Article 37 of the Act on Continuity of Enterprises states that "claims against the debtor related to services provided by its co-contractor during a judicial reorganization are to be qualified as privileged claims in a subsequent bankruptcy". Both the doctrine and case law are divided as to how this article should be interpreted, in particular whether or not only a direct co-contractor of the debtor can invoke the privileged nature of its claim. This discussion is particularly relevant with regard to claims for advance business tax, VAT claims and other tax debts. 

On 20 May 2015, the European Parliament adopted a new version (the "Revised Regulation") of Regulation 1346/2000 on insolvency proceedings (the "Original Regulation").

According to the statement of the Council's reasons, the Revised Regulation is aimed at making cross-border insolvency proceedings more effective with a view to ensuring the smooth functioning of the internal market and its resilience in economic crises.

En date du 20 mai 2015, le Parlement Européen a adopté une nouvelle mouture (le Règlement Révisé) du Règlement 1346/2000 relatif aux procédures d’insolvabilité (le Règlement Original).

Aux termes de l’exposé des motifs du Conseil, l’objectif du Règlement Révisé était de rendre les procédures d’insolvabilité transfrontières plus efficaces avec l’intention plus large d’assurer le bon fonctionnement du marché intérieur et sa résilience lors des crises économiques.

Principle

In order to secure the protection of judicial reorganization, the debtor needs to attach to the petition for judicial reorganization a certain number of documents provided for in article 17 § 2 of the Law on the continuity of enterprises (LCE). If these documents are not attached to the petition, the LCE provides that the petition shall be deemed inadmissible.

Most due diligence processes in a business acquisition context require a review of material contracts and, in particular, a review of any restrictions on assignment of those contracts.

When a business enters into a long term commercial contract with a customer, the identity of that particular counterparty may influence the terms of the contract. A party deemed more favourable may obtain a better price or better terms.  Unless restricted by enforceable anti-assignment provisions, these favourable contracts can be very valuable in a traditional M&A context.

Of general interest is the appeal in the case of Horton v Henry, on which we reported in our January 2015 update. In Horton, the High Court declined to follow a previous ruling, and decided that a bankrupt could not be compelled to access his pension savings to pay off creditors.

Introduction

In this Banking Reform updater we examine the single resolution mechanism (SRM), which together with the single supervisory mechanism (SSM) (Banking Reform updater 10) forms the key pillars of the EU Banking Union.

What is the SRM?

Declining to follow a 2012 decision, the High Court has ruled that a bankrupt’s unexercised rights to draw his pension did not represent income to which he was entitled within the meaning of the Insolvency Act 1986, and so did not form part of the bankruptcy estate.

Background

The process of repossession will involve complex issues of fact and law. Each one is different depending upon the jurisdiction involved, the approach of the operator and the attitude of the relevant authorities.

Information and planning

1. What is the risk if a counter-party is located in an exiting member state?