Suppose you were a German bank lending to a Spanish debtor under a loan agreement governed by German law. Once your Spanish debtor stops paying, the bank would have to obtain a German legal judgment and would then have to enforce it in Spain. Any measure to secure the debtor's assets in the meantime, is typically subject to the jurisdiction where the asset is located, or subject to lengthy recognition proceedings. Having to resort to local law measures usually puts foreign creditors in a worse-off position than local ones.

Fraudulent debtors are trying to use a disputable interpretation of Article 37, para 4 of the Special Pledges Act on the outcome of enforcement over a special pledge against the rights of secured mortgage creditors.

The Bulgarian legislator is notorious for leaving gaps in enacted legislation. Often such legal gaps combined with inexperience, or even worse – corruption of judges, lead to questionable judgments being handed down. Several of these judgments have put mortgage creditors at risk of losing their collateral in the past year.

In December 2013, the Bank of Slovenia adopted exceptional measures resulting in the annulment of financial instruments held by shareholders and subordinated bondholders for the purpose of burden-sharing in rescuing five Slovenian banks.1 In its decision of 19 July 2016, the European Court of Justice confirmed that such burden-sharing is not contrary to EU law; however, the Slovenian public remains divided.

Since the European Commission adopted the recommendation on restructuring and second chance in 2014, it has been working on the evaluation of its initiative and the introduction of a European legal framework. In 2015 the Capital Markets Union Action Plan included the announcement of a legislative initiative on early restructuring and second chance. Finally, on 22 November 2016, the European Commission published its proposal for a European Directive on preventive restructuring frameworks and a second chance for entrepreneurs.

Frequently a debtor’s assets are sold out of bankruptcy “free and clear” of liens and claims under §363(f).  While the Bankruptcy Code imposes limits on this ability to sell assets, it does allow the sale free and clear if “such interest is in bona fide dispute” or if the price is high enough or the holder of the adverse interest “could be compelled ... to accept a money satisfaction of such interest” or if nonbankruptcy law permits such sale free and clear of such interest.

On February 5, 2016 the IRS released Chief Counsel Advice Memorandum Number 201606027 (the IRS Memo) concluding that “bad boy guarantees” may cause nonrecourse financing to become, for tax purposes, the sole recourse debt of the guarantor. This can dramatically affect the tax basis and at-risk investment of the borrowing entity’s partners or members. Non-recourse liability generally increases the tax basis and at-risk investment of all parties but recourse liability increases only that of the guarantor.

The right to set-off claims and obligations in insolvency proceedings is an important tool for creditors in order to protect themselves against the insolvency risk of a contractual counterparty. This article gives a short overview of the rules for set-off in insolvency proceedings in Austria and certain CEE jurisdictions not taking into account special provisions for close-out netting and similar transactions.

Austria

Set-off in insolvency proceedings

The conundrum evolves

A long-honored concept in real property, that of “covenants running with the land,” is finding its way into the bankruptcy courts. If a covenant (a promise) runs with the land then it burdens or benefits particular real property and will be binding on the successor owner; if that covenant does not run with the land then it is personal and binds those who promised but does not impose itself on a successor owner.

We are often asked what to do if you have an operating agreement and your operator or one of the other working interest owners files for bankruptcy. The Bankruptcy Code allows the debtor to assume or reject the JOA (it is usually an executory contract).