Quick reference tables

These tables are for quick reference only. They are not intended to provide exhaustive procedural guidelines, nor to be treated as a substitute for specific advice. The information in each table has been supplied by the authors of the chapter.

Australia

 

Applicable insolvency law, reorganisations: liquidations

Corporations Act 2001 (Cth).

Customary kinds of security devices on immovables

Mortgage (both equitable and legal).

Customary kinds of security devices on movables

Security interest (charge, pledge, lien, etc) registered on the Personal Properties Securities Register.

Stays of proceedings in reorganisations/liquidations

The Federal Government’s new ipso facto laws (introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth)) impose an automatic stay on the enforcement of ipso facto clauses in certain contracts entered into on or after 1 July 2018 (Automatic Stay).

The Automatic Stay will apply where one of the following insolvency events occurs in relation to a company:

  • voluntary administration;
  • a receiver or controller is appointed over the whole or substantially the whole of the company’s assets;
  • the company announces, applies for or becomes subject to a scheme of arrangement in order to avoid a winding up; or
  • the appointment of a liquidator immediately following an administration or a scheme of arrangement.

A moratorium on legal actions exists in both voluntary administration and liquidation.

No such moratorium exists upon the commencement of a receivership.

Duties of the insolvency administrator

Insolvency practitioners have a number of duties including:

  • to act with reasonable care and skill;
  • to act in good faith;
  • to act bona fide; and
  • to be independent.

Each insolvency administrator is also considered an officer of the company so must also comply with the duties of officers of the company (both statutory and at common law).

Liquidators and administrators also considered fiduciaries and are held to a higher standard than receivers.

Set-off and post-filing credit

Available under section 553C of the Act.

Operates automatically in a liquidation when there is a mutuality of transactions between the debtor and the creditor.

Not available if the creditor knew of the debtor’s insolvency.

Creditor claims and appeals

Proof of debts are filed in liquidation, administrations, deeds of company arrangement and schemes of arrangement. A similar process exists for all of these.

The insolvency practitioner maintains a high degree of discretion with respect to admitting (or rejecting) claims, and may require further information.

Aggrieved creditors can seek recourse through the courts if a proof of debt is rejected. The courts have exhibited a reluctance to overturn decisions of independent insolvency practitioners.

Priority claims

Secured creditors have priority.

Under section 556 of the Act, certain other creditors are afforded a level of priority (including employees, providers of funding and the costs of the insolvency administrator).

Major kinds of voidable transactions

  • Uncommercial transactions;
  • unfair preferences;
  • unreasonable director-related transactions; and
  • unfair loans.

Operating and financing during reorganisations

Financing permitted under all forms of Australian administration (voluntary administration, deeds of company arrangement, liquidation and receivership).

Such financing is afforded a level of priority either under statute or existing security documents.

International cooperation and communication

Australia has adopted the UNCITRAL Model Law on Cross-Border Insolvency by implementing legislation called the Cross-Border Insolvency Act 2008 (Cth).

Liabilities of directors and officers

Directors and officers may be liable for insolvent trading (subject to both criminal and civil penalties).

Consequences include civil penalty orders or orders requiring a director to compensate either the company or aggrieved creditors.

In September 2017, new section 588GA was introduced into the Act to afford directors protection in certain circumstances to enable a company to delay entering into a formal insolvency process, and instead pursue a turnaround plan (ie, provide directors with a ‘safe harbour protection’). Under this new section, a director will not be liable for debts incurred by a company while it is insolvent if, ‘at a particular time after the director starts to suspect the company may become or be insolvent, the director starts developing one or more courses of action that are reasonably likely to lead to a better outcome for the company’ than the ‘immediate appointment of an administrator or liquidator to the company’.

Pending legislation

Draft legislation aimed at combatting illegal phoenix activity through the introduction of new phoenix offences targeted at directors and advisors who engage in creditor-defeating transactions. The draft legislation also proposes to restrict the voting rights of related creditors to remove an external administrator.

 

Austria

 

Applicable insolvency law, reorganisations: liquidations

Insolvency proceedings comprising bankruptcy proceedings, reorganisation proceedings and reorganisation proceedings with self-administration are governed by the Austrian Insolvency Code.

The EU Insolvency Regulation will affect cross-border insolvencies.

Customary kinds of security devices on immovables

The main type of security on immovables is the mortgage.

Customary kinds of security devices on movables

The possible security devices on movables are the pledge or the transfer of title. For movables other than rights, these devices are not very practical. Creditors, however, commonly make use of an assignment of receivables as security.

Stays of proceedings in reorganisations/liquidations

There is a complete stay of proceedings on the commencement of insolvency proceedings. Secured creditors can still continue to enforce their rights.

Duties of the insolvency administrator

In bankruptcy, the insolvency administrator takes control over the debtor’s assets and effects the distribution of such assets.

In reorganisation proceedings (without self-administration) the insolvency administrator takes control over the debtor’s assets and reviews the reorganisation plan.

In reorganisation proceedings (with self-administration) the reorganisation administrator supervises the debtor (who generally stays in control of its assets) and reviews the reorganisation plan.

Set-off and post-filing credit

Generally, creditors are entitled to exercise their rights of set-off in all types of insolvency proceedings. Claims that are to be compensated must have been compensatable at the opening of the bankruptcy proceedings.

In insolvency proceedings, an insolvency administrator is entitled to conclude credit agreements on behalf of the insolvent’s estate.

Creditor claims and appeals

In insolvency proceedings, the creditor must file its claims with the court. If the claim is disputed, the creditor must commence (or continue) legal proceedings to establish its claim, if it had not obtained an enforceable judgment prior to the initiation of the insolvency proceedings.

Priority claims

Claims against the debtor that arise from the continuing of business activities or liquidation of the business during the insolvency proceedings are generally granted priority.

Major kinds of voidable transactions

Under certain preconditions, the debtor’s transactions are voidable where they give preference to one creditor over others.

Operating and financing during reorganisations

In reorganisation proceedings, the debtor can continue to operate if and to the extent ordered to do so by the administrator, or, in the case of reorganisation proceedings, with self-administration subject to the administrator’s supervision. Claims against the debtor arising from the continuation of business during the reorganisation proceedings are granted priority.

International cooperation and communication

Austrian law allows for cross-border cooperation in several ways and provides for information transfers to foreign administrators and the foreign administrators’ right to submit proposals and statements relating to reorganisation plans and the liquidation or utilisation of assets located in Austria.

Liabilities of directors and officers

Directors can be personally liable for damage suffered because of the late filing of a petition. Managing directors may be personally liable for taxes and social security contributions.

Pending legislation

None.

 

Bahamas

 

Applicable insolvency law, reorganisations: liquidations

The Companies Act, the International Business Companies Act and subsequent amending acts and subsidiary legislation.

Customary kinds of security devices on immovables

Legal and equitable mortgages, debentures including fixed and floating charges.

Customary kinds of security devices on movables

Chattel mortgages, debentures including fixed and floating charges.

Stays of proceedings in reorganisations/liquidations

General stay automatically issues on commencement of an involuntary winding up. Actions by creditors etc may only be commenced or continued with the leave of the court.

Duties of the insolvency administrator

Secure all the assets of the company being wound up, prosecute appropriate claims against former directors or delinquent creditors of the company, release assets held in trust or pledged as security to beneficial owners or secured creditors, pay statutory priority claims, prepare the accounts of the company, receive and process all creditor claims, submit scheduled reports to the supervising court and to the creditors committee if one has been appointed.

Set-off and post-filing credit

These rights remain enforceable.

Creditor claims and appeals

Claims are first approved or rejected by the liquidator, whose decisions are subject to appeal to the court.

Priority claims

Unpaid wages, taxes due and owing and secured creditors.

Major kinds of voidable transactions

Fraudulent preferences, transactions at an undervalue, onerous contracts.

Operating and financing during reorganisations

No specific statutory regime but within the discretion of the court.

International cooperation and communication

Procedures for recognising and assisting foreign office-holders in respect of foreign companies in liquidation, limited to ‘relevant foreign countries’. No recognition of foreign office-holders in respect of Bahamian companies.

Liabilities of directors and officers

Liable for any pre-liquidation breach of duties owed to the company. Also, liable to cooperate fully with the liquidator throughout winding-up proceedings including provision of information.

Pending legislation

None.

 

Belgium

 

Applicable insolvency law, reorganisations: liquidations

Book XX of the Belgian Code of Economic Law.

Customary kinds of security devices on immovables

The most important form of security is the mortgage.

Customary kinds of security devices on movables

The principal type of security is a pledge. Other types of security: statutory lien of the unpaid seller, fiduciary transfer of title and retention of title.

Stays of proceedings in reorganisations/liquidations

Judicial reorganisation: within 15 days of the debtor’s request for the reorganisation, the court may grant a moratorium for a maximum of six months. During this moratorium period, no enforcement can take place in principle against the debtor’s assets and no bankruptcy proceedings can be opened.

Bankruptcy: any legal or enforcement proceedings are suspended. Secured creditors can only commence or continue enforcement proceedings subject to limits set by the bankruptcy legislation.

Duties of the insolvency administrator

Judicial reorganisation: the judge will appoint a delegated judge to report to the court on the process of the reorganisation procedure; in case of a debtor’s obvious and serious defaults, the judge may designate a temporary administrator for the moratorium period setting out its duties.

Bankruptcy: the bankruptcy trustee’s main duty is to liquidate the assets of the debtor to satisfy creditors’ claims. The trustee will review creditors’ claims and, if he or she disputes them, refer them to the court.

Set-off and post-filing credit

Creditors can in certain circumstances exercise their right of set-off provided it was agreed prior to the insolvency and provided further that it relates to mutual debts existing prior to the insolvency.

Loans and credit granted after the commencement of liquidation proceedings will receive preferential treatment over other claims.

Creditor claims and appeals

Judicial reorganisation: the debtor must draw up a list containing all outstanding claims and send this to their creditors, within eight days after the moratorium period is granted. This information will then be verified by each creditor. In case of disagreement between the creditor and the debtor, the court will resolve such dispute. Creditors can also file their claims in the reorganisation register.

Bankruptcy: creditors must file their claim in the bankruptcy register by the day mentioned in the bankruptcy declaration. If the bankruptcy trustee disputes the claim, the court will decide. Decisions can be appealed.

Priority claims

The basic concept for priority rules is the difference between specific statutory liens and general statutory liens. The former will nearly always rank in priority to the latter.

Major kinds of voidable transactions

The main voidable transactions are transactions at an undervalue or security arrangements entered into during a ‘suspect period’ of a maximum of six months preceding a bankruptcy decision, as well as transactions entered into during such period with counterparties that were aware that the debtor was actually insolvent.

Operating and financing during reorganisations

The court will in principle allow the debtor to continue to operate the business during the moratorium period. All ongoing contracts will continue notwithstanding the judicial reorganisation.

International cooperation and communication

A Belgian bankruptcy trustee will provide information and cross-border cooperation in respect of foreign court proceedings, in accordance with the relevant provisions of the Regulation (EU) 2015/848 of the European Parliament and Council of 20 May 2015 on insolvency proceedings and the Belgian private international law code.

Liabilities of directors and officers

In general, directors and officers are not liable for the company’s debts. They may become liable if, as a result of their obvious default, not all of the company’s debts can be paid in full.

Pending legislation

N/A

 

Bermuda

 

Applicable insolvency law, reorganisations: liquidations

Companies Act 1981

Companies (Winding Up) Rules 1982

Banking (Special Resolution Regime) Act 2016.

Customary kinds of security devices on immovables

Mortgages (legal and equitable); and

Fixed charges.

Customary kinds of security devices on movables

Mortgages (legal and equitable);

Fixed charges;

Floating charges;

Pledges;

Liens; and

Retention of title clauses in contract.

Stays of proceedings in reorganisations/liquidations

Automatic stay of proceedings upon the appointment of a provisional liquidator and/or the granting of winding-up order.

Duties of the insolvency administrator

The role of an insolvency administrator does not exist in Bermuda.

Set-off and post-filing credit

Automatic set-off upon the winding up of a company.

Post-filing credit paid in priority to other unsecured claims.

Creditor claims and appeals

Claims must be lodged with the liquidators in the permitted time.

A rejection of claim may be appealed within 21 days of receiving notice of the rejection.

Priority claims

Priority of claims is determined by the Companies Act 1981 and the rules of bankruptcy.

Major kinds of voidable transactions

Fraudulent preference;

Undervalued floating charges;

Onerous transactions;

Disposition of property after the commencement of winding up; and

Fraudulent conveyance.

Operating and financing during reorganisations

Operating and financing during reorganisation may proceed in the ordinary course, subject to the oversight of any provisional liquidator, if applicable.

International cooperation and communication

No international conventions.

The Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency matters based on the draft guidelines adopted by the Judicial Insolvency Network in October 2016.

