Transcript Header here - INSOL Europe

Academic Forum Sponsors:
www.edwincoe.com
Third Session:
Reforming the European Insolvency
Regulation III.
Chair:
Professor Christoph Paulus
(Humboldt University Berlin)
The Reform of the EIR:
Is there any Space
for Private Autonomy?
Matteo Winkler
(Bocconi School of Law)
The Commission’s Proposal of 2012
•
•
•
•
•
Extension of the EIR’s scope
Clarification of COMI
Reform of the secondary proceedings
Publicity of insolvency proceedings
Ad hoc provisions of multinational enterprises
Private Autonomy and Insolvency
• Relevance of private autonomy in insolvency
(hold-out problem)
• Role played in cross-border insolvency
• Significance in domestic context (pre-insolvency
proceedings and debtor-in-possession proceedings)
• Practice of “insolvency protocols and
agreements” – a very transnational
contractual framework
Pre-Insolvency Proceedings
• Now included in the EIR’s scope under the
new Art. 1
• Components of an “insolvency proceedings”:
– Divestment and a liquidator, or
– Control or supervision by a court
• List in Annex A
Critical Issues
• The existing lack of EU-wide circulation of preinsolvency arrangements
– Which arrangements can circulate precisely?
• Which limits? (public policy; non-public or
without-court-supervision arrangements)
Insolvency Protocols and Agreements
• Direct reference to “principles and guidelines
… adopted by European and International
associations …” (new Recital 20)
• But piecemeal references in the context of:
– Communication and cooperation in general
– Cooperation in groups of companies
Critical Issues
• Piecemeal structure: a bad drafting technique?
• Limits?
– “to the extent that [insolvency protocols] are not
incompatible with the rules applicable to each of the
proceedings”
– This limit operates only in court-to-liquidator
cooperation, and not in court-to-court cooperation:
why?
Conclusions
• Circulation of pre-insolvency arrangements (and
restructuring plans)
– A risk to a race to the bottom?
• Open reference to the contractual practice of
insolvency protocols and agreements: maximum
flexibility
– Piecemeal legislation: uncertainty as to the
transnational effects of insolvency protocols?
The Insolvency of Members
of a Group of Companies in the
Proposal for Amendment of the EIR
Giulia Vallar
(University of Milan)
The status quo
• No provisions on group insolvency
• Separate proceedings must be opened for each
individual member of a group
• Liquidators and courts are under no duty to cooperate
• Cooperation is possible between liquidators. It is more
difficult for judges
• Case-law has tried different ways to overcome such a
lack of a discipline
Need for a revision
• Public consultation on the future of European
Insolvency Law (2012): half of respondents felt the EIR
does not work efficiently for multinational group
insolvencies. One third felt it does
• The Commission agreed that the lack of a specific
framework for group insolvency constitutes in certain
cases an obstacle to the efficient administration of the
insolvency of members of a group of companies
• The proposed Regulation contains provisions on group
insolvency
Definition of “group of companies”
New Article 2(i)
“group of companies” means a number of
companies consisting of parent and subsidiary
companies
Definition of “group of companies”
New Article 2(j) further specifies that "parent company" means a company
which
(i) has a majority of the shareholders' or members' voting rights in another
company (a "subsidiary company"); or
(ii) is a shareholder or member of the subsidiary company and has the right
to
(aa) appoint or remove a majority of the members of the administrative,
management or supervisory body of that subsidiary; or
(bb) exercise a dominant influence over the subsidiary company pursuant
to a contract entered into with that subsidiary or to a provision in its
articles of association.
Definition of “group of companies”
Such a definition should be understood as being
limited to the context of insolvency and should
not have any influence on the company aspects
regarding groups (recital 7)
Two options
(New recitals 20a and 20b)
1. Several proceedings relating to two or more
members of a group of companies opened
before different courts in several member states
(default option)
2. Several proceedings relating to two or more
members of a group of companies opened
before the same court (therefore in a single
jurisdiction) (residual option)
Default option
Several proceedings opened before different
courts in several member states
New detailed discipline
New provisions
Chapter IVa
“Insolvency of members of a group of
companies”
(Articles 42a – 42d)
New provisions
• Article 42a: Duty to cooperate and communicate
information between liquidators
• Article 42b: Communication and cooperation
between courts
• Article 42c: Cooperation and communication
between liquidators and courts
• Article 42d: Powers of the liquidators and stay of
proceedings
Duty to cooperate and communicate
information between liquidators
Liquidators shall cooperate to the extent that such
cooperation:
• is appropriate to facilitate the effective administration of
the proceedings
• is not incompatible with the rules applicable to such
proceedings
• does not entail any conflict of interests
Suggested means of cooperation: “agreements or protocols”
Duty to cooperate and communicate
information between liquidators
Liquidators shall:
• immediately communicate any relevant information
(keeping in mind confidentiality)
• where the group can be restructured, negotiate a
coordinated restructuring plan
• coordinate the administration and supervision of the affairs
of the group members
A specific liquidator can be granted additional powers subject
to the agreement of all the liquidators
