As a result of the Recast European Insolvency Regulation (“REIR”), which applies to insolvency proceedings commenced since 26 June this year, insolvency practitioners in EU Member States have been given more freedom to commence insolvency-related claims in jurisdictions other than the jurisdiction of the insolvency proceedings (ie the court proceedings by which the affairs of the insolvent company are administered – eg liquidation or administration).

In a recent judgment, the Court of Justice of the European Union (CJEU) confirmed the extent to which an English law governed contract can be subject to the transaction avoidance provisions of the insolvency law of other another member state if one of the counterparties enters into insolvency in that member state (eg Italy): Vinyls Italia SpA v Mediterranea di Navigazione SpA C-54/16 (8 June 2017).

A recent judgment of the German Federal Fiscal Court (FFC) will have significant impact on the restructuring tool kit afforded under German law. The FFC has found that the existing practice of permitting a tax liability arising from restructuring gains to be deferred and (eventually) waived violates fundamental principles of German law. The ruling has created uncertainty regarding the proper tax treatment of restructuring gains, which may have the effect of diminishing the prospect of success of a restructuring for a company in financial distress.

In a recent judgment, the Court of Appeal has held that trustees in bankruptcy could not waive legal professional privilege of a bankrupt, even though (i) the trustees in bankruptcy were entitled to take possession of the documents in which the privileged information was contained and (ii) the Insolvency Act 1986 provides generally that trustees in bankruptcy can exercise any power in respect of a bankrupt's property that the bankrupt himself could have exercised: Avonwick Holdings

A recent judgment of the High Court will serve to remind minority, overseas creditors of any company having a substantial connection with England that their debtor’s liabilities could be compromised, restructured or reduced through a scheme of arrangement in England: Van Gansewinkel Groep BV [2015] EWHC 2151 (Ch).

In a recent decision, the High Court held that legal advice taken in relation to certain transactions was not protected by privilege, as there was prima facie evidence that the purpose of the advice was to structure the transactions in a way that avoided the client’s liability to pay local authority care charges and/or as a transaction defrauding creditors: London Borough of Brent v Kane [2014] EWHC 4564 (Ch).

In Rubin v Eurofinance SA [2012] UKSC 46, the Supreme Court (by a majority of 4 to 1) reversed the Court of Appeal’s unanimous decision and held that the English court would not enforce a judgment made by the New York court in insolvency proceedings to which the defendant did not submit.

German Insolvency Law – a Leap Forward

Creditors have often complained that German insolvency law does not give them sufficient influence in insolvency proceedings. On 1 March 2012 new amendments to the German bankruptcy code came into force which go some way towards ameliorating this concern and make a host of changes which should improve German insolvency law to facilitate an insolvency culture which facilitates reorganisation rather than liquidation of assets.  

Clarification on the jurisdiction of the English courts to sanction schemes of arrangement for overseas companies

Providing further evidence that schemes of arrangement (“schemes”) are an increasingly useful tool in the restructuring of overseas companies, on 20 January 2012, the High Court sanctioned a scheme proposed by PrimaCom Holding GmbH (“PrimaCom”), a German incorporated company, with its centre of main interests (or “COMI”) in Germany and whose affected creditors were domiciled outside the UK.

On the bill of the Federal German Government for an Act Serving the Further Facilitation of the Reorganization of Enterprises (ESUG)