With the current economic crisis significantly affecting global business, certain procedural remedies can be particularly useful in order to deal with unpaid debts.
The most common of these procedural remedies in Spain is the so-called 'proceso monitorio', which consists of a special payment procedure used for the recovery of specific monetary debts which:
Due to the economic downturn there has been a rapid growth in debt claims and bankruptcy cases in the Finnish courts. Compared to 2008, almost 40% more bankruptcy proceedings and twice as many debt claims have been started this year.
Last year, in the case of Oakland v Wellswood (Yorkshire) Ltd, the EAT suggested that, if an administrator has been appointed with a view to liquidating a transferor company, this fell within the exception provided by TUPE Regulation 8(7) (which provides that where there are insolvency proceedings instituted with a view to liquidation, the key employee protections afforded under TUPE do not apply). This ran contrary to government guidance.
On 15 September 20091 the judge responsible for the Lehman bankruptcy proceedings in the United States held that Metavante Corporation (“Metavante”) could not rely on Section 2(a)(iii) of the ISDA Master Agreement to suspend payments to Lehman Brothers Special Financing, Inc. (“LBSF”). Specifically, Judge Peck held that the safe harbour provisions in the US bankruptcy code protected a non-defaulting party’s contractual rights to liquidate, terminate or accelerate swaps and to net termination values but did not provide a basis to withhold performance under a swap if it did not terminate.
The facts behind Mr. Justice Lewison’s recent judgment in Stanford (STANFORD INTERNATIONAL BANK LIMITED [2009] EWHC 1441 (Ch)) have no direct connection with either the British Virgin or Cayman Islands but lawyers there do have particular reason to note the more general principles around the seemingly vexed but important issue of COMI in the context of multi-jurisdictional insolvency.
A recent application to the British Virgin Islands courts has sought to blur the lines between directors’ general duties to act for the benefit of an insolvent company’s creditors, and the statutory clawback associated with unfair preferences entered into in the twilight period prior to a company going into liquidation.
In recognition of the new BVI Commercial Court, Harneys is publishing quarterly Commercial Court case notes which summarise some of the more important judgments delivered by the Court.
Appropriation
The British Virgin Islands has opened a new Commercial Court which will specialise in cross-border commercial and insolvency matters. In two ceremonies earlier this month, the government of the BVI formally opened the court and signed a memorandum of understanding with the Eastern Caribbean Supreme Court (ECSC) for its operation and administration.
When can shareholders also have employee status?
Tax treatment in the hands of the creditor
The waiver of debt results in the accounting ‘loss’ of a receivable. Such loss, however, is not automatically tax deductible in the hands of the creditor.
The deductibility of such loss may be prohibited, either because it is deemed not to be incurred to retain or increase taxable income (‘general deduction criterion’), or because it is deemed to be an ‘abnormal or benevolent advantage’ granted to the debtor (‘anti-abuse rule’).