Communication and cooperation
between courts
Actors
Courts before which a request to open proceedings concerning a
member of the group is pending or which has opened such
proceedings
Conditions
Such cooperation should be appropriate to facilitate the effective
administration of the proceedings and should not be incompatible
with the rules applicable to them
How to
These courts may either communicate and request information and
assistance directly from each other or appoint a person or body for
this purpose
Communication and cooperation
between courts
•
•
•
•
Suggested means of cooperation
Communication of information by any appropriate means
which should (i) be free of charge and (ii) respect
procedural rights of the parties and confidentiality
Coordination of the administration and supervision of the
assets and affairs
Coordination of the conduct of the hearings
Coordination in the approval of protocols
Cooperation and communication
between liquidators and courts
Actors
Any liquidator and any court involved in a proceedings
concerning any member of the group
Conditions
Such cooperation should be appropriate to facilitate the
effective administration of the proceedings and should not be
incompatible with the rules applicable to them
How to
In particular, the liquidator may request information or
assistance from the court
Powers of the liquidators …
A liquidator shall have the right
• to be heard and to participate in any of the other proceedings
opened
• to request a stay of the other proceedings
• to propose a rescue plan, a composition or a comparable measure
for all or some members of the group for which insolvency
proceedings have been opened and to introduce it into any of the
proceedings opened in accordance with law applicable to those
proceedings
• to request any additional procedural measures under the law
applicable to the proceedings which may be necessary to promote
rescue, including the conversion of proceedings
… and stay of proceedings
A court requested to stay the proceedings shall act
accordingly if it is proven that such a stay would be to the
benefit of the creditors in that proceedings. In any case,
the court can request to the liquidator any suitable
measure to guarantee the interests of the creditors
The proceedings can be stayed for up to three months
and the stay can be continued or renewed for the same
period
Residual option
Several proceedings opened before the same
court
Just a hint in Recital 20(b)
Residual option
Condition
The COMI of all the companies of the group is
deemed to be located in a single Member State
Effects
If appropriate, the court should appoint the
same liquidator for all the proceedings
Comments to Articles 42a – 42d
Even if they retain the entity by entity approach of the EIR,
they take a step forward in providing a coordination of the
proceedings
The newly introduced system is built upon experience of
coordination between liquidators of main and secondary
proceedings
The other envisaged solution was the one called “procedural
consolidation” but it was considered less proportionate at the
current stage
Comments to Articles 42a – 42d
• The three forms of cooperation and
communication are explicitly made subject to
compatibility with the relevant norms applicable
to the proceedings
• Assuming these norms are the national
procedural rules, such a condition involves the
risk of spoiling the new provisions of their
apparent benefits: is this limitation appropriate?
Present and Future
of Judicial Cooperation in
Insolvency Cases in Europe
Professor Bob Wessels
(University of Leiden)
Main topics:
• Present status
• Proposal
• JudgeCo project
Chapter 3 “Judicial Cooperation in Civil Matters”
Art. 81 TFEU (ex Art. 65 TEC):
1. The Union shall develop judicial cooperation in civil matters having cross-border
implications, based on the principle of mutual recognition of judgments and of
decisions in extrajudicial cases. Such cooperation may include the adoption of
measures for the approximation of the laws and regulations of the Member States.
2. For the purposes of paragraph 1, the European Parliament and the Council, acting
in accordance with the ordinary legislative procedure, shall adopt measures,
particularly when necessary for the proper functioning of the internal market,
aimed at ensuring:
(a) the mutual recognition and enforcement between Member States of judgments
and of decisions in extrajudicial cases;
(c) the compatibility of the rules applicable in the Member States concerning
conflict of laws and of jurisdiction;
(f) the elimination of obstacles to the proper functioning of civil proceedings, if
necessary by promoting the compatibility of the rules on civil procedure applicable
in the Member States
Model of coordination of proceedings
Recital (12) …..To protect the diversity of interests, this Regulation permits secondary
proceedings to be opened to run in parallel with the main proceedings. ….Mandatory
rules of coordination with the main proceedings satisfy the need for unity in the
Community.
Recital (20) ….Main insolvency proceedings and secondary proceedings can, however,
contribute to the effective realisation of the total assets only if all the concurrent
proceedings pending are coordinated. The main condition here is that the various
liquidators must cooperate closely, in particular by exchanging a sufficient amount of
information. In order to ensure the dominant role of the main insolvency proceedings,
the liquidator in such proceedings should be given several possibilities for intervening
in secondary insolvency proceedings which are pending at the same time. For example,
he should be able to propose a restructuring plan or composition or apply for
realisation of the assets in the secondary insolvency proceedings to be suspended.