Liabilities of directors and officers

Liabilities of directors and officers determined by the Companies Act 1981.

Pending legislation

None.

 

British Virgin Islands

Applicable insolvency law, reorganisations: liquidations

BVI Business Companies Act 2004;

Insolvency Act 2003; and

Insolvency Rules 2005.

Customary kinds of security devices on immovables

Mortgages; and

Equitable fixed charges.

Customary kinds of security devices on movables

Equitable or legal mortgages over the shares of a BVI company;

Charges over bank accounts; and

Fixed and floating charges over assets.

Stays of proceedings in reorganisations/liquidations

Schemes of arrangement: no automatic moratorium on commencement or pursuit of winding-up proceedings whilst the scheme is being considered.

Liquidation: once a liquidator is appointed, there is a moratorium on the ability to pursue proceedings to judgment or execution in the British Virgin Islands (but this does not operate extraterritorially). However, no moratorium on the rights of a secured creditor to enforce its security following the appointment of a liquidator.

Duties of the insolvency administrator

The principal duties of a liquidator appointed under the Insolvency Act 2003 are:

  • to take possession of, protect and realise the assets of the company;
  • to distribute the assets or the proceeds of realisation of the assets in accordance with the Act; and
  • if there are surplus assets remaining, to distribute them, or the proceeds of realisation of the surplus assets, in accordance with the Act.

Set-off and post-filing credit

Save where: the creditor had actual notice that the company was balance sheet insolvent at the time the creditor gave/received credit or acquired the claim against the company; or there is a contractual right of set-off or non-set-off, set-off will be automatic in an insolvent liquidation (section 150.(1) of the Insolvency Act 2003) and an account shall be taken of what is due from each party to the other in respect of mutual credits, mutual debts or other mutual dealings, as at the date of the commencement of the liquidation.

Creditor claims and appeals

Creditors submit claims in the liquidation in writing to the liquidator together with supporting documents.

If the liquidator rejects the claim, he or she shall provide the creditor with a notice of rejection detailing the reasons for the rejection of the claim.

Any creditor that is dissatisfied with the decision of the liquidator may make an application to the court under section 273 of the Insolvency Act 2003 or (where the decision is taken at a meeting) under rule 59 of the Insolvency Rules 2005.

Priority claims

The costs and expenses of the winding up.

Employees’ wages, salaries and holiday pay.

Amounts due by the debtor to the BVI Social Security Board.

Amounts due by the debtor in respect of pension contributions or contributions in respect of medical insurance.

Sums due to the government of the Virgin Islands in respect of any tax, duty, including stamp duty, licence fee or permit.

Sums due to the Financial Services Commission in respect of any fee or penalty.

Major kinds of voidable transactions

Unfair preferences.

Transactions at an undervalue.

Voidable floating charges.

Extortionate credit transactions.

Operating and financing during reorganisations

The powers of the directors remain in full force and effect during any application to sanction a scheme of arrangement. Thereafter, it will be subject to the terms of the scheme.

International cooperation and communication

Part XIX of the Insolvency Act 2003 (Orders In Aid Of Foreign Proceedings) enables orders to be made in the BVI, on the application of a ‘foreign representative’, in aid of foreign insolvency proceedings in certain designated jurisdictions (ie, Australia, Canada, Finland, Hong Kong, Japan, Jersey, New Zealand, the UK and the USA).

Liabilities of directors and officers

Directors may be found liable in cases of:

  • insolvent trading;
  • fraudulent trading;
  • breach of statutory or fiduciary duties to the company; and
  • an unlawful distribution of the company’s assets when the company was insolvent.

Pending legislation

N/A.

 

Canada

 

Applicable insolvency law, reorganisations: liquidations

Bankruptcy liquidations are typically governed by the Bankruptcy and Insolvency Act (BIA). The Companies’ Creditors Arrangement Act (CCAA) by contrast applies only to reorganisations or liquidations of corporate entities. Where complex or fundamental changes must be made to the shareholdings and debt structures of corporations, the ‘arrangements’ provisions of the Canada Business Corporations Act (CBCA) and comparable provincial legislation may be applicable.

Federally incorporated banks and insurance companies are excluded from the BIA and CCAA and are dealt with under the Federal Winding-up and Restructuring Act (WURA).

Customary kinds of security devices on immovables

Security on immovable property is usually taken in the form of a ‘mortgage’ or ‘charge’ that is registered in the Land Registry Office in the province in which the real property is located.

Customary kinds of security devices on movables

Security interests in movable property are dealt with on a province-by-province basis under provincial personal property security legislation in Canada’s common law provinces. This legislation provides the requirements for taking ‘security interests’ in ‘personal property’ through the mechanism of ‘security agreements’.

Stays of proceedings in reorganisations/liquidations

In a BIA reorganisation, an automatic stay of proceedings is imposed on secured and unsecured creditors. In a CCAA reorganisation, a very broad stay of proceedings is imposed against both secured and unsecured creditors.

Duties of the insolvency administrator

Reorganisations: a ‘proposal trustee’ under the BIA and a ‘monitor’ under the CCAA are appointed in all cases and review the financial condition of the debtor, administer the claims process and carry out distributions under the proposal (BIA) or plan (CCAA).

Liquidations: a BIA bankruptcy trustee is vested with the debtor’s unencumbered property, collects and disposes of assets, supervises the claims process and distributes funds to creditors.

Set-off and post-filing credit

Canadian law recognises claims for ‘legal set-off’ and ‘equitable set-off’ in liquidations and reorganisations. Legal set-off requires that claims be both liquidated and mutual. Equitable set-off can exist regardless of whether debts are liquidated. Instead, the court looks at the connection between the various claims in respect of which set-off is asserted.

Both the BIA and CCAA contain special provisions that expressly permit netting of particular types of financial contracts such as swaps, repurchase agreements and commodity contracts.

Creditor claims and appeals

Creditors, including creditors with contingent or unliquidated claims, must file proofs of claim with the BIA trustee or CCAA monitor. A creditor that is dissatisfied with a decision of the trustee or monitor may appeal the decision to the court.

Priority claims

Excepting employee-related claims, major priority claims in liquidations and reorganisations include governmental claims for taxes withheld from employees’ wages, environmental clean-up costs, and real property taxes.

Major kinds of voidable transactions

The transactions that are subject to challenge, include: (i) transactions at an undervalue, namely, transactions in which the consideration received by the debtor is less than the fair market value given by the debtor; (ii) preferences that, in the case of arm’s-length creditors, are transactions made with the intent to prefer the creditor within three months of the date of bankruptcy or, in the case of non-arm’s length creditors, transactions within 12 months of bankruptcy that have the effect of giving a preference to the creditor; or (iii) dividends that are paid in the year before the insolvency filing when a corporate debtor is insolvent.

Operating and financing during reorganisations

During both BIA and CCAA reorganisations, the debtor typically continues to carry on business in the normal course. In liquidations, where a licensed insolvency trustee is appointed, the assets and business of the debtor company vest in the trustee and the directors and officers have no further authority to act on behalf of the company.

Provisions under both the BIA and the CCAA allow funding analogous to US debtor-in-possession financing.

International cooperation and communication

Both the BIA and CCAA have provisions for the recognition of foreign insolvency proceedings and orders made in those proceedings. To facilitate cooperation between courts, Canadian courts have adopted the Judicial Insolvency Network (JIN) Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters.

Liabilities of directors and officers

Depending on the province, directors may be liable to employees for certain arrears of wages for services performed by the employees during their directorships including vacation pay and other amounts. Directors are also liable for certain amounts payable by the corporation to governmental revenue authorities, such as unremitted source deductions.

Pending legislation

Certain limited amendments to the CCAA and BIA will come into force effective 1 November 2019.

 

Cayman Islands

 

Applicable insolvency law, reorganisations: liquidations

Companies Law (2018 Revision); Companies Winding Up Rules, 2018.

Customary kinds of security devices on immovables

Registered charge.

Customary kinds of security devices on movables

Mortgages, fixed and floating charges, liens, pledges, retention of title clause.

Stays of proceedings in reorganisations/liquidations

Court permission is required to commence or continue proceedings against a company in respect of which a winding-up order has been made. After commencement of insolvency proceedings but before the winding-up order is made, the company, or a creditor or member may apply for an order staying continuation or restraining commencement of proceedings against the company.

Duties of the insolvency administrator

Collect and realise assets; adjudicate claims and make distributions to creditors; report on conduct of liquidation.

Set-off and post-filing credit

Automatic set-off in insolvency, subject to contractual disapplication and notice of commencement of liquidation.

Creditor claims and appeals

Proof of debt with supporting evidence submitted to liquidator. If claim rejected entirely or in part by liquidator, appeal to court within 21 days of notification.

Priority claims

Employee-related claims, debts due to bank depositors, taxes due to the government.

Major kinds of voidable transactions

Voidable preference; transaction at undervalue.

Operating and financing during reorganisations

Subject to terms of restructuring plan.

International cooperation and communication

Courts generally willing to cooperate with foreign courts, and to recognise or assist foreign insolvency representatives.

Liabilities of directors and officers

None, unless personally guaranteed or breached duties.

Pending legislation

Data Protection Law (due to come into force on 30 September 2019).

 

China

 

Applicable insolvency law, reorganisations: liquidations

The Enterprise Bankruptcy Law of the People’s Republic of China [2006] (the EBL).

Customary kinds of security devices on immovables

Mortgage; finance lease.

Customary kinds of security devices on movables

Mortgage; pledge; lien.

Stays of proceedings in reorganisations/liquidations

Stays of proceeding will come into force on the commence of bankruptcy procedures.

Duties of the insolvency administrator

The administrator takes charge of the operation of the enterprise and the disposal of assets.

Set-off and post-filing credit

The administrator shall set off the debt if a creditor owes a debt to the debtor before the court accepts the bankruptcy application.

Creditor claims and appeals

Where a bankruptcy application is not accepted by the People’s Court, the applicant who is not satisfied with this ruling may appeal to the higher-level court within 10 days from the date of delivery of the rule.

Priority claims

Expenses for bankruptcy proceedings, the common benefits debts, employee-related claims, social security expenditure, tax owed by the debtor, the priority of the individual house buyer and the priority of construction projects, as well as personal injury caused by debtors.

Major kinds of voidable transactions

Transactions occurring within one year prior to the acceptance of the bankruptcy application: transactions conducted at an obvious unreasonable price; the settlement of undue debt; the waiver of creditors’ claims; the transfer of property without compensation or security provision for debts without security.

Operating and financing during reorganisations

The administrator or the debtor operates the enterprise during the reorganisation.

International cooperation and communication

If the foreign bankruptcy proceedings neither violate the basic principles of China’s laws nor harm national sovereignty, security and public interest, and do not harm legal rights and interests of creditors within the territory of China, the court will recognise and enforce the foreign proceeding.

Liabilities of directors and officers

The director, supervisor or senior management personnel of an enterprise have duties of loyalty and diligence duties based on laws.

Pending legislation

None.

 

Cyprus

Applicable insolvency law, reorganisations: liquidations

  • The Companies Law of Cyprus (Cap. 113)
  • Bankruptcy Law (Cap. 5)
  • Insolvency of Individuals (Personal Repayment Relief Plans) Law

Customary kinds of security devices on immovables

  • Mortgage
  • Deposit of Sale’s Contract
  • Memo (in case of court judgment)

Customary kinds of security devices on movables

  • Lien
  • Pledge
  • Floating charge

Stays of proceedings in reorganisations/liquidations

  • Section 215 of Companies Law – Stay of proceedings after application before a court staying a specific court proceeding or any other court proceedings pending conclusion of the one under which application was made.
  • Section 220 of Companies Law – Once winding-up order made or provisional liquidator appointed, no action or proceeding shall continue against liquidated company except by leave of the Court.
  • In examinership no claims brought or orders made until examinership process is concluded or set aside.

Duties of the insolvency administrator

In general to protect property of company so as to be able to repay the amount owed to the debenture holder without breaching general fiduciary duties as an in effect director.

Set-off and post-filing credit

  • Set-off rights may be exercised unless creditor had notice.
  • Post-filing credit in case of bankruptcy is an offence.
  • In case of a company general rule is that insolvent companies cannot enter into further transactions after liquidation order.
  • Same goes for examinership unless it involves new expenses duly incurred, are vital for continuation of company as going concern.

Creditor claims and appeals

  • Any creditor must submit proof of claim to liquidator within 35 days from issuance of liquidation order.
  • As in any judgment, appeal can be made against any order or judgment to Supreme Court without need to post security.

Priority claims

  • Costs of winding up
  • All government and local taxes
  • Sums due to employees
  • Secured creditors, like secured by floating charge
  • Unsecured creditors

Major kinds of voidable transactions

Conveyance, charge, mortgage, delivery of goods, payment, execution or other act relating to property made or done by or against a company within six months before the commencement of its winding up.

