Insolvency & Restructuring updates

Austria

Contributed by Graf & Pitkowitz Rechtsanwälte GmbH
Liability for payments after company has become insolvent
  • Austria
  • 22 June 2018

If a managing director of a company makes payments after a substantive insolvency, they may be liable for damages under the Statute on Limited Liability Companies. Managing a company in a crisis situation requires special diligence and care. In order to avoid unpleasant surprises later on, where possible, the admissibility of envisaged future payments should be checked in advance.

New group insolvency law
  • Austria
  • 08 December 2017

The Insolvency Code was recently amended in response to the introduction of the EU Insolvency Regulation, creating – for the first time – specific rules for the insolvency of corporate groups in Austria. From a practical standpoint, this approach is welcome, as it may lead to faster and more efficient insolvency proceedings. It remains to be seen how the new rules will affect insolvency practice and whether coordination proceedings according to the EU regulation will be applied in practice.

Protective measures in insolvency proceedings
  • Austria
  • 08 September 2017

In some cases of insolvency, it may be necessary to take special measures which affect the debtor or third parties in order to prevent the insolvent assets from diminishing. These cases are governed by Section 78 of the Insolvency Code, which offers the possibility of ordering individual protective measures with regard to the debtor and third parties. In particular, recent case law has extended the scope of application of these protective measures.

New Personal Bankruptcy Law – without minimum payment
  • Austria
  • 02 June 2017

One of the Bankruptcy Code's aims is to allow trustworthy debtors the right to be discharged from debts that remain unpaid after insolvency proceedings. However, in practice, low-income debtors cannot always avail of residual debt relief. As such, the government recently introduced an amendment to the personal bankruptcy process in its 2017/2018 Modern Insolvency Law Culture of Failure working programme.

Potential obligation of majority shareholder to file for insolvency
  • Austria
  • 17 March 2017

Recent changes to the Insolvency Code have considerably expanded the obligations of shareholders in insolvency situations. For example, a new obligation has been introduced which requires majority shareholders in so-called 'companies without management' to file for insolvency. The language of these new provisions remains vague and provides significant flexibility in interpretation, which inevitably results in a number of legal uncertainties.


Belgium

Contributed by ALTIUS
Follow-up monitoring of companies in financial difficulty
  • Belgium
  • 07 September 2018

The legislature recently took steps to improve the follow-up monitoring of companies in financial difficulty and strengthen the fight against inactive companies. To determine whether companies are in financial difficulty, the courts gather information from various (digital) sources. However, the focus remains on preventive mechanisms – namely, identifying companies in financial difficulty and following up with court action.

Personal bankruptcy of company administrators
  • Belgium
  • 27 July 2018

The Belgian insolvency law's scope was recently broadened. As of 1 May 2018, all entities that are involved in commercial or entrepreneurial activities can be declared bankrupt (or enter into court-supervised reorganisation proceedings). Discussion has started about whether company administrators can also be seen as being 'involved in an entrepreneurial activity' and thus declared bankrupt.

Insolvency goes digital: Regsol and its innovations
  • Belgium
  • 15 June 2018

The digitisation of different insolvency proceedings (ie, bankruptcies, judicial reorganisations and company voluntary agreements) recently reached a new milestone. All new insolvency files must now be commenced through the Central Solvency Register (Regsol) and followed up on the same system. Regsol offers a number of new features, including the electronic storage of insolvency files and a new declaration of debt form.

Relationship between privileged and secured creditors
  • Belgium
  • 04 May 2018

If reorganisation proceedings are unsuccessful and lead to bankruptcy proceedings, creditors with new claims resulting from services performed during the reorganisation proceedings often find it difficult to receive payment of their privileged claims when they are in competition with a general pledge on the debtor's estate that is held by a bank. The Supreme Court's recent judgment in this regard will help such privileged creditors to receive payment from the bankrupt estate.

Stricter scrutiny of inactive companies
  • Belgium
  • 02 February 2018

The legislature recently took steps to improve the follow-up monitoring of companies in financial difficulty and strengthen the fight against inactive companies. Companies that fail to pay their social security or value added tax debts, file their annual accounts or fulfil other administrative obligations on time will now appear on the radar of the Commercial Court's Investigative Services much earlier. The services' recently extended powers of action could lead to unfortunate surprises for some companies.


British Virgin Islands

Appointing liquidators after alleged loss of substratum
  • British Virgin Islands
  • 07 September 2018

The Court of Appeal recently considered the test for appointing liquidators to a company following an alleged loss of substratum. The case provides insight on the principles of loss of substratum, particularly in a case where a company's object is not prescribed by its memorandum and articles of association.

