INSOLVENCY AND CORPORATE REORGANISATION Survey 2014

Transcription

1 Insolvency and Corporate Reorganisation Survey 2014 INSOLVENCY AND CORPORATE REORGANISATION Survey 2014 Lead contributors: John Houghton, Howard Lam and Mitchell Seider

2 Survey Participants Austria Brazil Croatia Cyprus Macesic & Partners Czech Republic France Germany Greece Hong Kong Indonesia Ireland Mexico Norway Philippines Spain South Korea Switzerland United Kingdom United States Hong Kong New Zealand Europe United States

3 Logan Wright and Vladimir Barbolin, Clifford Chance Section 1: CREDITOR S RIGHTS Section 2: DEBTOR S RIGHTS 1.1 When may a company seek relief from creditors? Must a company be insolvent? There is no statutory regime for restructuring a company s debts outside formal insolvency proceedings, and no Chapter 11-equivalent protection. The directors of a company may only (and must) file for insolvency if the company meets the statutory test, but face administrative or potentially criminal liability for a fraudulent filing. Within formal insolvency proceedings the company can seek to return to solvency through a debt rescheduling, or through a solvency restoration plan, which among other things may involve an asset substitution. An asset substitution involves the contribution of the company s assets to a newly-formed subsidiary, which can be sold through public auction and the proceeds applied to discharge its debts. However, neither scheme allows for a haircut be imposed, the timing allowed to complete the restoration of solvency is short, and these schemes are rarely used in practice. The company can also seek to enter into a voluntary arrangement with its creditors (the terms of which may provide for both deferrals and haircuts). 1.2 Does an automatic stay against creditor action arise upon filing of a bankruptcy case? 2.1 Does the debtor have an exclusive right to propose a reorganisation plan? As a general rule, a debt rescheduling or a solvency restoration plan is proposed by the company. However, a debt rescheduling may also be proposed by a third party if the company agrees. A voluntary arrangement is most commonly proposed by the company; however, the creditors meeting may also propose such an arrangement. 2.2 What are the voting requirements for approval of a plan? A proposal for a debt rescheduling, solvency restoration plan or voluntary arrangement must first be approved by creditors holding a majority of the total amount of registered claims (excluding any fines, penalty interest, damages and other financial sanctions), and must then be approved by the court. A proposal for a debt rescheduling must also be approved by the company s shareholders. A proposal for either a voluntary arrangement or an asset substitution must also receive the unanimous approval of creditors holding registered claims that are secured by the company s assets. Formal insolvency proceedings commence upon the court verifying and accepting a bankruptcy petition. Upon commencement, the satisfaction of monetary claims (including by way of set-off and enforcement against the company s assets) is, with very limited exceptions, generally suspended. At the initial stage of insolvency proceedings the enforcement of security is also suspended, but this may be allowed at a subsequent stage through a court-supervised sale at public auction. 1.3 Who administers the estate following commencement of a voluntary bankruptcy case? 2.3 May a plan be approved over the objection of a creditor or a class of creditors (ie does the concept of a cram-down exist)? An approved proposal for a debt rescheduling, solvency restoration plan or voluntary arrangement binds all creditors holding registered unsecured claims, irrespective of whether they voted for the proposal. 2.4 Is post-petition financing able to receive super-priority status? At the commencement of the first stage of the insolvency proceedings an insolvency administrator is appointed by the court following its nomination by the bankruptcy petitioner (in the case of a voluntary bankruptcy, the company itself). At the commencement of subsequent stages of the proceedings, the insolvency administrator is proposed by the creditors committee and is approved by the court. Depending on the stage of the proceedings, the company s management may remain in place but with limited authority, or else be replaced by the insolvency administrator. Any post-petition financing will be treated as a current claim. Current claims are not registered and do not give the relevant creditors voting rights at creditors meetings, but are satisfied ahead of registered claims. However, any post-petition financing requires the approval of either the insolvency administrator or the creditors meeting (depending on the insolvency stage and the amount of the financing). In the case of any financing granted by the company s shareholders or a third party under a solvency restoration plan, such financing is treated as on demand, but cannot be demanded prior to the end of the relevant insolvency stage. 44 IFLR SUrvey INSOLVENCY AND CORPORATE REORGANISATION 2014

