolvency proceedings.

The Court of Appeal has ruled on a joint appeal relating to the application of the International Swaps and Derivatives Association master agreement in insolvency. Considering the position of out-of-the-money parties whose counterparty is subject to an event of default, it held that such parties remain potentially liable, such that they would have to pay if the event of default is cured, even after the transaction ends.

The Supreme Court has released its judgment in the Lehman Brothers client money litigation. In a somewhat divided analysis, the court outlined the correct approach for the distribution of client money and the entitlement to share in the client money pool on the insolvency of a firm that operates what is termed the 'alternative approach'.

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USA

In a significant victory for secured creditors, the US Court of Appeals for the Seventh Circuit held that a bankruptcy court cannot confirm a Chapter 11 plan providing for the sale of the debtor's assets where dissenting secured creditors did not have an opportunity to 'credit bid' for their collateral during the auction process.

The Supreme Court recently held that a bankruptcy court lacks the constitutional authority to enter final judgment on a counterclaim asserted by a debtor where the counterclaim is unrelated to the underlying claim. The decision distinguished between core and non-core counterclaims, and makes clear that only core counterclaims can be adjudicated with finality by bankruptcy courts.

The Second Circuit recently issued an opinion that addressed two separate appeals. The first ruling could make it more difficult for a secured creditor to resolve disputes with junior constituents over plan distributions, while the second may provide leverage to debtors in negotiations with strategic investors attempting to block or propose a plan of reorganisation.

A recent decision by the Fifth Circuit Court of Appeals is the first in which a US court has permitted a foreign representative in a Chapter 15 case to bring avoidance actions under foreign law. If widely adopted, it could significantly enhance the ability of foreign representatives to recover assets transferred from their home states to the United States.

The US Court of Appeals for the Third Circuit's recent opinion in In re Visteon Corp is a victory for retirees whose rights could be impaired in a Chapter 11 case. Following the decision, a debtor whose retiree benefits plans include the unilateral right to terminate such plans at any time will nevertheless be required to comply with Section 1114 of the Bankruptcy Code in order to terminate such plans post-petition.

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