Model: COORDINATION RE PROCEEDINGS
The liquidator in the main proceedings may:
• Request publication of opening judgment or registration of judgment
in public registers kept in another MS (Art. 21, 22)
• Request opening of secondary proceedings in other MSs (art. 29)
• Participate in secondary proceedings (Art. 32(3))
• Request stay of the process of liquidation of sec. proc. (Art. 33(1))
and may request measures ex Art. 34.1 (see Art. 34(3))
• Request termination of this stay (Art. 33(2))
• Propose a rescue plan, when allowed (Art. 34(1))
• Dis-agree with finalizing liquidation in sec. proc. (Art. 34(1))
• Claim the remaining assets (art. 35)
COORDINATION RE PROCEEDINGS (Cont’d)
Key duties of liquidator in main and secondary proceedings:
• 1. To communicate information (Art. 31(1))
• 2. To cooperate (Art. 31(2))
• 3. To lodge all claims which have already been lodged in the main
proceedings (Art. 32(2))
• 4. To immediately inform all known creditors (Art. 40(1)) by
individual notice (Art. 40(2))
Article 31 Duty to cooperate and communicate information:
-Text does not provide clear guidance
- Applies only to liquidators
www.insol-europe.org
European Communication and Cooperation Guidelines
For Cross-border Insolvency (2007)
CoCo Guidelines - www.insol-europe.org
My weblog
2007-09-doc1
- text CoCo Guidelines (18 in number)
2007-10-doc2
- endorsement by INSOL Europe
Status – “Soft law” / best practices
Promotes coordination, using ‘Protocols’ (includes “Checklist Protocol”)
•
Examples:
- Requirements for practitioners
- Language
CoCo Guidelines - Guideline 4
4.2. A liquidator is required to act with the
appropriate knowledge of the EC Insolvency
Regulation and its application in practice.
CoCo Guidelines - Guideline 10
10.1. Liquidators shall determine the language in which
Communications take place on the basis of convenience and
the avoidance of costs. The court is advised to allow use of
other languages in all or part of the proceedings if no
prejudice to a party will result.
10.2. Courts are encouraged, to the maximum extent
permissible under national law, to accept any documents
related to those communications in language decided upon
under Guideline 10.1, without the need for a translation into
the language of proceedings before them.
CoCo – A Useful Medicine?
CoCo Guidelines in Literature?
1. Literature: how to “include” in formal law?
– Annex to InsReg?
– In a national “Kodex”?
– Standard / yardstick to measure “national” duties?
– A “European” standard for liquidators?
(An non-binding “Opinion” ex Art. 288 TFEU?)
CoCo Guidelines in Practice?
1. Literature: how to “include” in formal law?
2. Practice:
– BenQ Holding (NL court – German court; 2007)
– Order of judicial decisions
– Automold (German court – UK liquidator)
– re scheduling creditors meeting in Germany
– Restructuring Committee Landsbanki – ICESAVE?
– Kauptingh – Norway?
– Lehman Brothers Holdings Inc. (LBHI)
– CoCo Guidelines referred to in draft-global protocol
– PIN AG
– German & Lux court share info re “main proceedings”
Application Report COM(2012) 743 final (p. 14:)
“….The duties to cooperate and communicate information
under Article 31 of the Regulation are rather vague. The
Regulation does not provide for cooperation duties between
courts or liquidators and courts. There are examples where
courts or liquidators did not sufficiently act in a cooperative
manner. These findings are confirmed by the results of the
public consultation where 48% of the respondents were
dissatisfied with the coordination between main and
secondary proceedings.”
Bank Handlowy w Warszawie SA, PPHU ‘ADAX’/Ryszard Adamiak,
V Christianapol sp. z o.o. (Case C-116/11)
•
•
•
Case relates to the opening of insolvency proceedings, in Poland, further to an application made
by Bank Handlowy and Adamiak in respect of Christianapol sp. z o.o., a company governed by
Polish law, in respect of which rescue proceedings (procédure de sauvegarde) had previously been
opened in France. Christianapol is a wholly-owned subsidiary of a German company, which in turn
is 90% owned by a French company.
By judgment of 1 October 2008, the Tribunal de commerce de Meaux (France) opened insolvency
proceedings against Christianapol (COMI in France). The court opened sauvegarde proceedings on
the ground that the debtor was not in a situation calling for the cessation of payments, but that it
would be in that situation if financial restructuring was not undertaken quickly.
On 21 April and 26 June 2009, Bank Handlowy, established in Warsaw (Poland), in its capacity as
creditor of Christianapol, asked the referring court to open secondary insolvency proceedings
against Christianapol under Article 27 of the Regulation. On 20 July 2009, the Tribunal de
commerce de Meaux approved a rescue plan for Christianapol, under which debts would be paid
off in instalments spread over 10 years and prohibiting the transfer of the undertaking of
Christianopol, situated in Łowyń (Poland) and of certain defined assets belonging to the debtor.
The French court maintained the appointment, made previously, of the persons responsible for
representing the interests of creditors for the period up to the closure of the procedure for the
verification of claims and the submission of a final report on the activities of those
representatives. In its judgment it also appointed a person to oversee the implementation of the
plan (commissaire à l’exécution du plan).
Bank Handlowy C-116/11 (cont’d)
• On 2 August 2009, another creditor, Adamiak, established in Łęczyca
(Poland), also asked for winding-up proceedings to be opened under
Polish law.
• Following the approval of the rescue plan by the French court,
Christianapol contended that the secondary insolvency proceedings
should be discontinued, since the main proceedings had been closed. It
also contended that it was fulfilling its obligations under the plan
approved by the French court, with the result that no pecuniary claims
were outstanding against it under Polish law and there were therefore no
grounds supporting a declaration of insolvency in respect of it.
