EUROPEAN INSOLVENCY PRACTITIONERS' HANDBOOK

EUROPEAN INSOLVENCY PRACTITIONERS' HANDBOOK Dealing with insolvency overseas can be a costly and timeconsuming business. This book is designed to reduce such problems. It makes available for the first time to a wider public the technical information contained in the members' handbook of the Association Europeenne des Practiciens des Procedures Collectives (European Association of Insolvency Practitioners). In it will be found chapters on the insolvency laws of: Belgium England and Wales France Germany Ireland Italy The Netherlands and additional chapters dealing with reservation of title. Each chapter has been written by an expert from the country concerned for the specific purpose of explaining the relevant law and practice to those outside. The work as a whole has been edited by two well-known British accountants, both of whom are officers of the AEPPC. The European Insolvency Practitioners' Handbook will prove invaluable to insolvency practitioners, accountants, lawyers, bankers and businessmen throughout the world as a guide to the insolvency laws and practices of some of the most important European nations. The fact that it has been prepared

by those who deal with these laws and practices as a matter of everyday professional life makes it unique. Sir Kenneth Cork recently retired after nearly forty years' practice in London as a chartered accountant specialising in insolvency. A former Lord Mayor of London, and a member of the Insolvency Practitioners Association, he was chairman of the Insolvency Law Review Committee appointed by the United Kingdom government in 1977. He had earlier been chairman of the Advisory Committee established by the government to consider the draft EEC Bankruptcy Convention. Mr G. A. Weiss is a partner in Cork Gully. A former president of the Insolvency Practitioners Association, he served as a co-opted member of the Insolvency Law Review Committee.

European Insolvency Practitioners' Handbook The AEPPC Compendium of Insolvency Law and Practice Edited by SIR KENNETH CORK and G. A. WEISS M MACMILLAN

Association Europeenne des Praticiens des Procedures Collectives 1984 Softcover reprint of the hardcover 1st edition 1984 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission First published 1984 by MACMILLAN PUBLISHERS LTD (Journals Division) and distributed by Globe Book Services Ltd Brunei Road, Houndmills Basingstoke, Hampshire RG21 2XS Typeset by RDL Artset Ltd, Sutton, Surrey British Library Cataloguing in Publication Data European insolvency practitioners' handbook. 1. Bankruptcy-European Economic Community countries I. Cork, Sir Kenneth II. Weiss, G. A. III. Association Europeenne des Practiciens des Procedures Collectives 342.6 1 78 1 094 ISBN 978-0-333-36615-8 ISBN 978-1-349-07157-9 (ebook) DOI 10.1007/978-1-349-07157-9 Neither Macmillan Publishers, nor Globe Book Services, nor the editors or contributors, nor the AEPPC can assume legal responsibility for the accuracy of any particular statement in this work. No responsibility for loss occasioned to any person acting or refraining from action as a result of the material in this publication can be accepted by the editors or contributors or publishers or distributors or the AEPPC.

Contents INTRODUCTION by Sir Kenneth Cork The international scene TheAEPPC This handbook THE CONTRIBUTORS xi xi xiii xiv xvii 1. BELGIUM: INSOLVENCY PROCEEDINGS by G. Aerts 1 1.1 Introduction 1 1.2 The granting of time for payment 2 1.3 Judicial composition 4 1.4 Bankruptcy 10 1.5 Effects of bankruptcy 20 1.6 Foreign resident and proceedings 25 Bibliography: principal Belgian works on bankruptcy 26 2. BELGIUM: RESERVATION OF TITLE by G. Schrans 2.1 Generally 27 27 v

CONTENTS 2.2 International law 2.3 European law Notes 3. ENGLAND AND WALES: INSOLVENCY PROCEEDINGS by G. A. Weiss 3.1 Introduction 3.2 Insolvency proceedings 3.3 Administrators 3.4 Assets 3.5 Business 3.6 Creditors 3.7 Control 3.8 Miscellaneous topics References 4. ENGLAND AND WALES: RESERVATION OF TITLE by C. J. Hanson 4.1 Introduction 4.2 Incorporation into contract 4.3 Extent of the reservation 4.4 Possible liability 4.5 Conflicting rights 4.6 Conclusion 30 31 32 35 35 37 47 52 56 58 63 65 69 71 71 71 73 77 81 83 5. FRANCE: INSOLVENCY PROCEEDINGS b~h~ ~ 5.1 Introduction 85 5.2 Liquidation of assets and judicial settlement 87 5.3 The syndic 93 vi