Discretionary beneficiaries' rights to trust information
  • British Virgin Islands
  • 31 August 2018

In separate but related proceedings, the BVI courts have permitted an applicant to inspect documentation relating to the liquidation of certain BVI companies. The decisions solidify the open justice policy and highlight the importance of allowing beneficiaries to oversee trustees' activities in order to ensure that the trust property is properly managed and that trustees can be held to account accordingly.

No armchair liquidators – court confirms appointment of provisional liquidators to Swiss company
  • British Virgin Islands
  • 01 June 2018

In the latest judgment regarding the DPH liquidation, the BVI Court of Appeal upheld the appointment of BVI provisional liquidators in respect of a Swiss company and clarified that evidence of dissipation of assets (in the Mareva sense) may not be a pre-condition to the appointment of provisional liquidators.

Court strikes out passing-off claim in relation to goodwill held outside British Virgin Islands
  • British Virgin Islands
  • 11 May 2018

Claims of passing off are rare in the British Virgin Islands and a recent attempt to bring a BVI action in relation to goodwill held outside the jurisdiction has failed. The court examined the law and relevant English authorities on the tort of passing off. It opined that goodwill is governed by territoriality and that in order to succeed, the claimant must prove that it has goodwill in the form of customers in the jurisdiction in which the suit is undertaken.

Pacific Andes saga: forum shopping, Chapter 11 and just and equitable winding up
  • British Virgin Islands
  • 01 September 2017

'Forum shopping' is the practice of choosing the most favourable jurisdiction in which to bring a claim. In principle, there is nothing wrong in seeking to have a case heard in the forum which is most favourable to the client. However, it can lead to some fierce jurisdictional battles, particularly in insolvency, where the choice between debtor and creditor-friendly procedures can be stark. The Commercial Court has been wrestling with this situation over the past 10 months.


Cayman Islands

Primeo: should a liquidator alter register of members?
  • Cayman Islands
  • 20 April 2018

The Cayman Islands Court of Appeal has held that a liquidator cannot use his or her statutory power pursuant to Section 112(2) of the Companies Law to rectify the register of members where the effect would be to override investors' proprietary rights. It held that the section does not aim to provide for substitution of incorrect net asset value if, despite its incorrectness, it has been calculated in accordance with a member's contractual rights.

Court clarifies ranking of shareholder claim
  • Cayman Islands
  • 18 November 2016

The Cayman Islands Court of Appeal recently provided some clarity on the ranking of priority in the liquidation of amounts owing to shareholders and former shareholders of a company operating as an open-ended investment fund. The decision has confirmed that Section 37(7)(a) of the Cayman Islands Companies Law applies where a shareholder has merely accrued the right to redeem his or her shares, but has not yet completed the redemption process prescribed by the company's articles.


Cyprus

Legal reform proposals over appointment of receivers
  • Cyprus
  • 08 June 2018

Members of Parliament have proposed legal reforms with the aim of regulating the procedure for the appointment of receivers by debenture holders. The issues under scrutiny are that borrowers have no say during the procedure for the appointment of a receiver, and that issues with the impartiality of the receiver can arise on many occasions. However, the proposal has encountered the resistance of financial institutions.

Imposition of fine on company in liquidation
  • Cyprus
  • 23 March 2018

A district court recently sentenced a company in liquidation that had once been Cyprus's biggest grocery retail company. The sentence concerned the issuance of a cheque with insufficient funds. According to the court, the fact that the company was under liquidation did not negate the fact that a sentence should be proportionate to the offence and act as a deterrent. The case is a useful illustration of how companies in liquidation should be treated when it comes to the imposition of fines.

Disagreement over who is preferential creditor in liquidation of state-owned company
  • Cyprus
  • 02 February 2018

The annual creditors' meeting of former state-owned air carrier Cyprus Airways recently took place. The state stepped in following the company's collapse and paid the majority of employees the money owed to them. Due to this payment, and by virtue of Section 300 of the Companies Law, the state became a preferential creditor, having made a payment that was owed to preferential creditors as a third party on behalf of the company.

Supreme Court examines Rule 56 of Companies (Winding-up) Rules
  • Cyprus
  • 28 July 2017

The Supreme Court recently examined the correct application of Rule 56 of the Companies (Winding-up) Rules, which regulates the procedure to be followed by the chair at a creditors' meeting in the case of an objection by a creditor regarding whether a proof of debt by another creditor must be accepted in order to determine the creditor's voting rights.