Operating and financing during reorganisations

  • Depending on form of reorganisation
  • Extra financing exceptionally allowed if shown necessary for company to continue as going concern

International cooperation and communication

Under treaties signed by Cyprus and relevant EU Regulation

Liabilities of directors and officers

  • Failure to file for proceedings-criminal offence
  • Fraudulent trading provisions
  • Tax obligation provisions etc

Pending legislation

N/A

 

Dominican Republic

Applicable insolvency law, reorganisations: liquidations

Law 141-15 on Restructuring and Liquidation of Companies and Business Persons, along with Decree No. 20-17.

Customary kinds of security devices on immovables

Mortgages and privileges.

Customary kinds of security devices on movables

Chattel pledges, both ordinary and non-possessory.

Stays of proceedings in reorganisations/liquidations

The stay in proceedings commences after the decision approving the reorganisation request becomes irrevocable and is overturned with the approval of the reorganisation plan or the initiation of the liquidation process.

Duties of the insolvency administrator

Dispose only of the necessary assets for the ordinary course of business, under the supervision of the officers.

Render accounts to the court.

Set-off and post-filing credit

Set-off and netting of debts are allowed during the insolvency proceedings.

The court may authorise the debtor to obtain secured and unsecured loans or credits, as well as new securities.

Creditor claims and appeals

Most decisions rendered during the proceedings may be appealed.

Priority claims

Credits originated after the commencement of the insolvency proceedings, when approved by the court, have a higher priority in relation to all other than those owed to the tax authorities, to the employees or originated by the insolvency proceedings.

Major kinds of voidable transactions

Transactions involving the free transfer or assets or those entered into with related parties.

Operating and financing during reorganisations

Debtor remains in possession of the business and may dispose of the necessary assets for the ordinary course of business, under the supervision of the conciliator.

The court may authorise new financing.

International cooperation and communication

Cooperation and coordination between domestic and foreign courts and administrators is conceived in our legislation.

Liabilities of directors and officers

Officers are subject to administrative sanctions and are responsible civilly and criminally for their own acts, as well as for the acts of their expert advisers.

Corporate officers and directors may be liable for labour claims and tax claims, as well as criminal claims regarding to the crime of bankruptcy.

Pending legislation

There is no pending legislation regarding insolvency proceedings.

 

England & Wales

Applicable insolvency law, reorganisations: liquidations

Corporations Act 2001 (Cth).

Customary kinds of security devices on immovables

Mortgage (both equitable and legal).

Customary kinds of security devices on movables

Security interest (charge, pledge, lien, etc) registered on the PersonalProperties Securities Register.

Stays of proceedings in reorganisations/liquidations

With effect from 1 July 2018, the federal government’s new ipso facto laws (which were introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth)) impose an automatic stay on the enforcement of ipso facto clauses in certain contracts entered into on or after 1 July 2018 (Automatic Stay).

The Automatic Stay will apply where one of the following insolvency events occurs in relation to a company: voluntary administration; a receiver or controller is appointed over the whole or substantially the whole of the company’s assets; the company announces, applies for or becomes subject to a scheme of arrangement in order to avoid a winding up; or the appointment of a liquidator immediately following an administration or a scheme of arrangement.

No such moratorium exists upon the commencement of a receivership.

Duties of the insolvency administrator

Insolvency practitioners have a number of duties including: to act with reasonable care and skill; to act in good faith; to act bona fide; and to be independent. Each insolvency administrator is also considered an officer of the company so must also comply with the duties of officers of the company (both statutory and at common law). Liquidators and administrators also considered fiduciaries and are held to a higher standard than receivers.

Set-off and post-filing credit

Available under section 553C of the Act. Operates automatically in a liquidation when there is a mutuality of transactions between the debtor and the creditor. Not available if the creditor knew of the debtor’s insolvency.

Creditor claims and appeals

Proof of debts are filed in liquidation, administrations, deeds of company arrangement and schemes of arrangement. A similar process exists for all of these. The insolvency practitioner maintains a high degree of discretion with respect to admitting (or rejecting) claims, and may require further information. Aggrieved creditors can seek recourse through the courts if a proof of debt is rejected. The courts have exhibited a reluctance to overturn decisions of independent insolvency practitioners.

Priority claims

Secured creditors have priority. Under section 556 of the Act certain other creditors are afforded a level of priority (including employees, providers of funding and the costs of the insolvency administrator).

Major kinds of voidable transactions

Uncommercial transactions; unfair preferences; unreasonable director-related transactions; and unfair loans.

Operating and financing during reorganisations

Financing permitted under all forms of Australian administration (voluntary administration, deeds of company arrangement, liquidation and receivership). Such financing is afforded a level of priority either under statute or existing security documents.

International cooperation and communication

Australia has adopted the UNCITRAL Model Law on Cross-Border Insolvency by implementing legislation called the Cross-Border Insolvency Act 2008 (Cth).

Liabilities of directors and officers

Directors and offices may be liable for insolvent trading (subject to both criminal and civil penalties). Consequences include civil penalty orders or orders requiring a director to compensate either the company or aggrieved creditors.

In September 2017, new section 588GA was introduced into the Act to afford directors protection in certain circumstances to enable a company to delay entering into a formal insolvency process, and instead pursue a turnaround plan (ie, provide directors with a ‘safe harbour protection’). Under this new section, a director will not be liablefor debts incurred by a company while it is insolvent if, ‘at a particular time after the director starts to suspect the company may become or be insolvent, the director starts developing one or more courses of action that are reasonably likely to lead to a better outcome for the company’ than the ‘immediate appointment of an administrator or liquidator to the company’.

Pending legislation

Draft legislation aimed at combatting illegal phoenix activity through the introduction of new phoenix offences targeted at directors and advisors who engage in creditor-defeating transactions. The draft legislation also proposes to restrict the voting rights of related creditors to remove an external administrator.

 

European Union

Applicable insolvency law, reorganisations: liquidations

The Recast Regulation on Insolvency Proceedings (Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015) (the Recast Regulation). The Directive (EU 2019/2015) of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt (the Restructuring Directive).

Other relevant legislation: Credit Institutions Directive, Insurance Undertakings Directive, Bank Recovery and Resolution Directive, Financial Collateral Arrangements Directive.

Customary kinds of security devices on immovables

Mortgages and fixed charges (but no EU-wide harmonised system)

Customary kinds of security devices on movables

Security assignments, fixed charges, floating charges, pledges, liens (but no EU-wide harmonised system).

Stays of proceedings in reorganisations/liquidations

This is a matter for the law of the member state in which those proceedings are opened. The Restructuring Directive provides for a stay in certain circumstances.

Duties of the insolvency administrator

The duties of the insolvency office holder will depend on the type of insolvency procedure the debtor is undergoing.

Set-off and post-filing credit

Set-off: The conditions under which set-offs may be invoked are determined by the laws of the member state in which proceedings are opened. The opening of insolvency proceedings must not affect the right of creditors to demand set-off of a creditor’s claims against the claims of the debtor, where such a set-off is permitted by the law applicable to the debtor’s claim.

Post-filing credit: procedures vary significantly between jurisdictions. The Restructuring Directive provides for DIP financing to be given adequate protection.

Creditor claims and appeals

This is a matter for the law of the member state in which those proceedings are opened.

Priority claims

Most jurisdictions afford some measure of priority for certain tax and other governmental claims.

In some jurisdictions there is a requirement for money to be ring-fenced for employees.

Most jurisdictions also provide that the costs of an insolvency process and the insolvency office holder’s fees and expenses are paid out first.

Major kinds of voidable transactions

The rules are a matter for the law of the state where the insolvency proceedings are opened.

Operating and financing during reorganisations

The rules vary among member states.

Where a reorganisation is implemented under the supervision of the court, a debtor will be able to carry on its business subject to court-imposed conditions.

The powers that directors and officers can exercise after insolvency proceedings have been commenced vary according to both the type of insolvency process and member state. The Restructuring Directive provides for a debtor-in-possession lead restructuring framework.

International cooperation and communication

The Recast Regulation governs cross-border insolvency proceedings for member states. In particular under the Recast Regulation an insolvency office holder appointed over one member of a corporate group is to cooperate with an insolvency office holder appointed to another member of the same group to the extent appropriate. Any insolvency office holder appointed over a group member of companies can request the court to open group coordination proceedings.

The UNCITRAL Model Law on Cross-Border Insolvency has currently only been implemented by Greece, Poland, Romania, Slovenia and the United Kingdom.

Office holders in main proceedings and secondary proceedings have a duty to communicate and cooperate.

Liabilities of directors and officers

The laws governing liability will generally be those of the jurisdiction of incorporation, where insolvency proceedings are commenced in that jurisdiction.

Generally, directors and officers may be liable to contribute to the debtor’s assets, but this is normally limited to where conduct falls below the requisite standard.

Directors are also exposed to a range of criminal sanctions arising from their conduct prior to insolvency.

Pending legislation

None.

 

France

Applicable insolvency law, reorganisations: liquidations

Articles L610-1 to L680-7 and article L811-1 et seq of the French Commercial Code.

Customary kinds of security devices on immovables

Mortgages.

Customary kinds of security devices on movables

Pledges.

Stays of proceedings in reorganisations/liquidations

A stay of proceedings is applicable from the date of the judgment opening safeguard, reorganisation or liquidation proceedings.

Duties of the insolvency administrator

To supervise, assist or replace the management in place depending on the type of insolvency proceedings or the situation at stake.

Set-off and post-filing credit

Set-off between a pre-filing and a post-filing credit is possible in limited circumstances.

Creditor claims and appeals

Creditors generally have two months (+ two months for foreign creditors) from the official publication of the judgment ordering the opening of safeguard or insolvency proceedings to send a statement of their claim to the court-appointed creditors’ representative.

In certain circumstances, creditors enjoy a right of appeal and opposition to safeguard or insolvency judgments.

Priority claims

Certain claims enjoy a priority repayment, namely including certain employee-related claims, tax claims and claims resulting from new money or goods provided for to the debtor company in a conciliation.

Major kinds of voidable transactions

Certain claims enjoy a priority repayment, namely including certain employee-related claims, tax claims and claims resulting from new money or goods provided for to the debtor company in a conciliation.

Operating and financing during reorganisations

New financing granted to a company in conciliation or insolvency proceedings will enjoy a priority repayment.

International cooperation and communication

Cooperation between insolvency practitioners usually results in the signing of cooperation protocols.

Liabilities of directors and officers

Directors and officers can be held personally liable for all or part of the debts of the company placed in liquidation proceedings if they are found to have mismanaged the company’s business.

In limited circumstances, directors and officers can also be held criminally liable.

Pending legislation

Not applicable.

 

Germany

Applicable insolvency law, reorganisations: liquidations

The German Insolvency Act. The EU Insolvency Regulation and the EU Recast Regulation affect cross-border insolvency.

Customary kinds of security devices on immovables

Hypothek: charge on real property as security for payment of a certain sum that equals the secured personal debt.

Grundschuld: charge on real property for payment of a definite sum of money.

Customary kinds of security devices on movables

Retention of title; fiduciary transfer of assets; fiduciary transfer of receivables; and chattel pledge.

Stays of proceedings in reorganisations/liquidations

For the duration of insolvency proceedings, claims cannot be enforced by individual insolvency creditors (save for enforcement actions by secured creditors). The insolvency court may prohibit or suspend measures of execution against the debtor’s assets for the period between the application for the opening of insolvency proceedings and the ruling on the application.

Duties of the insolvency administrator

The insolvency administrator (in both liquidations and reorganisations) takes possession of and administers all assets that comprise the insolvency estate. The powers of the debtor’s management pass to the insolvency administrator.

Set-off and post-filing credit

Generally, claims by or against the insolvency estate existing as of the date of the opening of the insolvency proceedings may be set off against each other, provided that the set-off position has been created prior to the opening.

If a debt is to be incurred that would significantly burden the insolvency estate, the insolvency administrator must obtain the consent of the creditors’ meeting. Besides this, an insolvency plan can give priority to creditors that make loans or other credits available to the debtor or a takeover company.

Creditor claims and appeals

Creditors must submit their claims to the administrator within a period set by the court between two weeks and three months from the date of the order opening the insolvency procedure.

If the claim is disputed by the administrator or another creditor, the creditor can issue an appeal.

Priority claims

Creditors with proprietary claims for the return of assets not belonging to the insolvency estate are not affected by the insolvency. Costs of the insolvency rank in priority over unsecured creditors.

Major kinds of voidable transactions

The insolvency administrator may set aside transactions that prefer one creditor over another or where there has been a fraudulent conveyance. The repayment of shareholder loans made within the last year prior to the filing for the opening of insolvency proceedings is voidable.