CONTENTS 5.4 Provisional stay of proceedings 5.5 Conclusion 6. FRANCE: RESERVATION OF TITLE by M. Herissay 6.1 Introduction 6.2 Conditions for efficacy 6.3 Effects 7. GERMANY: BANKRUPTCY PROCEEDINGS by H. M. Johlke 7.1 Introduction 7.2 Duties of the court 7.3 Duties of the administrator 7.4 Remuneration 7.5 Termination References 8. GERMANY: COMPOSITION PROCEEDINGS by K.-H. Braun 8.1 Introduction 8.2 Institution 8.3 Duties of the court 8.4 Duties of the administrator 8.5 Termination References 9. GERMANY: RESERVATION OF TITLE by U. HUbner 9.1 Introduction 9.2 Simple reservation of title 98 99 101 101 103 108 111 111 112 115 120 122 125 127 127 128 130 134 136 137 139 139 140 vii

CONTENTS 9.3 9.4 9.5 9.6 Prolonged reservation of title 148 Extended reservation of title 152 Transmitted and appended reservation of title 154 Right of pursuing title 157 References 158 10. ITALY: INSOLVENCY PROCEEDINGS by P. Pajardi 10.1 Introduction 10.2 Bankruptcy 10.3 Controlled administration 10.4 Preventive composition 10.5 Forced administrative liquidation 10.6 Special administration 11. NETHERLANDS: INSOLVENCY PROCEEDINGS by F. Hamminga 11.1 Introduction 11.2 Bankruptcy 11.3 Assets 11.4 Administrators 11.5 Business 11.6 Creditors 11.7 Termination 11.8 Legal moratorium 11.9 Possible alterations 12. NETHERLANDS: RESERVATION OF TITLE by B. F. M. KnUppe 12.1 Introduction 12.2 Limitations 161 161 163 183 184 187 189 193 193 196 201 204 207 211 219 221 223 225 225 228 viii

CONTENTS 12.3 Conflicting rights 230 12.4 Enforcement 236 12.5 Miscellaneous topics 239 References 242 13. REPUBLIC OF IRELAND: INSOLVENCY PROCEEDINGS by P. F. Shortall 245 13.1 Introduction 245 13.2 Insolvency proceedings 252 13.3 Administrators 260 13.4 Assets 264 13.5 Business 266 13.6 Creditors 268 13.7 Control 273 13.8 Miscellaneous topics 274 References 276 Appendix: comparison of insolvency proceedings 277 Index 283 ix

Introduction Sir Kenneth Cork The international scene Generally The granting of credit, and the possibility that the debtor might ultimately be unable to pay, have been with us for countless centuries. The Old Testament contains rules governing articles taken as security for a debt. Insolvency laws can be found in the Roman Law of the XII Tables, in the ancient Brehon law of heland, and elsewhere. Originally a man's insolvency was likely to affect only those in the immediate locality. Throwing Mr Pickwick into the debtors' prison could have no possible consequence so far as those outside England were concerned. The vast improvement in communications and transport in modern times has meant that even quite modest businesses have foreign customers and suppliers. It is therefore important that today's business people have access to information on insolvency laws elsewhere. Unfortunately the economic difficulties of recent years have caused financial failures in practically every country of xi

INTRODUCTION the world where commercial activities are not a state monopoly. Some of the failures had international ramifications. The collapse of an American toy company brought problems to companies in England, Germany, the Netherlands and Hong Kong; some of those companies had to submit to insolvency proceedings themselves. Administrators Wherever there are insolvency proceedings there must be people appointed to administer them. This was as true in ancient Rome as it is in France today. The class of person that can be appointed insolvency administrator has varied from time to time and place to place. At one period in ancient Rome he had to be a creditor; in Germany today he or she must not be a creditor. Whereas in certain states of the United States of America he or she must be a lawyer, and in most other countries usually is, in Commonwealth and former Commonwealth countries an accountant is normally appointed. A notable feature of present-day commercial life in a number of countries, however, is a recognition that insolvency administration is a specialised discipline. In smaller countries, perhaps, the practitioner will combine insolvency administration with a broader-based legal or accountancy practice. In others, although qualified as a lawyer or accountant, he or she will deal exclusively with insolvency. In Australia and Canada there are official registers of those qualified to act as liquidators or trustees, and in France the syndics form a separate profession. If it is important for business people to have access to xii

SIR KENNETH CORK information on foreign insolvency laws, it is even more essential for the insolvency administrators, who may well find themselves dealing with a company which has subsidiaries or other assets abroad. There is one African company, which had its main office in Kenya and substantial assets in the Netherlands and elsewhere in Europe, now being wound up under Tanzanian law by liquidators resident in England. This is not the only example of the sort of problems we can face. TheAEPPC The idea of a European association of insolvency practitioners was conceived when I met Mr Y. Pavec, a syndic practising in Paris, at a congress in Vienna in 1980. We contacted some of the leading insolvency practitioners we knew in other countries and from there was born the Association Europeenne des Praticiens des Procedures Collectives (universally known, for obvious reasons, as 'the AEPPC'). The AEPPC has now been established under French law as an international professional association, with its registered office in Paris and its administrative office in London. At the time of writing there were members in twelve European countries. The organisation has amply fulfilled our hopes for it. We have been able to exchange information on insolvency developments in our various countries. We have identified problems which are common to us all (such as the implications of the EEC directive on the preservation of contracts of employment on the transfer of a business to a new proprietor). My own greatest pleasure has been to discover that insolvency xiii

