On 7 December 2022, the EU Commission issued a proposal for a Directive harmonising certain aspects of insolvency law. In this article, we focus on insolvency avoidance rights from a Slovak law perspective and the impact of the Proposed Directive.

On 28 June 2023, the Slovak Parliament approved the Act on Company Transformations No. 309/2023 Coll. (the “Act”). The Act incorporates several changes that may have an impact on the financing market in Slovakia.

1.Whitewash

Only a year ago, Slovakia transposed EU Directive 2019/2023 on preventive restructuring frameworks with an intention to reform insolvency proceedings and make them more effective.

Only a year ago, Slovakia transposed EU Directive 2019/2023 on preventive restructuring frameworks with an intention to reform insolvency proceedings and make them more effective.

Finance companies in Slovakia have felt endangered since 2019 when the Regional Court in Košice, acting as a second instance court confirmed a lower-court ruling that a financial party could be qualified as a related party in the eventual insolvency of the borrower as debtor.

On 16 March 2022, the Slovak Parliament approved the anticipated new act on solving threatened bankruptcy (the Act) and also amended related legislative documents. It implements the Directive (EU) 2019/1023 on preventive restructuring, whose implementation was postponed by one year to 17 July 2022 due to the COVID-19 pandemic. The Act aims to reform insolvency in Slovakia and make preventive mechanisms effective enough to reduce the number of bankruptcies.

To whom does the Act apply?

The Bankruptcy Code confers upon debtors or trustees, as the case may be, the power to avoid certain preferential or fraudulent transfers made to creditors within prescribed guidelines and limitations. The U.S. Bankruptcy Court for the District of New Mexico recently addressed the contours of these powers through a recent decision inU.S. Glove v. Jacobs, Adv. No. 21-1009, (Bankr. D.N.M.

In In re Smith, (B.A.P. 10th Cir., Aug. 18, 2020), the U.S. Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Tenth Circuit recently joined the majority of circuit courts of appeals in finding that a creditor seeking a judgment of nondischargeability must demonstrate that the injury caused by the prepetition debtor was both willful and malicious under Section 523(a)(6) of the Bankruptcy Code.

Factual Background

In a recent decision, the U.S. Bankruptcy Court for the Southern District of New York held that claim disallowance issues under Section 502(d) of the Bankruptcy Code "travel with" the claim, and not with the claimant. Declining to follow a published district court decision from the same federal district, the bankruptcy court found that section 502(d) applies to disallow a transferred claim regardless of whether the transferee acquired its claim through an assignment or an outright sale. See In re Firestar Diamond, 615 B.R. 161 (Bankr. S.D.N.Y. 2020).

InIn re Juarez, 603 B.R. 610 (9th Cir. BAP 2019), the Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit addressed a question of first impression in the circuit with respect to property that is exempt from creditor reach: it adopted the view that, under the "new value exception" to the "absolute priority rule," an individual Chapter 11 debtor intending to retain such property need not make a "new value" contribution covering the value of the exemption.

Background