Operating and financing during reorganisations

Generally, the right to manage and transfer the debtor’s assets passes to the insolvency administrator upon the opening of the insolvency proceedings. The debtor may, however, apply to court for self-management under an insolvency practitioner’s supervision.

International cooperation and communication

A German insolvency administrator shall share all relevant information and documentation with a foreign administrator in order to facilitate an effective and smooth process and the best possible satisfaction of creditors in the insolvency procedures.

German insolvency courts usually cooperate with foreign insolvency courts in order to avoid jurisdictional conflicts.

Liabilities of directors and officers

The managing directors of a German limited liability company and the members of the management board of a stock corporation may have a (personal) liability to third parties and the company itself. In particular, such liability may result from the delayed application for the opening of insolvency proceedings or an action that leads to a reduction of the (insolvency) estate.

Pending legislation

Germany has to implement the EU Directive on Insolvency, Restructuring and Second Chance (see the European Union chapter) that forces the EU member states to implement a pre-insolvency restructuring procedure (see question 59).

 

Greece

Applicable insolvency law, reorganisations: liquidations

Law No. 3588/2007, as amended.

Law No. 3858/2010.

The EU Regulation on insolvency proceedings.

Customary kinds of security devices on immovables

Prenotation of mortgage.

Mortgage.

Customary kinds of security devices on movables

Pledge.

Notional pledge.

Floating charge.

Retention or fiduciary transfer of ownership.

Stays of proceedings in reorganisations/liquidations

Automatic stay upon commencement of bankruptcy proceedings.

Automatic stay upon application of pre-packaged recovery process.

Stay at the request of the debtor or the creditors prior to the submission of the recovery agreement.

Automatic stay upon commencement of special administration proceedings.

Duties of the insolvency administrator

Management of the insolvency estate and distribution of the bankruptcy proceeds to creditors.

Set-off and post-filing credit

Yes, provided that the claim fell due prior to the declaration of bankruptcy.

The claims that arise from post-filing financing provided on the basis of a recovery agreement or reorganisation plan are ranked ahead of any other pre-existing claim.

Creditor claims and appeals

Announcement of creditors’ claims.

Appeal against the judgment that accepts or rejects a creditor’s claim.

Priority claims

New and interim financing provided on the basis of a recovery agreement (super-priority ranking), satisfied in full and ahead of all other creditors’ claims, regardless of ratification by the Bankruptcy Court.

Unpaid employee remuneration incurred in the two years prior to bankruptcy being declared and employment termination compensation; lawyers’ fees that date up to six months prior to the declaration of bankruptcy, and claims for compensation of salaried lawyers because of termination of their contract for a salaried mandate; social security contributions that arose until the declaration of bankruptcy; claims of the state arising from value added tax (VAT) and its surcharges.

Other claims of the state excluding claims arising from VAT.

Major kinds of voidable transactions

  • Donations and gratuitous acts;
  • payments of debts that did not fall due;
  • payments of due debts that were not made in cash; and
  • security over the debtor’s estate for pre-existing debts.

Operating and financing during reorganisations

In recovery procedure, no conditions or restrictions are set by law on the debtor’s conduct of business. Upon declaration of bankruptcy, the bankruptcy administrator manages the debtor’s assets and affairs.

Upon application, the court may permit the debtor to remain in administration of its assets always along with the bankruptcy administrator’s cooperation.

International cooperation and communication

Law No. 3858/2010 (UNCITRAL Model Law on Cross-Border Insolvency).

The EU Regulation on insolvency proceedings.

Liabilities of directors and officers

The general partner of a limited partnership: personally liable for corporate debts.

Directors and officers of a private company, limited liability company and a société anonyme: in principle, no liability. Exceptions are:

  • personal liability in the event of delay with regard to the filing of the bankruptcy petition; or fraudulent act or gross negligence; and
  • personal and joint liability with regard to the payment of corporate taxes.

Pending legislation

N/A.

 

Hong Kong

Applicable insolvency law, reorganisations: liquidations

Companies (Winding Up and Miscellaneous Provisions) Ordinance, Companies Ordinance, Bankruptcy Ordinance, Banking Ordinance, Resolution Ordinance, subsidiary legislation.

Customary kinds of security devices on immovables

Mortgages and charges.

Customary kinds of security devices on movables

Mortgages.

Charges (fixed and floating).

Pledges.

Liens.

Quasi-security (eg, set-off and retention of title arrangements).

Stays of proceedings in reorganisations/liquidations

Discretionary stay with court leave of legal actions and enforcement procedures after petition presented. Absolute stay absent court leave when provisional liquidator appointed or winding-up order made.

No statutory stay in reorganisations.

Duties of the insolvency administrator

Duties of a liquidator:

  • to receive statement of affairs;
  • to adjudicate on creditors’ claims;
  • to collect and preserve debtor’s assets; and
  • to realise the debtor’s assets and to distribute dividends to creditors.

Duties of a receiver:

  • to realise secured assets for charge holder; and
  • to return surplus assets to company.

Set-off and post-filing credit

Generally, there is automatic and mandatory set-off of mutual credits, mutual debts and other mutual dealings.

Creditor claims and appeals

Creditors file proof of debts with liquidator. Rejections can be appealed to the High Court.

Priority claims

Costs and expense of the insolvency proceedings.

Creditors secured by a fixed charge.

Preferential creditors (eg, employees, Hong Kong government).

Creditors secured by a floating charge.

Unsecured creditors.

Major kinds of voidable transactions

Unfair preferences, fraudulent dispositions/conveyance, invalid floating charges and transactions at an undervalue.

Operating and financing during reorganisations

Currently no statutory reorganisation procedure. Directors remain in control until a provisional liquidator or liquidator is appointed to the company. No special financing regime during reorganisation.

International cooperation and communication

Principles based on comity have evolved to guide the practical coordination of Hong Kong and foreign proceedings.

Liabilities of directors and officers

Fraudulent trading.

Misfeasance.

Falsification or destruction of books and records.

Disqualification of directors.

Pending legislation

Legislation is expected to be introduced in respect of insolvency reform generally. It is likely that the legislation will introduce, inter alia, a provisional supervision regime and insolvent trading provisions.

 

Hungary

Applicable insolvency law, reorganisations: liquidations

Act XLIX of 1991 on Bankruptcy Proceedings and Liquidation Proceedings (the Bankruptcy Act).

Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings (the Companies Act).

Customary kinds of security devices on immovables

The real property mortgage and the independent lien.

Customary kinds of security devices on movables

Mortgage on movables, pledge on movables, floating charge and security deposit in the form of money, securities or payment account balances (possessory lien).

Stays of proceedings in reorganisations/liquidations

Reorganisation proceedings shall be divided into two parts: (i) the first part takes from the request to opening the bankruptcy proceedings to the publishing of stay of payment; and (ii) the second part is the stay of payment period and is lasts until the publication of the ruling closing the proceedings.

Liquidation proceedings shall also be divided into two parts: (i) the first part is the examination of the debtor’s insolvency and the declaration of insolvency or the termination of proceedings; and (ii) the second part is, in case of the debtor’s insolvency, the period of the real liquidation managed by the liquidator which ends with the debtor’s dissolution without succession.

Duties of the insolvency administrator

  • Approve and endorse any financial commitment of the debtor after the time of the opening of bankruptcy proceedings.
  • Approve any new commitment made by the debtor.
  • Supervise the debtor’s business activities with a view to protect the creditors’ interests and to make preparations for the composition with creditors.
  • Categorise and register the claims.

Set-off and post-filing credit

For the duration of the stay of payment, set-off may not be applied against the debtor; however, a set-off claim may be heard in judicial proceedings initiated by the debtor and still in progress, if submitted before the time of the opening of bankruptcy proceedings. In case of reorganisation, no priority is given for post-filing credits. The debtor shall be allowed to undertake any new commitment only with the consent of the administrator.

In a liquidation proceeding, with regard to the debtor’s claims, right of set-off may be exercised only with respect to such creditor’s claims which have been registered by the liquidator as acknowledged and have not been assigned subsequent to the date when the court received the petition for opening liquidation proceedings, or, if the claim has occurred at a later date, subsequent to its occurrence.

In case of liquidation, the Bankruptcy Act does not expressly regulate a debtor’s right to obtain secured or unsecured loans or credit. The liquidator, however, is able to contract new obligations, such as a loan or a credit, but only in connection with the rational termination of the debtor’s business operations. Such loans granted to the debtor have a priority in the liquidation.

Creditor claims and appeals

The administrator shall categorise and register the claims of creditors. The debtor and creditors shall be informed without delay concerning the classification of claims and the amount registered, and they shall be given an opportunity to present their views. Such comments shall be decided by the administrator and the creditor and the debtor shall be notified immediately, upon which they shall have five working days to submit any objection to the court concerning the administrator’s action pertaining to the classification process. The court shall adopt a decision relating to such objection in priority proceedings. The ruling may not be appealed separately.

In case of liquidation, the liquidator shall register the claims against the debtor. The liquidator shall dispose of the debtor’s assets through public sales at the highest price that can be obtained on the market. and the debts of the economic operator shall be satisfied from its assets that are subject to liquidation in the order prescribed by the Bankruptcy Act.

Priority claims

In the liquidation process the following priority groups of claims exist: (i) liquidation costs; (ii) claims secured; (iii) claims as alimony and life-annuity payments, compensation benefits, income supplement to minors, which are payable by the economic operator, furthermore monetary aid granted to members of agricultural cooperatives in lieu of household land or produce for which the beneficiary is entitled for his or her lifetime; (iv) claims of private individuals not originating from economic activities, claims of small and micro companies; (v) debts owed to social security funds, taxes; (vi) other claims; (vii) default interests and late charges, as well as surcharges and penalty and similar debts; and (viii) claims, other than wages and other similar benefits.

In bankruptcy proceedings, the administrator shall categorise the claims as per the following: (i) claims with regard to stay of payment; and (ii) secured and unsecured claims notified within the time limit.

Major kinds of voidable transactions

The Bankruptcy Act lists those contracts that shall be considered invalid if the creditor successfully contests them in court.

Operating and financing during reorganisations

Under the duration of the stay of payment, the debtor shall be allowed to undertake any new commitment subject to the consent of the administrator and payments may be made from the debtor’s assets subject to authorisation by the administrator. During the reorganisation, the debtor can carry on business only with the supervision of the administrator.

International cooperation and communication

The general rules regarding foreign judgments apply (with the provisions of the Insolvency Regulation of the EU). The regulations of the EU regarding the recognition of foreign insolvency proceedings apply. In any other case, cooperation and recognition depend on bilateral treaties or on the principle of reciprocity. The UNCITRAL Model Law on Cross-Border Insolvency has not been adopted in Hungary.

Liabilities of directors and officers

Former executives shall bear liability in those cases where they fail to properly represent the interests of creditors.

Pending legislation

A new act on insolvency proceedings is currently under preparation with expected coming into force in 2021. The main goals of the new regulation are to enhance competitiveness and to provide an innovative regulation suitable for the modern economy.

 

India

Applicable insolvency law, reorganisations: liquidations

Insolvency and Bankruptcy Code, 2016

Companies Act, 2013

Customary kinds of security devices on immovables

Mortgages of various types

Customary kinds of security devices on movables

Pledges, hypothecation, charges, liens, assignment, escrow

Stays of proceedings in reorganisations/liquidations

All suits and proceedings against the debtor are stayed during insolvency resolution and liquidation.

While secured creditors cannot enforce security during insolvency resolution period, they can enforce security in liquidation by standing outside the liquidation proceedings.

No stay is available in case of reorganisations under the Companies Act

Duties of the insolvency administrator

To conduct the business as a going concern.

To invite, verify and admit claims from various creditors of the company.

To take control and custody of assets of the company.

To oversee the resolution process.

To invite resolution plans for the company and check for compliance.

To apply to NCLT for avoidance of transactions.

Set-off and post-filing credit

Post admission (as opposed to filing) credit can be availed by the interim resolution professional and resolution professional subject to certain restrictions. The same forms part of insolvency resolution process costs.

Set-off (of pre-insolvency commencement dues) may not be available to a creditor during corporate insolvency resolution process as it may amount to recovery action by the creditor.

Set-off on account of mutual dealings is mandatory in liquidation.

Creditor claims and appeals

Claims can be filed by creditors with the insolvency professional during the resolution and liquidation process.

Creditor may appeal to NCLT against the decision of the insolvency professional.

Priority claims

Insolvency resolution process costs and liquidation costs.

Workmen claims (for last 24 months) rank pari passu with secured creditors’ claims.

Major kinds of voidable transactions

Preference, undervalued transaction, extortionate credit transactions, fraudulent and wrongful trading.

In liquidation – in addition, disclaimer of onerous contract.

Operating and financing during reorganisations

The company’s operations are continued by the insolvency professional as a going concern.

Interim finance can be availed subject to certain restrictions.

International cooperation and communication

While foreign judgments are recognised, the provisions relating to cross-border insolvency and co-operation are not notified as yet.