INTRODUCTION practitioners on the European mainland are just as great characters as their English counterparts. This handbook Origins Right from the beginning the AEPPC council felt that it would be helpful if members could be provided with a handbook giving an outline of the insolvency laws of the different European countries. This work was put in hand in 1982 and a bilingual members' handbook was issued to all members in the autumn of that year. It was also felt that the information in the handbook would be useful to business people working in other fields. Indeed, we have received requests for copies from both governmental and commercial organisations. The European Insolvency Practitioners' Handbook therefore reproduces the technical material from our own book, the only alterations made being those necessary to cater for the slightly different audience. Scope This handbook contains chapters outlining the insolvency procedures in seven European countries, together with chapters explaining briefly the law governing reservation of title in five of them. Reservation of title is included because it is assuming an increasing importance in insolvency practice today and is of international scope. (The law in Ireland is xiv

SIR KENNETH CORK similar to that in England; Italian law does not recognise reservation of title.) The AEPPC is first and foremost an association of practitioners. This is reflected in the backgrounds of the contributors. Nearly all the chapters have been written by professional men involved in the practical application of the laws they describe. Readers will find in this handbook tables summarising and comparing the various insolvency laws which I hope will prove useful as a quick reference guide. It has for years been generally accepted in the United Kingdom that, on an insolvency elsewhere, the local creditors are given priority. AB many of the authors specifically state, this is simply not true. Indeed, there are some interesting similarities in our laws: between the positions of secured creditors in England and in the Netherlands, for example. There are also some unexpected differences. I knew that our colleagues on the mainland would find it difficult to appreciate that the English and Irish laws include some very important insolvency procedures with which the courts have no involvement. What I could not understand was their own reluctance to give details of the classes of liability which were entitled to preferential treatment under their local laws, until I realised that France had over 180! The laws and practices described in this handbook were those in operation in the spring of 1983. XV

INTRODUCTION Acknowledgements Gerry Weiss and I would like to thank all the contributors for the trouble they have taken to describe their countries' laws so clearly, and particularly Mr F. Hamminga for helping us with the preparation of the original brief. We are also grateful to Mr K. H. Otter, the AEPPC's technical officer, who has handled the practical problems involved in producing this book with his usual patience and tact. xvi

The Contributors Mr G. Aerts is an advocaat practising in Ghent and a member of the AEPPC council. Mr K.-1-1. Braun is a wirtschaftpriifer in practice in Hamburg. He is also a member of the AEPPC council. Sir Kenneth Cork, the president of the AEPPC, recently retired after nearly forty years' practice in London as a chartered accountant specialising in insolvency. A former Lord Mayor of London, and a member of the Insolvency Practitioners Association, he was chairman of the Insolvency Law Review Committee appointed by the United Kingdom government in 1977. He had earlier been chairman of the Advisory Committee established by the government to consider the draft EEC Bankruptcy Convention. Mr F. Hamminga, a member of the AEPPC council, is in partnership as an advocaat in Gronigen. Mr C. J. Hanson is a partner in a firm of solicitors in London. xvii

THE CONTRIBUTORS Mr M. Herissay is a syndic of the Paris Courts of Grand Instance and of Commerce. Professor U. Hiibner is Professor of Law at the University of Konstanz. He also holds the degree of Licencee en Droit from the University of Paris. Mr H. M. Johlke is a rechtanswalt practising in Hamburg. He is also a member of the AEPPC council. Mr B. F. M. Kniippe is in practice as an advocaat in Dordrecht. Professor P. Pajardi, a member of the AEPPC council, is President of the Law Courts at Milan. Mr Y. Pavec, as well as being vice-president and secretary of the AEPPC, is president of the Compagnie des Syndics Judiciaires pres les Tribunaux de Paris. Professor G. Schrans, general manager of the Societe Generate de Banque in Brussels, holds the degrees of Doctor!uris from the University of Ghent and Master of Laws from Harvard University. He has taught commercial and economic law at the University of Ghent since 1967. He is an honorary member of the Belgian Bar and a member of the International Bar Association. xviii

THE CONTRIBUTORS Mr P. F. Shortall is a partner in a firm of chartered accountants in Dublin. He is also a member of the Insolvency Practitioners Association. Mr G. A. Weiss is in partnership as a chartered accountant in London. A former president of the Insolvency Practitioners Association and a member of the AEPPC council, he served as a co-opted member of the United Kingdom government's Insolvency Law Review Committee. xix