• “The referring court asked the Tribunal de commerce de Meaux whether
the insolvency proceedings in France, which were main proceedings for the
purposes of the Regulation, were still pending. The answer given by the
French court did not provide the necessary clarification. The referring court
then consulted an expert.”
• The Sąd Rejonowy Poznań-Stare Miasto w Poznaniu decided to stay the
proceedings and to refer questions to the Court of Justice of the EU for a
preliminary ruling:
Bank Handlowy C-116/11 (Cont’d)
•
Article 4(2)(j) InsReg must be interpreted as meaning: that it is for the national law
of the Member State in which insolvency proceedings have been opened to
determine at which moment the closure of those proceedings occurs.
•
Article 27 InsReg must be interpreted as meaning: that the court before which an
application to have secondary insolvency proceedings has been opened cannot
examine the insolvency of a debtor against which main proceedings have been
opened in another Member State, even where the latter proceedings have a
protective purpose.
•
Article 27 InsReg must be interpreted as meaning: that it permits the opening of
secondary insolvency proceedings in the Member State in which the debtor has an
establishment, where the main proceedings have a protective purpose. It is for the
court having jurisdiction to open secondary proceedings to have regard to the
objectives of the main proceedings and to take account of the scheme of the
Regulation, in keeping with the principle of sincere cooperation.
Bank Handlowy C-116/11 - argumentation
• “59 …., the fact remains that the opening of secondary
proceedings, which, …., must be winding-up proceedings, risks
running counter to the purpose served by main proceedings,
which are of a protective nature.
• 60 It should be noted that the Regulation provides for a
certain number of mandatory rules of coordination intended
to ensure, as expressed in recital 12 in the preamble thereto,
the need for unity in the Community. In that system, the main
proceedings have a dominant role in relation to the secondary
proceedings, as stated in recital 20 in the preamble to the
Regulation.
Bank Handlowy C-116/11 - argumentation
• 61 The liquidator in the main proceedings thus has certain
prerogatives at his disposal which allow him to influence the
secondary proceedings in such a way, that the protective
purpose of the main proceedings is not jeopardised [follow
examples; Wess.]
• 62 The principle of sincere cooperation laid down in Article
4(3) EU requires the court having jurisdiction to open
secondary proceedings, in applying those provisions, to have
regard to the objectives of the main proceedings and to take
account of the scheme of the Regulation, which, ……, aims to
ensure efficient and effective cross-border insolvency
proceedings through mandatory coordination of the main and
secondary proceedings guaranteeing the priority of the main
proceedings.”
Cross-border Cooperation under 12-12-12 Proposal
• Renewed recital 20
• Two new recitals (20a & 20b)
• Renewed Art. 31
CoCo between liquidators
• New Art. 31a
CoCo between courts
• New Art. 31b
CoCo between liquidators
and courts
Pr(13) Recital 20 is replaced by the following:
• “(20) Main insolvency proceedings and secondary proceedings can only
contribute to the effective realisation of the total assets if all the
concurrent proceedings pending are coordinated. The main condition here
is that the various liquidators and the courts involved must cooperate
closely, in particular by exchanging a sufficient amount of information. In
order to ensure the dominant role of the main proceedings, the liquidator
in such proceedings should be given several possibilities for intervening in
secondary insolvency proceedings which are pending at the same time. In
particular, the liquidator should be able to propose a restructuring plan or
composition or apply for a suspension of the realisation of the assets in
the secondary insolvency proceedings. In their cooperation, liquidators
and courts should take into account best practices for cooperation in
cross-border insolvency cases as set out in principles and guidelines on
communication and cooperation adopted by European and international
associations active in the area of insolvency law.”
Pr(35) Article 31 is replaced by the following:
Cooperation and communication between liquidators
1. The liquidator in the main proceedings and the
liquidators in the secondary proceedings shall
cooperate with each other to the extent such
cooperation is not incompatible with the rules
applicable to each of the proceedings. Such cooperation
may take the form of agreements or protocols.
2. (………….)
Pr(36) Article 31a to be inserted:
Cooperation and communication between courts
1. In order to facilitate the coordination of main and secondary insolvency proceedings
concerning the same debtor, a court before which a request to open insolvency
proceedings is pending or which has opened such proceedings shall cooperate with
any other court before which insolvency proceedings are pending or which has opened
such proceedings to the extent such cooperation is not incompatible with the rules
applicable to each of the proceedings. For this purpose, the courts may, where
appropriate, appoint a person or body acting on its instructions.
2. The courts referred to in paragraph 1 may communicate directly with, or to request
information or assistance directly from each other provided that such communication
is free of charge and respects the procedural rights of the parties to the proceedings
and the confidentiality of information.
3. Cooperation may be implemented by any appropriate means, including
(a) communication of information by any means considered appropriate by the court;
(b) coordination of the administration and supervision of the debtor’s assets and affairs;
(c) coordination of the conduct of hearings,
(d) coordination in the approval of protocols.