Liabilities of directors and officers

Directors and officers can be made liable to contribute to company’s assets for fraudulent or wrongful trading undertaken prior to insolvency commencement.

They can also be made liable for offences relating to misrepresentation to creditors or concealment of assets from creditors.

Pending legislation

Laws relating to cross-border insolvency.

Notification of provisions in IBC for personal and partnership bankruptcy.

Laws relating to insolvency of financial service providers.

 

Isle of Man

Applicable insolvency law, reorganisations: liquidations

Companies Act 1931, Companies (Winding Up) Rules 1934, Companies Act 2006.

Customary kinds of security devices on immovables

Mortgages, fixed and floating charges and debentures.

Customary kinds of security devices on movables

Liens, pledges (normally share pledges), debentures and title retention.

Stays of proceedings in reorganisations/liquidations

Automatic in a compulsory winding up. An application can be made for a stay in respect of voluntary winding up.

Duties of the insolvency administrator

To secure, collect and distribute the assets to creditors and thereafter to contributories.

Set-off and post-filing credit

Section 22 of the Bankruptcy Code 1982 provides for set-off.

Creditor claims and appeals

Claims are made to the Isle of Man High Court of Justice and appeals to the Staff of Government Division of the High Court of Justice (the Isle of Man Appeal Court Division).

Priority claims

Debts to the Crown, employee payments and unpaid pension contributions rank ahead of secured creditors.

Major kinds of voidable transactions

Fraudulent preferences, floating charges created within six months of winding up, fraudulent assignments.

Operating and financing during reorganisations

Subject to the type of reorganisation and specific circumstances.

International cooperation and communication

Subject to the discretion of the Isle of Man High Court.

Liabilities of directors and officers

Includes misfeasance and fraudulent trading.

Pending legislation

None

 

Italy

Applicable insolvency law, reorganisations: liquidations

  • The Italian Civil Code;
  • The Insolvency Act and the EU Insolvency Regulation;
  • Law No. 270/1999 governing the extraordinary administration of large insolvent enterprises; and
  • Law No. 39/2004 governing the industrial restructuring of large insolvent enterprises.

Customary kinds of security devices on immovables

Mortgages to be entered into notarial form and registered with the relevant real estate register.

Customary kinds of security devices on movables

Pledge (with depossession only until the non-possessory pledge legal framework is implemented); and

general and special liens.

Stays of proceedings in reorganisations/liquidations

Automatic stay for all reorganisation and liquidation procedures but not applicable in case of out-of-court recovery plans.

Duties of the insolvency administrator

In an ordinary bankruptcy proceeding, to manage the bankruptcy estate under court supervision.

Set-off and post-filing credit

Subject to some exceptions, creditors can set-off debts they owe to the insolvent debtor against claims that they have against the insolvent debtor.

Claims against the bankruptcy estate are crystallised as a result of the insolvency declaration and post-filing credit must be expressly authorised.

Creditor claims and appeals

Only claims arisen before the declaration of insolvency can be admitted.

Any creditor whose claims have not been (in whole or in part) recognised may challenge to the decision within 30 days of the hearing.

Priority claims

Mortgages, pledges and general and special liens. Other priority claims are possible if expressly authorised by the court.

Major kinds of voidable transactions

Payments, asset transfers and other transactions made during a ‘suspect’ period (ie, ranging from two years to six months prior to the bankruptcy declaration).

Operating and financing during reorganisations

Unlike in ordinary bankruptcy proceedings, the debtor remains in charge of operating the company (with the exclusion of extraordinary transactions).

Subject to certain conditions, financing can be recognised as a priority or super senior status.

International cooperation and communication

Essentially within the EU within the framework of the EU Insolvency Regulation.

Italy has not entered into any bilateral or multilateral conventions on the recognition of insolvency proceedings.

Liabilities of directors and officers

Directors may be held liable to: (i) the company, if they negligently fail to fulfil the duties imposed upon them by the law or the company’s by-laws; (ii) the company’s creditors, if they have failed to preserve the company’s assets; and (iii) third parties, for damages caused with wilful misconduct or negligence.

Pending legislation

Legislative Decree No. 14 of 12 January 2019 enacting the Code of Insolvency and Crisis (ie, the New Insolvency Code). Most of the provisions will enter into force in August 2020.

 

Japan

Applicable insolvency law, reorganisations: liquidations

Bankruptcy Act for the bankruptcy proceeding; Companies Act for the special liquidation proceeding; Civil Rehabilitation Act for the civil rehabilitation proceeding; and Corporate Reorganisation Act for the corporate reorganisation proceeding.

Customary kinds of security devices on immovables

Mortgage.

Customary kinds of security devices on movables

Assignment of movables as security, title retention (reservation of ownership), etc.

Stays of proceedings in reorganisations/liquidations

Respective collection of unsecured claim will be stayed in bankruptcy, civil rehabilitation and corporate reorganisation. Secured claim will not be stayed in bankruptcy and civil rehabilitation, while it will be stayed in corporate reorganisation.

Duties of the insolvency administrator

Duty of care to interested parties, especially creditors.

Set-off and post-filing credit

Set-off is permissible as a general rule; however, it is prohibited under certain circumstances. In civil rehabilitation and corporate reorganisation, set-off notice must be completed by the bar date of the filing the proof of claim. DIP financing is protected as an administrative claim, as a general rule.

Creditor claims and appeals

The creditors must file the proof of unsecured claim in bankruptcy and civil rehabilitation, and the proof of secured and unsecured claim in corporate reorganisation.

Priority claims

Treatment of the priority claims (including but not limited to tax claims and labour claims) differs depending upon the proceedings.

Major kinds of voidable transactions

Fraudulent conveyance and preferential payment or collateralisation.

Operating and financing during reorganisations

In civil rehabilitation, as a general rule, the debtor company keeps operating the business as a debtor in possession. In the corporate reorganisation, the court-appointed trustee will handle the operation of business. In either case, DIP financing is available as a general rule.

International cooperation and communication

Japan was one of the earliest countries to adopt the UNCITRAL Model Law on Cross-border Insolvency and enacted the Act on Recognition of and Assistance for Foreign Insolvency Proceedings.

Liabilities of directors and officers

Directors and officers may be responsible for their pre-commencement conduct.

Pending legislation

None.

 

Jersey

Applicable insolvency law, reorganisations: liquidations

The Companies (Jersey) Law 1991 and the Bankruptcy (Désastre) (Jersey) Law 1990.

Customary kinds of security devices on immovables

Security over immoveable property in Jersey is taken by way of one of three varieties of hypothec (mortgage): legal, conventional or judicial.

Customary kinds of security devices on movables

Other than in relation to ships, the only method of creating security over tangible movables in Jersey is by way of pledge. Specific charges or chattel mortgages do not exist in Jersey.

Stays of proceedings in reorganisations/liquidations

Leave of the court is required to commence or to continue legal action against a debtor which is en désastre, or which is subject to a creditors’ winding-up.

Duties of the insolvency administrator

The Viscount is an officer of the Royal Court and the Official Receiver of Jersey. The Viscount is responsible for determining the validity of creditor claims and realising and distributing the assets available accordingly. Where a liquidator is appointed, duties include investigating the assets of the company; realising the company’s property and distributing it accordingly, and reporting any potential criminal offences to HM Attorney General.

Set-off and post-filing credit

Set-off is a mandatory rule where there have been mutual credits, mutual debts or other mutual dealings between the debtor and a creditor such that the balance of the account, and no more, shall be claimed or paid on either side. It is an offence under A.25 of the Bankruptcy Law to obtain credit in excess of £250 without disclosing to the intending creditor the fact that the company is en désastre.

Creditor claims and appeals

The Royal Court of Jersey (Samedi Division) is the court of first instance. An appeal lies to the Court of Appeal and onwards to the Privy Council. Permission to appeal is not generally required, save from a procedural decision.

Priority claims

Viscount or liquidator; payments under the Banking Business (Depositors Compensation) (Jersey) Regulations 2009; Health Insurance Fund, Social Security Fund, Income Tax and Goods and Services Tax; rent; parochial rates (local property taxes); all other debts proved.

Major kinds of voidable transactions

The principal types of transactions that can be set aside in liquidations are extortionate credit transactions, transactions at an undervalue and preferences.

Operating and financing during reorganisations

There is no concept of corporate rescue in Jersey that would allow a business to continue to trade once a creditors’ winding-up under the Companies Law has commenced or a declaration en désastre under the Bankruptcy Law has been made. In exceptional circumstances it may be possible to bring this about under the just and equitable winding-up procedure, or by way of a letter of request to the English court to appoint administrators.

International cooperation and communication

Certain foreign judgments may be registered in Jersey under the Judgments (Reciprocal Enforcement) (Jersey) Law 1960 if they originate from one of the following jurisdictions: England & Wales, Scotland, Northern Ireland, the Isle of Man and Guernsey, whereafter they are enforceable as if they were a domestic judgment. Judgments from other jurisdictions may be enforced by way of a fresh action in Jersey. Under the Bankruptcy Law, the court may assist the courts of designated territories (presently the United Kingdom, the Isle of Man, Guernsey, Finland and Australia) in all matters relating to the insolvency of any person or entity.

Liabilities of directors and officers

If a company trades whilst insolvent, transactions entered into at the time in question are at risk of being set aside. Its directors will also be at risk of personal liability. Other potential risks are wrongful and fraudulent trading. A director who signs a certificate delivered to the registrar of companies without having reasonable grounds for believing that the statements in it are true is guilty of an offence. Liability can also arise out of the duty to cooperate with the liquidator of the company in a creditors’ winding up or to supply the Viscount with such information and do everything possible to assist the Viscount in the realisation of property and the distribution of the proceeds amongst creditors. Where a company is en désastre, it is an offence: (i) to fail to keep proper accounts in respect of any business carried on by the company for the two years prior to the commencement of winding up; (ii) to fail to appear before the Viscount on a summons; and (iii) to obtain credit in excess of £250 without disclosing to the intending creditor the fact that the company is en désastre. A person who acts as a director while disqualified is guilty of an offence punishable by imprisonment for up to two years or a fine and may be declared personally responsible for the debts of any company of which he or she acts as a director while disqualified.

Pending legislation

Bank (Recovery and Resolution) (Jersey) Law 2017.

 

Kenya

Applicable insolvency law, reorganisations: liquidations

The Insolvency Act No. 18 of 2015

The Insolvency Rules, 2016

The Insolvency (Amendment) Regulations, 2018

Insolvency (Amendment) (No. 2) Regulations, 2018

Customary kinds of security devices on immovables

Equitable mortgages (also known as charges) and legal mortgages.

Customary kinds of security devices on movables

Liens (a possessory right to retain the debtor’s asset until the debt is repaid).

Fixed charges (providing security over a particular asset, for example, bank accounts or insurance proceeds).

An equitable mortgage.

Stays of proceedings in reorganisations/liquidations

Any creditor can apply for stay of proceedings at any time after the making of a liquidation application, and before a liquidation order has been made.

Duties of the insolvency administrator

To take possession of, collect and get in the property of the company and, for that purpose, to take such proceedings as the administrator considers necessary.

To sell or otherwise dispose of the property of the company by public auction or private contract.

To borrow money for the beneficial realisation of the company’s assets and to give security over those assets for the borrowing.

To do all acts and execute, in the name and on behalf of the company, all deeds, receipts and other documents and for that purpose to use, when necessary, the company’s seal.

To bring or defend any action or other legal proceedings in the name and on behalf of the company.

To rank and claim in the bankruptcy, insolvency, sequestration or liquidation of any person indebted to the company and to receive dividends, and to accede to trust deeds for the creditors of any such person.

Set-off and post-filing credit

There are no statutory provisions for circumstances when the creditors’ right of set-off is deprived.

A debtor in a liquidation or reorganisation may not obtain secured or unsecured loans or credit.

The liquidator, with the creditor’s approval, however, has power to borrow money for the beneficial realisation of the company and give security for the borrowing over whole or part of the property comprised in that estate’s assets.

Such a loan or credit shall be prioritised under the preferential creditors group.

Creditor claims and appeals

A creditor (including a creditor who has a preferential claim) who wishes to claim in the bankruptcy shall submit a creditor’s claim to the bankruptcy trustee before the deadline for submitting claims.

The High Court of Kenya (Commercial & Admiralty Division) handles bankruptcy and insolvency proceedings.

Appeals from the High Court lie in the Court of Appeal in some instances with leave of the court and in some instances, without leave of the court – depending on the specific decision being challenged.

The Court of Appeal requires that the appellant posts security of costs that are assessed based on the value of the appeal and the nature of the reliefs sought.