4 2.5 Can the debtor sell all or a portion of its assets through a going concern reorganization plan or otherwise? the company s return to solvency or results in greater losses than under similar transactions. A liquidator also has a limited right to disclaim executory contracts. There is no pre-pack equivalent in, although a sale of all or a portion of the company s assets through public auction or an asset substitution (as described above) are theoretically possible. 2.6 What are the duties of directors of an insolvent company? For so long as they remain in office, directors continue to have a duty to act in the interests of the company. The directors are obliged to petition for insolvency within certain deadlines where the company satisfies the statutory criteria for insolvency, and will bear subsidiary liability for the company s debts if they fail to do so, or if their actions or omissions caused the company s insolvency. Directors may also face criminal or administrative liability for any unlawful actions (such as concealing assets) during insolvency proceedings, or at a time when the company showed signs of insolvency. 3.2 Is contractual subordination enforceable? The contractual subordination of a claim is not recognised by the relevant legislation, and is unlikely to be given effect by an administrator or liquidator. Section 4: OTHER MATERIAL CONSIDERATIONS 4.1 What other major stakeholders (eg governmental or regulatory institutions) could have a material impact on the outcome of the reorganisation? Claims of governmental or regulatory institutions (e.g. tax claims) are treated equally with the claims of other creditors. However, the political or social importance of certain businesses often means that the interests of such institutions need to be taken into account. Section 3: CONTRACTS AND SUBORDINATION 3.1 How are executory contracts treated? In the first three months of external administration, the insolvency administrator may disclaim executory contracts if performance impedes Logan Wright Managing partner Clifford Chance Moscow ul. Gasheka, Moscow T: E: logan.wright@cliffordchance.com W: About the author Logan Wright is the managing partner of Clifford Chance s Moscow office, and he specialises in cross-border finance. His expertise includes trade finance, project finance, syndicated lending, acquisition finance, insolvency and work-outs, secured and unsecured facilities, real estate finance and structured finance. His industry expertise includes energy, utilities, metal and mining, telecommunications, and real estate. Vladimir Barbolin Counsel Clifford Chance Moscow ul. Gasheka, Moscow T: E: vladimir.barbolin@cliffordchance.com W: About the author Vladimir Barbolin is a counsel in Clifford Chance s Moscow office, and he specialises in cross-border finance. His expertise includes pre-export finance, syndicated lending, insolvency and restructuring, secured and unsecured facilities, real estate finance and structured finance. IFLR SUrvey INSOLVENCY AND CORPORATE REORGANISATION

5 CROSS-JURISDICTIONAL ANALYSIS Key Generally favourable to creditors CREDITORS DEBTORS CONTRACTS & RIGHTS RIGHTS SUBORDINATION Neutral or neither favourable to creditors or debtors Generally favourable to debtors Creditors rights Debtors rights Contracts and subordination Automatic stays Administrator Reorganisation plan Voting requirements Cram-downs Post-petition financing Asset sales Executory contracts Contractual subordination Austria Binder Grösswang Brazil Felsberg Advogados Croatia Macesic & Partners Cyprus Andreas Neocleous & Co Czech Republic BBH France Allen & Overy Germany Dentons Greece Karatzas & Partners Hong Kong Indonesia DNC Advocates At Work Ireland Dillon Eustace Mexico Creel García-Cuéllar Aiza y Enriquez Norway Kvale Advokatfi rma Philippines SyCip Salazar Hernandez & Gatmaitan Clifford Chance South Korea Yoon & Yang Spain Baker & McKenzie Switzerland Meyerlustenberger Lachenal UK US NA NA IFLR SURVEY INSOLVENCY AND CORPORATE REORGANISATION