Pr(36) Article 31b to be inserted:
Cooperation and communication between liquidators and courts
1. In order to facilitate the coordination of main and secondary insolvency
proceedings opened with respect to the same debtor,
(a) a liquidator in main proceedings shall cooperate and communicate
with any court before which a request to open secondary proceedings is
pending or which has opened such proceedings and
(b) a liquidator in secondary or territorial insolvency proceedings shall
cooperate and communicate with the court before which a request to
open main proceedings is pending or which has opened such proceedings,
2. The cooperation referred to in paragraph 1 shall be implemented by any
appropriate means including the means set out in Article 31a (3) to the
extent these are not incompatible with the rules applicable to each of the
proceedings.
Pr(14) recital 20a to be inserted
• (20a) This Regulation should ensure the efficient administration of
insolvency proceedings relating to different companies forming part of a
group of companies. Where insolvency proceedings have been opened for
several companies of the same group, these proceedings should be
properly coordinated. The various liquidators and the courts
involved should therefore be under the same obligation to cooperate and
communicate with each other as those involved in main and secondary
proceedings relating to the same debtor. In addition, a liquidator
appointed in proceedings relating to a member of a group of companies
should have standing to propose a rescue plan in the proceedings
concerning another member of the same group to the extent such a tool is
available under national insolvency law.
Shaping and Modeling “Cooperation”?
Recital 20, new last line:
“In their cooperation, liquidators
and courts should take into
account best practices for
cooperation in cross-border
insolvency cases as set out in
principles and guidelines on
communication and cooperation
adopted by European and
international associations active in
the area of insolvency law.”
www.insol-europe.org
Global Principles (2012)
• ALI-III project “Global Principles for Cooperation in
International Insolvency Cases”
• Contents:
– Worldwide acceptance of ALI NAFTA Principles
– Refine ALI Guidelines Applicable to Court-to-Court Communication in
Cross-Border cases
– “Glossary”
– Recommendations re “Applicable law”
http://www.ali.org/index.cfm?fuseaction=publications.ppage&node_id=85
or
http://www.iiiglobal.org/component/jdownloads/finish/557/5932.htm
or
Weblog 2012-06-doc1 Final report
www.bobwessels.nl
European Cross-border Insolvency:
Promoting Judicial Cooperation
Profs Bob Wessels and Jan Adriaanse
Prof. Paul Omar
European Cross-border Insolvency:
Promoting Judicial Cooperation
Objective: to develop ‘guidelines’, ‘best practices’ and ‘standards’ for
communication and cooperation in insolvency cases between courts in the
European Union. The result should lead to a set of
“EU Cross-Border Insolvency Court-to-Court Cooperation Guidelines”:
(i) ensuring as far as possible that the EU Insolvency Regulation works in
practice, to efficiently and effectively deal with a debtor’s estate;
(ii) fitting the current environment where solutions have been developed
based on models reflecting cooperation and communication;
(iii) guaranteeing the organisation and conduct of a fair legal process and
ensuring the fair representation of stakeholders concerned in insolvency
processes.
Three Phases
• Workstream 1 (January 2013-September 2013)
– Two surveys will be developed and sent out to a representative group of around
40 experts – insolvency judges, senior insolvency court representatives, insolvency
lawyers/trustees/ practitioners, academics – chaired by prof. Fletcher UCL
– Study of 5 Int’l and EU Codes on Independency / Integrity of Judges
– Redrafting Global Principles and CoCo Guidelines in discussion with Review &
Advisory Group
• Workstream 2 (September 2013-July 2014)
– focuses on capacity building by inviting individual EU Insolvency Judges to
participate in sidetracks of (already) planned conferences by the projects’
participating or invited partners [ERA Trier; III; Insol Europe; IBA IS?]
• Workstream 3 (July 2014-December 2014)
– focuses on bringing together 60 EU Insolvency Judges for ‘Cooperation Trainings’
of 10-12 hours at three European universities (Leiden, Nottingham, and a city in
the Eastern-European region?).
Where do we stand in 2016?
Future of Cross-border Cooperation
•
•
•
•
Present status: model of coordination
CoCo Guidelines (2007)
Global Principles (2012)
EU Cross-Border Insolvency Court-toCourt Cooperation Guidelines
(JudgeCo project; 2014?)
• Prof & Ethical rules re IOH’s (Best
Practices project INSOL Europe;
2014?)
www.bobwessels.nl
Coffee break
Fourth Session:
Young Academics’ Network
Chairs:
Myriam Mailly (University of Kent)
Emmanuelle Inacio
(Université du Littoral Côte d’Opale)
YAN
The Younger Academics Network on
Comparative and International
Insolvency Law and Finance
Who are we ?
-
Representation of younger academics or PhD fellows
-
Linked with the Academic Forum of INSOL Europe
-
33 participants from 13 different jurisdictions (Estonia,
Poland, Russia, France, England, Sweden, The Netherlands, South
Africa, Germany, Czech Republic, Italy, Luxembourg & Croatia.)
What are we doing ?
- A (virtual) network
- Exchange and cooperation
- Support between researchers
Where to find us ?
- INSOL Europe website: http://www.insol-europe.org/academicforum/younger-academics-network-website/
How to join us ?