Priority claims

Apart from employee-related claims, other priority claims in liquidations and reorganisations, as provided in the Act, include: the expenses of the liquidation such as the liquidator’s remuneration; costs for the person who applied to the court for an order placing the company under liquidation; and amount of costs incurred by that creditor in protecting, preserving the value of or recovering those assets (this has priority over the secured creditors), and outstanding taxes due to the Kenya Revenue Authority.

Major kinds of voidable transactions

A transaction that is undervalued.

An extortionate credit transaction.

A transaction based on certain preferences.

Operating and financing during reorganisations

The Insolvency Act, 2015 now gives the company an opportunity to operate as a going concern and to realise the property of the company in order to make distributions to secured or preferential creditors.

A debtor in a liquidation or reorganisation may not obtain secured or unsecured loans or credit.

The liquidator, with the creditor’s approval, however, has power to borrow money for the beneficial realisation of the company and give security for the borrowing over whole or part of the property comprised in that estate’s assets.

International cooperation and communication

The Act provides for co-operation and direct communication between Kenyan courts and foreign courts or foreign representatives.

Liabilities of directors and officers

Company directors and officers are not customarily held personally liable for the obligations of the company unless they are found to have made decisions in breach of their fiduciary duties towards the company; have participated in fraudulent trading; or wrongful trading; or where they have given personal guarantees.

Pending legislation

There is no pending legislation but there are various stakeholder forums being held with the aim of amending the Insolvency Act, 2015 and the regulations to fit the needs of the country’s social- economic development and to ease insolvency procedures for lay persons.

 

Korea

Applicable insolvency law, reorganisations: liquidations

Debtor Rehabilitation and Bankruptcy Act

Customary kinds of security devices on immovables

Mortgage is the customary type of security on immovables.

Customary kinds of security devices on movables

Pledge is the customary type of security on movables.

Stays of proceedings in reorganisations/liquidations

If the court finds that there are not enough assets to proceed with the insolvency proceeding, it will terminate the proceeding.

Duties of the insolvency administrator

The insolvency administrator has authority to manage, dispose of the debtor’s assets and run the business.

Set-off and post-filing credit

In reorganisation proceedings, creditors may set off until the claim report period and post-filing credit is allowed before the second interested parties meeting.

Creditor claims and appeals

If a creditor’s claims are objected in the proceeding, he or she may file a lawsuit to confirm its claims.

Priority claims

Usually, employees’ salaries and severance pay, taxes are classified as the priority claims.

Major kinds of voidable transactions

Gift by a debtor or contract unfavourable to the debtor may be avoided by an administrator or a trustee.

Operating and financing during reorganisations

In general, operating and financing during reorganisation requires the court’s approval. The creditors are protected as holders of the priority claims.

International cooperation and communication

The DRBA adopted the Model Law and provides cooperation and communication with foreign courts.

Liabilities of directors and officers

Administrators and trustees investigate the liabilities of directors and officers of the debtor.

Pending legislation

None.

 

Mexico

Applicable insolvency law, reorganisations: liquidations

Ley de Concursos Mercantiles.

Customary kinds of security devices on immovables

Mortgage and guaranty trust.

Customary kinds of security devices on movables

Pledges.

Stays of proceedings in reorganisations/liquidations

Relief that may be granted as a precautionary measure as of the filing and at the adjudication in concurso mercantil.

Duties of the insolvency administrator

In conciliation (reorganisation), debtor in possession, conciliator seeks plan of reorganisation and provides for the recognition of creditors. In liquidation, trustee is the administrator for the liquidation of assets.

Set-off and post-filing credit

Set-off is allowed regarding some financial transactions. Post-filing credit is not.

Creditor claims and appeals

Creditor claims shall be filed for recognition. Upon recognition, allowed creditors are vested to vote on the reorganisation plan. Appeals and other remedies can challenge court decisions.

Priority claims

Administrative debts against the estate.

Labor, tax, mortgage, pledge.

Major kinds of voidable transactions

Transfers and encumbrance transactions in the call-back period.

Operating and financing during reorganisations

Debtor in possession. Post-financing as administrative debt priority against the estate.

International cooperation and communication

LCM generally incorporates the UNCITRAL Model Law on Cross-border Insolvency.

Liabilities of directors and officers

Joint and several liability.

Pending legislation

None pending.

 

Netherlands

Applicable insolvency law, reorganisations: liquidations

Dutch Bankruptcy Act. There are special provisions in the Dutch Financial Supervision Act for financial institutions.

Customary kinds of security devices on immovables

Mortgages.

Customary kinds of security devices on movables

Pledges.

Stays of proceedings in reorganisations/liquidations

In bankruptcy: stay of proceedings with respect to claims against the bankrupt. No enforcement of unsecured claims.

In suspension of payment: enforcement measures of unsecured non-preferential claims can be stopped.

Duties of the insolvency administrator

In bankruptcy: to manage and liquidate the assets.

In suspension of payments: to manage the assets jointly with the managing board.

In a pre-pack: an advisory role in which he or she explores and prepares restructuring measures together with the debtor and the most important (secured) creditors.

Set-off and post-filing credit

Both in bankruptcy and ‘suspension of payments’ but not automatic.

There is no legal basis for post-filing credit: in practice a post-filing credit is granted and treated as a super senior estate claim.

Creditor claims and appeals

In bankruptcy: claims are submitted to the trustee and can be disputed by the trustee and the other creditors in a claims allowance meeting.

In ‘suspension of payments’ creditors will have to file their claims if a reorganisation plan is submitted by the debtor.

Priority claims

The most important priorities:

  • claims arising after the commencement of the insolvency proceedings;
  • tax claims, security premiums; and
  • wages and pension claims.

Major kinds of voidable transactions

The trustee in bankruptcy may void transactions for consideration which have been entered into without obligation to do so if the act was detrimental to the creditors and both the debtor and the other party at that time knew or should have known it to be detrimental to the creditors.

Operating and financing during reorganisations

As post-petition debts have priority it may be easier to attain fresh money during the insolvency proceedings. Both in bankruptcy and in a suspension of payment the business may be continued.

International cooperation and communication

The Recast Regulation provides an obligation for cooperation and information exchange between liquidators. Cooperation and communication is not (yet) dealt with explicitly in the Dutch Bankruptcy Code. In practice, coordination or cooperation does occur and cross-border insolvency agreements (protocols) have been used.

Liabilities of directors and officers

Managing directors may be liable to the company in bankruptcy for mismanagement. They may also be liable to the tax authorities, the social security institutions and the pension funds. New legislation has not only introduced the possibility of managing directors being disqualified but has also increased the risk of criminal liability for managing directors.

Pending legislation

Various legislative proposals for legislation to amend Dutch insolvency laws, under which the Dutch Bankruptcy Act, have been published for public consultation or submitted to the Dutch Parliament for approval.

There are a number of legislating updates pending:

  • The Continuity of Companies Act I – this proposal is for a for a pre-pack procedure and is still pending before Parliament;
  • The Act Transfer of Undertaking – this draft proposal introduces new rules regarding the position of employees in a transfer of undertaking in insolvency. The public consultation closed in August 2019;
  • The Act on Court Confirmation of Private Restructuring Plan – this legislative proposal introduces a fast and efficient procedure to restructure a debtor’s business through a scheme. The proposal was submitted to the Lower House on 5 July 2019;
  • The Act Enhancement of the Efficiency of Insolvency Procedural Law – this proposal will provide means to facilitate the continuation of businesses in bankruptcy and is still in the preparatory phase;
  • The Act Modernisation of Bankruptcy Proceedings – this act focuses on, among other things, achieving a more efficient and transparent insolvency procedure in which the bankruptcy trustee can exercise his or her duties more easily and effectively. The act entered into force on 1 January 2019 and applies to bankruptcies opened in the Netherlands on or after 1 January 2019.
  • Implementation of the EU Restructuring Directive – the Act on court confirmation of private restructuring plan ties in with the aim of the Directive to ensure that member states have a preventive restructuring framework in place. A separate legislative proposal that implements the directive will be prepared (which, according to the Ministry of Justice and Security, will amend the current regime regarding the composition in ‘suspension of payments’).
  • International insolvencies – The Ministry of Justice and Security is considering whether to amend the Dutch Bankruptcy Act to incorporate parts of the UNCITRAL Model Law on Cross-Border Insolvencies.

 

Norway

Applicable insolvency law, reorganisations: liquidations

Main statutes:

The Bankruptcy Act of 8 June 1984, No. 58.

The Satisfaction of Claims Act of 8 June 1984, No. 59.

Customary kinds of security devices on immovables

Mortgages and execution liens.

Customary kinds of security devices on movables

Pledges, either in each asset or floating charges, and execution liens. Note that the requirements for establishing retention of title are narrow, and exclude stock.

Stays of proceedings in reorganisations/liquidations

Yes.

Duties of the insolvency administrator

Handle all aspects of the proceedings; more or less functions as the chairman of the board and CEO if compared with a limited liability company.

Set-off and post-filing credit

Set-offs may be allowed. Post-filing credit is not allowed.

Creditor claims and appeals

Claims may usually be filed in the estate throughout the proceedings; there is no preclusive deadline. Claims are subject to a set order of priorities. Claims are tested by the administrator/creditors’ committee, and potentially the court. The court’s decisions may in general be appealed within one month from passing.

Priority claims

Employees’ claims for wages rank first in priority, and certain VAT and tax claims rank second in priority. The next class of priority is unsecured claims, which include most claims.

Major kinds of voidable transactions

Transactions of a certain size within last three months before proceedings were opened, covering old debt, gifts, transactions beneficial to closely related parties. Bad faith transcations have a 10-year lookback period.

Operating and financing during reorganisations

Operations continue as usual during debt negotiation proceedings under the supervision of the administrator and creditors’ committee. Financing during debt negotiation proceedings is not allowed unless accepted by the administrator/creditors’ committee.

International cooperation and communication

Little or no cooperation between Norwegian and foreign courts.

Liabilities of directors and officers

May potentially be held criminally or financially liable.

Pending legislation

Changes in the Bankruptcy Act, providing new legislation on cross-border cases, have been passed. It is not yet decided when the changes will enter into force. The Justice Department is working on new judicial debt restructuring rules.

 

Portugal

Applicable insolvency law, reorganisations: liquidations

Portuguese Insolvency and Recovery Code ( CIRE) and Regulation (EU) 2015/848 of the European Parliament and the Council.

Customary kinds of security devices on immovables

Mortgage.

Customary kinds of security devices on movables

Pledge; mortgage; general lien over all movable assets.

Stays of proceedings in reorganisations/liquidations

Pending enforcement proceedings filed by the creditors against the debtor or other proceedings affecting the debtor’s assets are suspended.

Duties of the insolvency administrator

Normally, the insolvency administrator is responsible for the administration of the company after the declaration of insolvency, it is responsible for receiving credit claims and ranking them and proposes the liquidation of the company or the presentation of an insolvency plan and the continuation of business.

Set-off and post-filing credit

After the declaration of insolvency creditors can only balance their debts to the insolvency estate with their credits if the right of set-off is prior to the declaration of insolvency and the credit is due, and the object of credit and that of the debit are of the same nature.

Creditor claims and appeals

Creditors’ claims must be filed with the insolvency administrator or court-appointed administrator within the established deadline and producing a list of recognised credits. Any creditor whose claims have not been recognised or have been partially recognised may lodge a challenge to the list of credits recognised and any creditor may challenge the recognition of other creditors’ claims.

Priority claims

Claims are ranked as follows: claims over the insolvent’s estate; secured claims; preferential claims; non-secured claims (unsecured, unprivileged and unsubordinated credits); and subordinated claims.

Major kinds of voidable transactions

As a rule, the insolvency administrator can decide not to fulfil any contract that is not yet fulfilled. Further, contracts unfairly favour one creditor over the others or reduce, make it more difficult or impossible, jeopardise or delay payment to the creditors, and those which were carried out in bad faith and within the two years prior to the initiation of the proceedings, can be terminated by the administrator.

Operating and financing during reorganisations

The debtor in insolvency proceedings can carry out its business if the creditors’ general meeting agrees. In PER the debtor will always continue its business and it can obtain loans. The debtor’s activity will be supervised by the creditors’ general meeting, the creditors’ committee, the court-appointed administrator and the court.

International cooperation and communication

Within the EU the recognition of foreign proceedings and the cooperation between courts is made according to the terms of Regulation (EU) 2015/848.

Other foreign insolvency proceedings are recognised by Portuguese courts as long as the foreign court that declared the insolvency based its competence on the criteria of the location of the residence or headquarters of the debtor or of its centre of main interests and the recognition does not violate public order. Secondary proceedings can be initiated in Portugal and the Portuguese court-appointed administrator will coordinate with the foreign administrator on all relevant matters.

Liabilities of directors and officers

Directors can face civil and criminal penalties for breaching their legal duties. When the insolvency is deemed to be caused by directors’ actions, the court may impose several sanctions upon them. Directors can also be held personally liable for a company’s tax or social security debt.

