In a recent ruling, the Court of Appeal confirmed that administrators owe a duty to all creditors and cannot be held personally liable for the economic loss of a creditor where no special relationship exists. In coming to its decision, the court showed a willingness to look at the commercial realities of the decisions that administrators must make on a daily basis.
The Privy Council has determined that, notwithstanding the absence of express statutory provisions permitting service out of the jurisdiction of fraudulent preference claims, such claims are to have extraterritorial effect. This decision clarifies the law as it relates to the extraterritorial effect of fraudulent preference claims; however, it also creates difficulties for subscribers to mutual funds that may be held liable for investments made on behalf of third-party beneficiaries that are the ultimate recipients of payments.
The Bankruptcy Act has been amended by a statute which came into force on 1 July 2019. The amendments aim to simplify and accelerate bankruptcy proceedings. This article focuses on amendments that affect the position of creditors located outside Finland, such as those concerning the lodgement of claims, dates of creditors' meetings and the bankruptcy and restructuring proceedings case management system.
Singapore is positioning itself as a hub for insolvency and restructuring. Imminent changes to Singapore's mediation landscape suggest that mediation will soon become one of the tools available to insolvency and restructuring practitioners in resolving their clients' concerns. Similarly, there is room for employing arbitration in specific types of dispute, which will assist with insolvency and restructuring matters and help to resolve them more expediently.
The European Court of Justice recently confirmed that the Belgian reorganisation framework infringes the EU Transfer of Undertakings Directive with regard to the transfer of personnel. This judgment looks set to have a significant impact on reorganisation proceedings, with parties more likely to be reluctant to organise a transfer of assets leading to bankruptcies and redundancies.
As a result of the numerous cross-border structures involving Cyprus, the need to recognise foreign insolvency proceedings in Cyprus is becoming more common. While the framework for recognising cross-border insolvencies originating outside the European Union remains largely untested in Cyprus, case law shows the Cyprus courts' willingness to follow the principles of common law in line with current commercial realities.
An online travel platform recently obtained Singapore's first super priority order for rescue financing pursuant to Section 211E(1)(b) of the Companies Act. This groundbreaking decision provides valuable guidance to insolvency practitioners regarding future applications for super priority rescue financing, which will hopefully increase the attractiveness of distressed financing as an investment opportunity in Singapore, fostering its development as an insolvency and restructuring hub.
The Eastern Finland Court of Appeal recently ruled on a bankruptcy estate's liability for a mutual real estate company's maintenance charges. This decision further defines the scope of bankruptcy estates' liabilities and is a logical continuation of Supreme Court precedent in this area. As payments of bankruptcy estates' administrative expenses are privileged compared with claims against debtors, the definition of 'administrative expenses' should be interpreted cautiously.
In an insolvency situation, the fate of ongoing contracts is something to be discussed. Such contracts are often closely linked to the essence of a company's business. For example, for (commercial) leases, a lessor's bankruptcy or a tenant's judicial reorganisation will probably result in discussions about the agreement, its (forced) execution and rental payments. If a company's activities are based on patent or software licences, the effect on these agreements will also be of crucial importance.
In June 2018 the House of Representatives narrowly voted to support a bill which proposes additional protection from claw-back actions for creditors which grant loans that are pre‑approved by an insolvency administrator. While the next steps in the legislative process are unclear, the House of Representatives will likely reopen the debate on this bill in its next session in Summer 2019.
Under the Insolvency Act, once a restructuring plan has been confirmed, the debtor is discharged from its debt and is subsequently prevented from paying its creditors their deficiency or repaying other granted benefits. Consequently, any claims that were not registered during the insolvency proceedings – even if they should have been – fall under this restriction and cannot be repaid. That said, exceptions to the rule exist.
The Singapore High Court recently delivered a landmark decision on the recognition of foreign bankruptcy proceedings and the public policy exception under the Singapore Model Law. In this groundbreaking decision, the court ruled on several matters relating to the law for the first time, including the relevant date and other factors for determining a debtor's centre of main interests.
Pursuant to Article 376/3 of the Commercial Code, where there are signs that a company is in financial distress, its board of directors should prepare an interim balance sheet. If the balance sheet verifies that the company is in financial distress, the board should notify the first-instance commercial court where the company is headquartered and request a bankruptcy declaration. Directors of boards which fail to follow these steps could be held civilly or criminally liable.
In a major development in BVI insolvency law and practice, the Commercial Court recently held that provisional liquidation is available to facilitate a restructuring. The objective of a restructuring provisional liquidation is to provide a better outcome for creditors than would be likely on a winding up. The Commercial Court's decision will certainly influence the current debate in the British Virgin Islands regarding insolvency legislation reforms.
The examinership framework – which was introduced to the Companies Law in 2015 – offers an effective mechanism for restructuring financially distressed companies. However, judging from relevant case law, it appears that an application for examinership must be pursued promptly when the financial distress arises and not when the need for a moratorium becomes apparent.
The European Court of Justice appears likely to rule that the Belgian reorganisation framework infringes the EU Transfer of Undertakings Directive with regard to the transfer of personnel. If the option to transfer only a portion of staff is no longer available in Belgian reorganisation proceedings, companies will have no choice but to formally file for bankruptcy, which is exactly the issue that the legislature and the labour unions had hoped to avoid when introducing this mechanism into Belgian law.
The Companies Act was amended in May 2017 to introduce a number of improvements to Singapore's debt restructuring laws regarding super-priority status for rescue financing, schemes of arrangement, judicial management and cross-border insolvency. This article reviews the various court decisions (both reported and unreported) that have been issued since the changes became operative.
A number of revisions to the Private International Law Act and the Debt Enforcement Bankruptcy Act recently entered into force. The revisions aim to improve and facilitate the recognition and enforcement of foreign bankruptcy rulings and enhance protection against unjustified debt enforcement proceedings. Significantly, Swiss law now recognises foreign bankruptcies opened at the bankrupt's seat, registered office or centre of main interest.
Two joint administrators recently applied to the Royal Court of Guernsey seeking an order that it issue the High Court of Justice of England and Wales with a letter of request to act in aid of and auxiliary to the Royal Court in recognising their appointment as administrators of a company. While the Royal Court has dealt with incoming letters of requests, in making the application, counsel was unaware of any case where the Royal Court's jurisdiction to issue a letter of request had previously been considered.
The reorganisation effort of distressed companies often requires new funding. This has led the Italian insolvency system to abandon punitive solutions in favour of incentives for companies in distress. An interesting aspect of this change is represented by the new rules adopted in recent years with regard to financing granted by shareholders of companies in crisis.