- How to join ?
http://www.insol-europe.org/academic-forum/yanhow-to-join
The Integration of Pre-Insolvency
Proceedings in the EIR:
A Comparative Analysis of CVAs and
the Procédure de Conciliation
Marie Padellec
(University of Aix-Marseille III)
A different approach of the pre-insolvency
proceedings by French Law and English Law to
rescue the company
A determinate process under
English law
– Creditor’s meeting
– Shareholder’s meeting
– A scheme who binds all
creditors
The liberty under French law
• A scheme open to usual
co-contracting
• The absence of meetings
• The absence of binding
procedure
A different approach of the pre-insolvency
proceedings by French Law and English Law to
rescue the company
The choice of transparency
under English law
• an asset: the faculty of the
moratorium
• a weight: a big cost for the
company + distrust for the
creditors
The choice under French Law:
Secret or publicity
•
•
The secret agreement ( absence of knowledge by
the creditors of the financial situation of the
company)
– Minimum of costs
– A company protect against his creditors by
the “Délai de grâce”
The public agreement
– The “New Money”, a privilege who increase
the creditors to find an agreement
The integration of pre-insolvency proceeding in the
EIR under the purpose of the Commission
4 conditions to integrate pre-insolvency proceedings in the EIR suggest by the
Commission
– A proceeding based on a law relating to insolvency or adjustment of
debt
– The assets and affairs of the debtor are subject to control or supervision
by a court
– Proceedings which have for objective rescue, adjustment of debt,
reorganization or liquidation
– A collective judicial or administrative proceedings
The integration of pre-insolvency proceeding in the
EIR under the purpose of the Commission
The exclusion on principle of the Procédure de conciliation by the integration of the new
definition of the Commission in the EIR
– The absence of the condition of collective proceedings
– The precision by the Commission of the Exclusion of confidential proceedings
An alternative issue?
– The absence of control of the meeting of the conditions required by the
definition before the inscription of proceedings: possibility to insert in the
Procédure de Conciliation in the REI
• The exclusion of the confidential proceedings “since they become public”
The Credit Institutions Directive and the Gap in the EU Legal Framework Addressing Subsidiaries
of Financial Institutions
Chindar Teo
Victoria University,
Melbourne, Australia.
DIRECTIVE 2001/24/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
on the reorganisation and winding up of credit institutions
•
Effective coordination and cooperation between jurisdictions and respective authorities
•
Operationally integrated subsidiaries complicate insolvencies through conflict
•
Less than optimal regime to resolve cross-border banking groups
Conflict between home and host jurisdictions
•
Article 3(1) states that the administrative or judicial authorities of the home Member State shall alone be empowered to
decide on the implementation of one or more reorganisation measures in a credit institution, including branches established
in other States.
•
Systemically damaging implications to host country economy
•
Legal separateness of subsidiary: To abandon or not abandon?
•
Disparity in the treatment of subsidiaries across and among domestic regimes
•
Many foreign banking authorities & conflicting measures
•
National authority’s ability to resolve foreign subsidiary and limitations
National Territorial Sovereignty
•
The Icelandic banking crisis
•
The problem with universalism in SIFI resolution
•
Recent banking crisis in Europe- when subsidiaries are not separated
•
The chance of a local rescue: maximisation or minimisation?
Concluding remarks and future research
•
Adequate mechanisms to deal effectively and efficiently with cross-border aspects
•
The possibility of harmonized rules, powers and sanctions
•
Addressing the distinctiveness of subsidiaries
•
Future research inclusive of SIFIs and the extension of resolution powers
•
Recent banking crisis in Cyprus: impact on the real economy
The Credit Institutions Directive and the Gap in the EU Legal Framework Addressing Subsidiaries of
Financial Institutions
Thank you for your attention!
Email: [email protected]
“Reorganization Plans as Alternatives to
Pre - Insolvency Measures under the
European Insolvency Regulation and
Domestic Laws”
Maria Kilteni (L.L.B. & PhdC
Democritus University of Thrace,
L.L.M. Tübingen, National &Kapodistrian
Un. of Athens)
Structure of Presentation
1. What is a “Reorganization Plan”?-Where does it
belong?
2. Why Corporate Rehabilitation Plans ?
3. Why not Private Restructuring Plans (“Workouts”)?
4. Why (not) a “Pre-Packaged” Plan?
5. European Regulation 1346/2000 & Proposal
6. Comparison-Similarities among Greek, American,
German and French Insolvency Law.
What is a “Reorganization Plan”? Where does it
belong?(1/3)
Insolvency Proceedings
Rescuing/Restructuring
Proceedings
Judicial
Rehabilitation
Proceedings
Liquidation
Proceedings
Private Agreements/
“Workouts”
What is a “Reorganization Plan”? Where does it
belong?(2/3)
Judicial Rehabilitation Proceedings
Voluntary
Compositions
Traditional
Compositions
and Moratoriums
Corporate
Rehabilitation
Proceedings
Reorganization Plan
What is a “Reorganization Plan”? Where does it
belong?(3/3)
2. “Mild”
Rehabilitation
proceedings
1. Traditional
Compositions
Private Agreements/
“Workouts”
3. “Tough”
Rehabilitation
Proceedings
Reorganization Plan
Why Corporate Rehabilitation Plans ?