Pending legislation

None. Recent amendment of the Portuguese Insolvency and Recovery Code by Decree-Law No. 79/2017.

 

Russia

Applicable insolvency law, reorganisations: liquidations

Civil Code; Federal Law on Insolvency (Bankruptcy); Federal Law on Financial Restoration of Agricultural Commodity Produces; Federal Law No. 29-FZ On Enforcement Proceedings.

Customary kinds of security devices on immovables

Mortgage (subject to state registration).

Customary kinds of security devices on movables

Pledge (may be registered by a notary in the register of pledge notices at the discretion of pledgor or pledgee).

Stays of proceedings in reorganisations/liquidations

In general, upon commencement of bankruptcy proceedings, no claims against the debtor’s assets may be enforced. Corporate reorganisations or liquidations of companies do not have the said effects.

Duties of the insolvency administrator

Supervision: to identify creditors, prepare a report on the debtor’s financial status and convene the first creditors’ meeting.

Financial restoration: to monitor performance of the debtor’s obligations in accordance with a plan and payment schedule.

External administration: to prepare a reorganisation plan, to deal with the debtor’s assets and to restore its solvency.

Winding up: to evaluate all assets of the debtor and sell them separately or as an entire business to satisfy the creditors’ claims.

Set-off and post-filing credit

Generally, set-off is permitted provided that it does not affect the priority of claim satisfaction and does not entail preferential claim satisfaction (which actually means that it cannot be used). The debtor is not prevented from obtaining loans or credits. Claims that arise from such loans and credits outrank all other claims.

Creditor claims and appeals

Creditors are allowed to submit their claims at any time during the bankruptcy proceedings.

Priority claims

Generally as follows: personal injury and some related claims; employee’s and copyright-fees claims; and all other claims (including claims by secured creditors that, however, may in some cases prevail over first and second-ranking creditors). Distributions to creditors may be made at any stage of the bankruptcy procedure.

Major kinds of voidable transactions

In general, any transactions concluded by the debtor in violation of the Federal Law on Insolvency (Bankruptcy) may be set aside. Major kinds of voidable transactions are: transactions concluded within a particular period that negatively affected the debtor’s financial position or the economic interests of creditors (other than those who have entered into such voidable transactions).

Operating and financing during reorganisations

During the supervision or the financial restoration, an insolvency officer supervises the debtor’s management and limits its authority. In external administration or bankruptcy proceedings an insolvency office holder replaces the debtor’s management. Any shareholder of an insolvent company or any third party can, at any time before the end of bankruptcy proceedings, offer to pay all of the company’s debts to prevent its ultimate liquidation.

International cooperation and communication

Russian bankruptcy legislation does not provide any specific rules on cross-border cooperation between domestic and foreign courts and domestic and foreign insolvency administrators in cross-border insolvencies and restructurings.

Foreign court decisions on insolvency (bankruptcy) are recognised in Russia based on international treaties and the principle of reciprocity.

Liabilities of directors and officers

Criminal and administrative liability: providing misleading information in financial and accounting documents of an organisation with the intention to suppress the signs of insolvency, misbehaviour in the course of bankruptcy, fictitious or intentional bankruptcy.

Civil liability for the company’s debts in case of causing the company’s bankruptcy as a person exercising control over the debtor or failure to file a bankruptcy petition when necessary; and for losses caused by a breach of duty to act in the interests of the company, reasonably and in good faith.

Pending legislation

One pending bill provides that the primary assessment of claims of creditors in bankruptcy proceedings shall be made by a insolvency administrator rather than by a court. Another bill stipulates a special insurance payment paid by every employer and ensuring the satisfaction of claims of its employees in case of its insolvency

 

Singapore

Applicable insolvency law, reorganisations: liquidations

The Singapore Companies Act (Cap 50).

Customary kinds of security devices on immovables

Mortgages.

Fixed and/or floating charges.

Pledge.

Lien.

Customary kinds of security devices on movables

Fixed and/or floating charges.

Stays of proceedings in reorganisations/liquidations

All proceedings against a company in liquidation are stayed unless court approval is sought to commence or continue proceedings.

All proceedings against a company undergoing a reorganisation under a JM or Scheme, unless the court orders otherwise. The stay may be extra-territorial in nature.

Duties of the insolvency administrator

A liquidator is an officer of the court and must act in the best interests of the company’s general body of unsecured creditors.

Set-off and post-filing credit

Set-off in insolvency may not be contracted out of.

Proofs of debt may be filed with the liquidator who exercises a quasi-judicial function in assessing such proofs.

Creditor claims and appeals

A creditor aggrieved with the liquidator’s adjudication of its proof may appeal to the Singapore High Court.

Priority claims

See Section 328(1) of the Companies Act.

Major kinds of voidable transactions

Transactions at undervalue.

Unfair preferences.

Floating charges created six months prior to liquidation, in certain circumstances.

Operating and financing during reorganisations

A matter of agreement between the debtor and its creditors.

International cooperation and communication

The Singapore courts support cross-border cooperation between courts.

Liabilities of directors and officers

See questions 17 to 20.

Pending legislation

The Insolvency, Restructuring and Dissolution Act, 2018.

 

Spain

Applicable insolvency law, reorganisations: liquidations

The main regulation of insolvency proceedings is the Insolvency Law, enacted on 9 July 2003, which came into force on 1 September 2004 having been subject to several amendments since then.

Customary kinds of security devices on immovables

The principal security device on immoveable property is the mortgage. Mortgages must be granted by public deed and be registered in the Land Registry. No security enforceable against third parties is created until the mortgage registration has been completed.

Stays of proceedings in reorganisations/liquidations

Declarative proceedings pending at the time of the insolvency declaration will continue but may be consolidated into the insolvency proceedings. New declarative proceedings can be initiated but must be filed with the insolvency court.

Unsecured claims for the attachment of assets pending at the time of the insolvency declaration can continue if the assets attached are not required to continue running the business. No new unsecured claims for the attachment of assets can be enforced during the insolvency proceedings.

Security over the assets that are used in the debtor’s business cannot be initiated until a settlement agreement that does not affect the security/secured claim is approved or a year passes following the insolvency declaration without the liquidation phase being opened.

As an exception, this is not applicable to secured claims related to certain financial collateral.

Duties of the insolvency administrator

The insolvency receiver’s duties may range from mere supervision of the debtor to administration of the debtor’s assets and activities. Whether directors are entirely released from their duties or continue in office under the supervision of the receiver will be at the court’s discretion in view of the particular circumstances of the case. There is a preference for releasing the directors if the insolvency filing is made by a creditor. The relevant regime and specific insolvency receivers’ duties will be decided by the court case-by-case.

Set-off and post-filing credit

In general, set-off is not permitted in an insolvency proceeding unless the requirements for set-off have been met prior to the insolvency declaration. As an exception to the general regime: set-off provisions complying with the requirements set out in Spanish Royal Decree-Law 5/2005 (which implements EU Directive 2002/47 on financial collateral) will be enforceable in an insolvency scenario; set-off is allowed if the non-Spanish law governing the reciprocal claim allows such set-off in insolvency proceedings.

The Insolvency Act does not expressly regulate the debtor’s right to obtain secured or unsecured loans but provides that during the insolvency proceedings it is possible to resume loan agreements that have been accelerated in the three months before the insolvency declaration.

Creditor claims and appeals

Any claim against the debtor must be filed with the court dealing with the insolvency proceedings. Appeals may be available, under certain circumstances, before the relevant court of appeals.

Priority claims

The insolvency debts are classified as follows:

Debts of the insolvency estate – These include, among others, debts that originated within the insolvency proceedings (e.g., judicial expenses, loan agreements that are rehabilitated by the court, 50 per cent of the fresh money granted within the framework of a refinancing agreement which satisfies some conditions), debts that originated after the insolvency declaration (e.g., debts arising from the continuation of the business) and salary claims for the 30 days immediately preceding the declaration of insolvency.

Insolvency debts – These debts are classified as: specially privileged debts (among others, debts secured by mortgages or pledges, rental payments arising from lease agreements and instalments arising from hire-purchase agreements); generally privileged debts (among others, salaries and severance payments up to certain limits, certain taxes, credits arising from tort liability, 50 per cent of the fresh money granted within the framework of a refinancing agreement which satisfies some conditions and 50 per cent of the debt of the creditor who applied for the insolvency are classified as generally privileged debts); ordinary debts; or subordinate debts.

Debts of the insolvency estate will be paid out of the debtor’s assets (other than those assets attached to specially privileged debts) with preference to any other debts. Secured debts are generally paid with the proceeds of the enforcement of the security. Generally, privileged debts will be paid by segregating from the debtor’s estate those assets covering the aggregate amount of such credits.

Major kinds of voidable transactions

Acts and agreements entered into by the debtor in the two years before the insolvency declaration may be rescinded by the court on the basis that these acts or agreements are harmful to the insolvency estate. Certain acts and agreements are presumed by law to be harmful to the insolvency estate, without any possibility for the parties to file evidence against this presumption. This is the case for gifts and early payments of unmatured debt.

The law also presumes (although admitting evidence against such presumption) that certain acts or agreements damage the insolvency estate (e.g., the creation of security in favour of pre-existing obligations, or contracts entered into with specially related persons (among others, shareholders owning more than 5 per cent of listed companies (or 10 per cent if not listed) or directors)).

Refinancing agreements that meet the requirements provided for in the Insolvency Act are excluded from the general rescission regime and can only be challenged by the receivers on other grounds (eg, fraud).

Operating and financing during reorganisations

Depending on the specific regime decided by the court, the debtor might be able to enter into operations within the ordinary course of business. Any other transactions should be agreed by the court. Loan agreements accelerated prior to the insolvency declaration can be rehabilitated by the court.

International cooperation and communication

Regulation (EU) 2015/848 (the Recast Regulation) on cross-border insolvency proceedings, as well as the Insolvency Act establish the duty of reciprocal cooperation for domestic and foreign receivers. The Recast Regulation has introduced a completely new voluntary regime for group coordination that encourages members of a group to consider whether possibilities exist for restructuring the group and to coordinate a restructuring plan. A new regime to improve coordination and communication between receivers and courts has also been established by the Recast Regulation.

Liabilities of directors and officers

Directors may be liable for the harm caused as a result of actions or omissions that are contrary to the law or to the by-laws or that are in breach of the duties inherent to their position. Directors may also be liable if the company ceases to comply with certain subscribed capital-to-equity ratios and such ratios are not re-established within certain periods, in which case directors are under a legal duty to procure the winding up or (if applicable, the insolvency) of the company.

The insolvency court may declare the director liable if the insolvency is classified as ‘guilty’.

The Spanish Criminal Code includes a number of criminal offences that may apply to a director.

Pending legislation

Law 1/2019 includes a final provision which enables an eight-month period for the Spanish government to elaborate a Restated Text of the Insolvency Act.

   

 

Switzerland

Applicable insolvency law, reorganisations: liquidations

The Debt Collection and Bankruptcy Act governs the enforcement of pecuniary claims and claims for the furnishing of security against private individuals and legal entities of private law. Regulated financial institutions are subject to special rules (BIO-FINMA).

Customary kinds of security devices on immovables

Security interests in real estate, ships and aircraft by way of a mortgage.

Customary kinds of security devices on movables

Pledges, right of retention, retention of title, fiduciary transfer of property title (in particular assignment of claims).

Stays of proceedings in reorganisations/liquidations

The commencement of composition and bankruptcy proceeding automatically stays almost all enforcement proceedings. Except for urgent matters, civil court proceedings will be suspended.

Duties of the insolvency administrator

During a composition agreement, the administrator supervises the debtor’s business, examines its business operations and submits recommendations regarding its reorganisation plan to the court. In liquidation, the administrator marshals and liquidates the assets for distribution to the creditors according to the creditors’ schedule.

Set-off and post-filing credit

Set-off is permitted except in cases considered as misuse. The debtor is either prevented (bankruptcy) or restricted (composition) from disposing of its assets. The administrator has to consent to contract new obligations, such as loan or credit, which may touch free assets.

Creditor claims and appeals

Creditors must submit their claims within a month after the public announcement of commencement of a composition or a bankruptcy.

A creditor may challenge the disallowance of its claim by instituting legal proceedings.

Priority claims

Three different classes are distinguished:

  • first class: claims of employees that arose during the six months prior to the opening of proceedings and unpaid pension plan contributions;
  • second class: unpaid social security contributions; and
  • third class: all other claims (including taxes).

Major kinds of voidable transactions

Gifts (and equivalent transactions), preferential transactions concluded in situations of over-indebtedness; fraudulent transactions.

Operating and financing during reorganisations

Under the supervision of the commissioner, the debtor may continue its business operations. However, certain transactions will require approval by the court or the creditors’ committee. Transactions approved by the administrator (and the court or creditors’ committee if necessary) enjoy privileged treatment.