-Ease in entry
-Full freedom to the debtor to commence proceedings
-Freeze on execution of the creditors and on liquidation petitions
-Permitted and lawful alterations on securities such as stay on
enforcement
Why not Private Restructuring Plans
(“Workouts”)?
-Necessity of unanimity, illegal transactions during the suspect
period, no “erga omnes” binding force
Why a “Pre-Packaged” Plan?
All the advantages of the “Judicial Rehabilitation &
Proceedings” and of the “Workouts”:
-Time-saving: the negotiations for the plan, the distribution of the
disclosure statements, the procedure of voting take place before
the bankruptcy case is filled
-The maximization of returns
-The saving of jobs
Why not a “Pre-Packaged” Plan? : “Panacea”?
-Time-saving can be proved to be a “labyrinth”
-Probability of impairment for some creditors
European Regulation 1346/2000 (1/8)
Possible Applicable law for the plan: “lex fori concursus” , art.
4 par. 2 (j)
“the conditions for and the effects of closure of insolvency
proceedings, in particular by composition”
such as the rescue plan : the law of the State of opening
European Regulation 1346/2000 (2/8)
The Regulation accepts :
a) The possibility of “Secondary Ins. Proceedings”
ending in a Composition, a Plan or an Equivalent
Measure
b) The possibility of “Independent Territorial Ins.
Proceedings” also ending in a Reorganization
Plan
c) The “Main Insolvency
Proceedings” can share the same end?
European Regulation 1346/2000 (3/8)
The coexistence and the equalization of all possibilities come to
art. 34 of R.:
a)
The liquidator of the “Main Insolvency Proceedings” has the
power to decide on the closure of the “Secondary Insolvency
Proceedings” with a plan
b)
His consent can be ignored, if the financial interests of the
creditors of the “Main Ins. Proceedings” are not impaired by
the plan
c)
If there is restriction of creditors’ rights by a plan concerning
the “Secondary Ins. Proceedings”, it has no effect to other
States, unless all the creditors consent
European Regulation 1346/2000 (4/8)
• Proposal of E.C. (12.12.2012)
A “second chance”
to the debtor
-a more complete definition of COMI (art. 3 par. 1 &3)
-the secondary proceedings are not only winding-up proceedings,
but also restructuring procedures (the word liquidation disappears!) (art. 3
par. 2)
-a full recognition of the scheme of “debtor in possession” [art. 2b (ii),
d (ii)]
-̔synthetic secondary proceedings̕
protection of the local creditors
(art. 18 par. 1& 29a par. 2 and 3)
-upgrading of the cooperation among liquidators of main and secondary ins.
Proceedings (art. 31 par. 2b, even to the extent of a group of companies, art.
42a par. 2b, art. 42d par. 1c & par. 2, suspension or rescue plan)
European Regulation 1346/2000 (5/8)
-Neither special rule nor exception to the “lex fori concursus”
It is generally accepted :
- for issues on the functioning and the internal structure of the
company, the managers’ and the members’ respective rights
“lex societatis”
- for the issues on the functioning and the formation of the
rights related to the objectives of the insolvency proceedings
(such us the sale to the creditors)
“lex fori concursus”
European Regulation 1346/2000 (6/8)
Emerging Worsening
Financial Problems:
Problems Private
Workout
Without Lex
the
reform
Societatis
Lex
Contractus
Cessation
of
Payments
Insolvency
With
Possible
Viable
Reorganization
Insolvency
With
Impossible
Reorganization
No
Regulation
Lex
Fori
Concursus
Lex
Fori
Concursus
With the
reform
The Law of the Most Significant Creditors
European Regulation 1346/2000 (7/8)
How is this translated in terms of international private
and insolvency law? (Proposals)
Introduction of the “lex magnum creditorum”=law of the State
where the Most Significant Creditors are located. This law will
determine in the scheme of a “Reorganization Plan” or of a
“Workout”:
• Jurisdiction
• Applicable Law
• Potential Creditors’/Participants’ Objections
• Recognition to other States
European Regulation 1346/2000 (8/8)
C1
C2
Courts of
Domicile of
Creditors
A,B,C….
European Committee of
Insolvency &
European Register of
Insolvency
State of the
Most
Significant
Creditors
C3
Competent Court
“Reorganizations Plans” in
Comparison (1/6)
Similarities
-Regarding the Face of the Debtor (!)
-Concerning the Role of the Insolvency
Practitioner ( a “typical lawyer”!)
He always
knows everything!
domestic
laws
Comparison (2/6)
-A clear reference to the Rescue of the Company among the
targets of the plan: Greek (art. 107), American (§1123),
German (§ 217), French (art. L. 626 – 1)
-A clear reference to the Possibility of the “Debtor – In –
Possession” and to the “Transfer” of all or of a part of the
enterprise: American (§1107), German (§ 270-285, 217 and
220), Greek (art. 18, 78, 109 par. 1b and 106h), French (only for
transfer, art. R. 642-1- R. 642-22)
-The person that legitimatizes actively to file the plan:
1)
2)
Debtor, Trustee: German (§ 218), Greek (art. 108), French (art. L.