International cooperation and communication

The Swiss legal system provides for simplified recognition of foreign insolvency proceedings, evidence of reciprocal recognition is no longer required. If successful, the recognition of the foreign decree subjects the debtor’s assets in Switzerland to the consequences of Swiss law. This is referred to as a ‘mini-bankruptcy’ proceeding (PILA, articles 166 to 175).

In international cooperation, official secrecy rules have to be observed and language barriers can occur. Special rules apply to insolvency proceedings involving regulated financial institutions.

Liabilities of directors and officers

Any member of the board of directors or any person entrusted with management (officers) is liable for any damage caused to the corporation, its shareholders or creditors where he or she has intentionally or negligently acted in breach of his or her duties. Directors and officers can also become liable for unpaid social security contributions or certain taxes.

Pending legislation

The legislator currently aims, inter alia, to develop a framework governing distributed ledger technology (eg, segregation of crypto assets and data belonging to the debtor and to third parties), to transfer competencies from FINMA to federal and state authorities regarding the insolvency of financial institutions, to prevent abusive bankruptcies and to negotiate the abolishment of the historic cantonal treaties on bankruptcy with individual German principalities.

 

Thailand

Applicable insolvency law, reorganisations: liquidations

Bankruptcy Act BE 2483 (AD 1940).

Establishment of and Procedures for Bankruptcy Court Act BE 2542 (AD 1999).

Regulations for Bankruptcy Cases BE 2549 (AD 2006).

Customary kinds of security devices on immovables

Mortgage.

Customary kinds of security devices on movables

Pledge and retention.

Stays of proceedings in reorganisations/liquidations

Automatic stay is available only in reorganisation under section 90/12 of the Bankruptcy Act BE 2483 (AD 1940).

Duties of the insolvency administrator

In bankruptcy, the official receiver must gather the assets of the debtor and distribute them among the creditors. In reorganisation, the plan administrator plays the said role in compliance with the reorganisation plan.

Set-off and post-filing credit

Creditors can set-off debts, unless the creditor’s right of claim against the debtor is accrued after the court’s order of receivership or after the court’s order of a reorganisation. Upon the issuance of the court’s order of receivership, a debtor is prohibited from doing any acts relating to the asset, or the business, except by order or approval of the court, the official receiver, the administrator of the asset, or of a creditors’ meeting (as the case may be). Otherwise, the transaction will be void.

Once the court orders acceptance of the reorganisation petition, the debtor is prohibited from undertaking certain activities during the term of automatic stay.

Creditor claims and appeals

The application for repayment of debt is submitted to the official receiver. In bankruptcy proceedings, the appeal of the court’s order with respect of the repayment of debt is made to the Supreme Court, Bankruptcy Division. In reorganisation proceedings, the appeal of the official receiver’s order with respect of the repayment of debt is made to the court.

Priority claims

Bankruptcy: Official receiver’s fees, court fees and taxes due for payment within six months prior to the bankruptcy order; secured creditors with regard to secured assets; and employees.

Reorganisation: In accordance with the plan, but if a priority creditor is treated other than in accordance with the normal distribution rules, that creditor must give its consent; if the reorganisation order is revoked and the debtor is declared bankrupt, debts incurred by the official receiver, planner and plan administrator have priority equal to the expenses of the official receiver in bankruptcy.

Major kinds of voidable transactions

Fraudulent transfer and preferential transfer.

Operating and financing during reorganisations

Operating and financing during reorganisation which is conducted in the ordinary course of business can be done under the Bankruptcy Act BE 2483 (AD 1940).

International cooperation and communication

None at present.

Liabilities of directors and officers

The liability of the directors and officers is separated from the liability of the company.

Pending legislation

None at present.

 

Ukraine

Applicable insolvency law, reorganisations: liquidations

The Law of Ukraine on Restoration of Debtor’s Solvency or Declaration of Bankruptcy.

The Commercial Procedural Code of Ukraine.

The Commercial Code of Ukraine.

The Civil Code of Ukraine.

The Law of Ukraine on Introduction of Moratorium on the Forcible Sale of Property.

The law of Ukraine on Financial Rehabilitation etc.

The Law of Ukraine on Banks and Banking etc.

Customary kinds of security devices on immovables

A mortgage.

Customary kinds of security devices on movables

A pledge (public and private pledge).

Stays of proceedings in reorganisations/liquidations

A moratorium on satisfaction of the creditors’ claims is imposed immediately after commencement of the bankruptcy proceedings and is terminated from the date of the beginning of the liquidation procedure.

Duties of the insolvency administrator

The insolvency administrator must:

  • satisfy creditors’ claims;
  • convene creditors’ meetings and sessions of the creditors’ committee;
  • participate in the creditors’ meetings and sessions of the creditors’ committee with advisory vote;
  • take measures for the sake of debtor’s assets protection; and
  • prepare and keep the register of the creditors’ claims.

Set-off and post-filing credit

Not applicable.

Creditor claims and appeals

The creditors’ claims are divided into pre-bankruptcy creditors’ claims and current creditors’ claims.

Creditors may appeal only those court resolutions that directly stipulated by the Bankruptcy Law.

Priority claims

Rank 1: claims of secured creditors; employees’ claims; payments to the fund securing bank deposits of individuals; creditors’ claims under insurance contracts; court fees, insolvency administrators’ fees and expenses incurred in connection with insolvency proceedings.

Rank 2: other employees’ claims (personal injury).

Rank 3: claims for taxes and other mandatory duties.

Rank 4: unsecured creditors’ claims.

Rank 5: claims of the employees to receive contributions from the share capital of the debtor.

Rank 6: other claims.

Major kinds of voidable transactions

Major kinds of voidable transactions include:

  • transactions that have been executed with an ‘affiliated person’, as a result of which debtor’s creditors have incurred or may incur losses;
  • transactions that are executed with a particular creditor or any other person within the period of six months prior to the court decision on commencement of the debtor’s rehabilitation and if these transactions establish preferential treatment of one creditor as compared to the other creditors;
  • transactions, which cause damage to the debtor or would prevent the restoration of the debtor’s solvency; and
  • transactions with a term longer than one year.

Operating and financing during reorganisations

During reorganisation or rehabilitation of the debtor, the latter has the right to conduct its business operations. The control is exercised by the creditors’ committee.

International cooperation and communication

International cooperation or communication is carried out according to the principle of reciprocity.

Liabilities of directors and officers

Civil liability; criminal liability for deliberate bankruptcy; and administrative liability for fraudulent bankruptcy, concealing permanent insolvency and illegal actions during bankruptcy.

Pending legislation

Code of Ukraine on Bankruptcy Procedures, which will come into force on 21 October 2019.

 

United Arab Emirates

Applicable insolvency law, reorganisations: liquidations

UAE Federal Bankruptcy Law No. 9 of 2016 is the main legislation. Free zones generally have their own laws and processes. Sometimes laws are enacted to cater for specific restructurings.

Customary kinds of security devices on immovables

Mortgage over freehold, mortgage over leasehold and mortgage over buildings.

Customary kinds of security devices on movables

Pledges over receivables, shares, bank accounts etc, business mortgages and assignments.

Stays of proceedings in reorganisations/liquidations

Statutory moratorium applies once the court has accepted the application for preventive composition or bankruptcy proceedings.

Duties of the insolvency administrator

The insolvency administrator as an officer of the court has reporting and supervision obligations as well as managing claims.

Set-off and post-filing credit

Set-off is allowed if contractually agreed prior to insolvency. Requires mutuality and there is no specific post-insolvency close out netting provision in the law.

Creditor claims and appeals

There is no specific bankruptcy court system. Processes are dealt with by the competent court under the Civil Procedure Rules.

Priority claims

Employees, judicial fees, judgement debts, fees, costs and expenses incurred during the insolvency process.

Major kinds of voidable transactions

Main grounds for challenge are no consideration, where liabilities of a company in that transaction exceed those of the counterparty, payment of debts prior to their stated maturity dates, new security or guarantees for old debts and payment of debts in amounts greater than was agreed.

Operating and financing during reorganisations

Supervision by court-appointed trustee applies throughout the process. Where bankruptcy proceedings are initiated, the trustee takes control of management of the entity. Other than where there is a supervisory creditor committee, there is no individual creditor oversight.

International cooperation and communication

There are limited provisions for international cooperation in the national law.

Liabilities of directors and officers

Criminal liability can arise in a number of circumstances, e.g. not keeping adequate records, not supplying required information to the court appointed trustee, illegal disposal of assets etc.

Pending legislation

There are no changes to the national law anticipated in the near future.

 

United States

Applicable insolvency law, reorganisations: liquidations

Title 11 of the United States Code (Chapter 7 governs liquidations; Chapter 11 governs reorganisations).

Customary kinds of security devices on immovables

The real estate mortgage. Alternative forms include the land sale contract and deed of trust.

Customary kinds of security devices on movables

Security interests created under and enforced by article 9 of the UCC. Special security devices exist for certain intangible property, equipment such as automobiles, aeroplanes, etc, and intellectual property.

Stays of proceedings in reorganisations/liquidations

The filing of a bankruptcy petition immediately triggers an automatic stay that enjoins most creditor enforcement action against the debtor and its property.

Duties of the insolvency administrator

The trustee or debtor-in-possession is an officer of the court and has a fiduciary duty to protect and preserve assets of the estate, and to administer such assets in the best interests of creditors.

Set-off and post-filing credit

Bankruptcy generally does not affect set-off rights existing under non-bankruptcy law, but relief from stay must be obtained. Unsecured and secured post-petition credit may be obtained with court approval.

Creditor claims and appeals

Creditors generally file proofs of claim. Disputes are litigated in the bankruptcy court (or other court of competent jurisdiction) and may be appealed.

Priority claims

Expenses of administrating the estate and other specified claims such as wages, pension benefits, and certain taxes enjoy priority.

Major kinds of voidable transactions

Fraudulent and preferential transfers may be avoided.

Operating and financing during reorganisations

The debtor-in-possession may operate its business in the ordinary course. Court approval must be obtained for transactions outside the ordinary course of business.

International cooperation and communication

Chapter 15 of the Bankruptcy Code codifies the UNCITRAL Model Law on Cross-Border Insolvency, with some modifications. Chapter 15 enables a foreign representative of a foreign entity to obtain US bankruptcy court recognition of a foreign proceeding and thereby access a panoply of relief with respect to the foreign debtor’s assets and operations in the US, including the imposition of the automatic stay, administration of the foreign debtor’s US assets and operation of the foreign debtor’s US business. The statute authorises and encourages communication between and among US and non-US courts.

Liabilities of directors and officers

Corporate directors and officers generally have no personal liability unless they have breached their fiduciary duties. Such duties expand to include the interests of creditors upon or near insolvency.

Pending legislation

Congress enacted HR 3311, the Small Business Reorganization Act of 2019, which is expected to become effective in February 2020. The Act attempts to streamline the bankruptcy process for small business debtors.

 

Vietnam

Applicable insolvency law, reorganisations: liquidations

Bankruptcy Law 2014.

Enterprise Law 2014, applied to voluntary liquidation out of the court-driven insolvency proceedings.

Customary kinds of security devices on immovables

A mortgage.

Customary kinds of security devices on movables

A mortgage or a pledge.

Stays of proceedings in reorganisations/liquidations

After the court’s acceptance of the bankruptcy petition, except for limited exceptions, the following are suspended: (i) civil, business, commercial or labour legal proceedings; (ii) enforcement a court/arbitral judgment, award or decision; and (iii) enforcement of security over assets.

Duties of the insolvency administrator

An asset management officer or firm (the receiver) appointed by court to play a role similar to that of a receiver in bankruptcy proceedings or liquidator in case of liquidation.

Set-off and post-filing credit

A set-off is generally permitted and, subject to certain limitations, a debtor may incur debts after the filing of the bankruptcy petition.

Creditor claims and appeals

Claims of creditors must be sent to the receiver, and the list of creditors must be finalised thereafter, within a fixed time frame.

Priority claims

Priority claims include: (i) bankruptcy costs and expenses; (ii) payment to employees; and (iii) post-filing debts for the purpose of business recovery.

Major kinds of voidable transactions

Voidable transactions include: (i) transfer of property not at market price; (ii) conversion of an unsecured debt into a secured debt; (iii) making payments or setting off obligations under terms in favour of a creditor; (iv) donation of assets; (v) transaction outside the scope of business; and (vi) transactions for the purpose of ‘dispersing’ assets.

Operating and financing during reorganisations

Subject to the approved recovery plan.

International cooperation and communication

Orders, decisions and judgments of most of the courts of developed jurisdictions are generally not recognised in Vietnam.

Liabilities of directors and officers

Officers and directors will not generally be personally liable for obligations of their company, except when they act ultra vires or breach fiduciary duties.

Pending legislation

N/a