626-2, instead of the trustee, the “administrateur”),
Debtor, Trustee, Creditor: American (§ 1121)
Comparison (3/6)
-Organization of the creditors into groups and subgroups:
German (§ 222), Greek (art.111), American (§ 1122), French
(art. L. 626-29- L.626-35, R. 626-52- R. 626-63)
-The Necessary Majorities for the acceptance of the plan:
a) Greek: at least 60% of all the claims and 40% of the claims that
belong to the secured creditors (art. 121 par. 1)
b) American: (for the class of claims) holders of more than 50% in
number of the allowed claims and at least holders of 2/3 of the dollar
amount of the allowed claims and (for the class of interests) holders of
at least 2/3 in the amount of the allowed interests
Comparison (4/6)
c) German: a totally different formulation, in every group of creditors: 1)
the majority of the creditors must have consented to the Plan and 2) the
claims of the consented creditors must be more than 50% of the amount of
creditors that have voted for the plan (§ 244)
d) French: holders of 2/3 claims that have voted for the Plan (art. L. 626 –
30 – 2)
-“Creditors that are not impaired by the plan, do not have
the right to vote” : German (§ 237 par. 2 InsO), Greek (art. 116
par. 3 ), French (Art. L. 626 – 30 – 2 )
Comparison (5/6)
Content
– Form:
a)
“skeleton”/minimum content: Greek (art. 109), German (§ 219, 220 and
221), American (§1123)
b) a general description: French (art L. 626-1 and 626-2)
– The “filter” of a better satisfaction by liquidation, none:
(American and French) ≠ Greek (art. 108 par. 2, 109 par. 1a,
124 par. 1 d), German (§217 and 231)
– The principle of “Relative”/ “Economic” Equality:
American [§ 1122 (a)], Greek (art. 113 B.C), German (§
226), French (art. L. 626 – 30 – 2)
– “Erga omnes validity”: American (§1142), German (§ 254,
257), Greek (art. 125 and 126), French (art. L. 626 – 11)
Comparison (6/6)
- A special reference to the “Secured Creditors” and the
distinction among those that are influenced by the plan
and the others that remain intact: German (§ 223, 228),
Greek (art. 112), American [§1129 16 (b) (2) (A)], French
(art. L. 626 -22)
- A special reference to the Possibility of transformation
of the creditors’ claims into shares by the plan: German
(§ 225a), Greek. (art. 109), French (art. L. 626 – 18)
- “Cram Down”: American (§ 1129), German (§ 245),
Greek [art. 120par. 3(b)]
Thank you very much for
your attention !
When is a Company unable to pay
its Debts? An Assessment of the
Tests for Corporate Insolvency
Vincenzo Volpe
(University College London)
Defining “Insolvency”
• Is it only necessary to determine access to
proceedings?
OR
• Does it have legal significance per se?
• A European definition of insolvency?
- Article 3 EC Regulation on Insolvency
Proceedings 2000.
• The UK definition: “inability to pay debts”
- Section 123 Insolvency Act 1986.
The cash flow test
• S. 123(1)(e) IA 1986
A company “is unable to pay its debts as they fall due”.
The balance sheet test
• S. 123(2) IA 1986
A company is also deemed unable to pay its debts “when the
value of its assets is less than the amount of its liabilities,
taking into account prospective and contingent liabilities”.
Cash flow: Present vs Future debts
• Highberry Limited v Colt Telecom Group Plc
- Jacob J. “no shaky, tentative and speculative peering into the
middle-distance” when applying the liquidity test.
• Re Cheyne Finance Plc
- Brigg J. : “the words as they become due look to the future”.
- Reliance on Australian jurisprudence.
Issues with Cheyne
• A short-sighted version of the balance sheet
test?
• How far do we look into the future?
• The need to valuate prospective liquidity.
Balance sheet: BNY Corporate Trustee
Services Ltd v Eurosail-UK
• The rationale
• The debt/liability distinction
• The troubled relationship of law and
accounting
• Legal title and commercial substance
VALUATION of LIABILITIES
• Contingent liabilities
- Untied to existing obligations
- Arising from past events? (FRS 12)
• Prospective liabilities
- Current transaction or obligation
THE METHOD
• No mechanistic adding up at face value.
• Value is a factual enquiry involving judicial
discretion.
• Face value discounted for futurity?
VALUATION OF ASSETS
• Only present assets to be taken into account.
• Strategic and structural sources of
uncertainty.
• Economic distress and break-up value.
• Financial distress and going concern surplus.
Valuation in Cross-Border
Insolvencies
• Informational asymmetries
• Intangible assets
• Facilitating valuation through substantive
consolidation.
Lunch
Academic Forum Sponsors:
www.edwincoe.com
Edwin Coe Prize Winners
(Travel Grants/Book Prizes)
Introduction of Guest Speaker
Marc Udink
(INSOL Europe Honorary Chairman)
Edwin Coe Lecture:
“Spreading the Gospel:
The Mission of Insolvency Law,
and the Insolvency Practitioner,
in the early Twenty-First Century”
Professor Ian Fletcher
(University College London)
Closing Address and Handover
Professor Stefania Bariatti
(University of Milan)
Academic Forum Sponsors:
www.edwincoe.com