Now everything will be better! The new ESUG legislation which entered into force on 1 March 2012 has generated huge expectations. The somewhat unwieldy title of “Law for the Further Facilitation of the Restructuring of Businesses” covers a raft of significant changes to the Insolvency Act and existing restructuring regulations. Its objectives are ambitious. The ESUG is intended to make business restructuring easier, more effective and faster – thus a press release from the Federal Ministry of Justice dated 23 February 2012.

In insolvency proceedings, claims for repayment of shareholder loans – particularly if granted to a company limited by shares or a limited commercial partnership – are generally subordinate. In its judgment of 15 November 2011 (II ZR 6/11), the Federal Court of Justice (Bundesgerichtshof, BGH) addressed whether and for what period this also applied to corresponding claims by former shareholders.

The Federal Court of Justice (Bundesgerichtshof, BGH) pronounced on double securities in its eagerly anticipated judgment of 1 December 2011 (IX ZR 11/11). The practice was controversial even before the Act for the Modernisation of Limited Liability Company Law and for the Prevention of Abuse (Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen, MoMiG) came into force. “Double security” arises where security is provided over a creditor‘s claim both by the company itself and by its shareholders.

On 27 October 2011, the German parliament adopted the Law for Further Facilitation of the Restructuring of Businesses (Gesetz zur Erleichterung der Sanierung von Unternehmen, ESUG), which entered into force on 1 March 2012. In particular, legislators have increased the importance of debtequity swaps as part of this reform. Significant practical obstacles that previously often caused debt-equity transactions to fail have now been removed.

Previous legal framework

The Scottish Government launched a consultation on the question of the reform of Scotland’s bankruptcy law earlier this year, and a lengthy and detailed consultation paper was released.  Those of us who have heard the Accountant in Bankruptcy speak at conferences and the like over recent months eagerly awaited a discussion document which would reflect her guarded admission that things had perhaps swung rather too far in favour of debtors, and the time was right to try to redress that balance by looking towards the impact of debt on creditors.

This blog is supposed to be about real estate, mostly commercial real estate.  So when one of my Celtic-supporting partners who has been watching avidly every twist and turn of the Rangers saga said I should read the latest court judgement and what it said about property law, I was a little surprised.  But there is quite a lot that is relevant to what we do on a day to day basis.

In an earlier blog I touched upon the belief which exists within certain parts of the market that there is still a way to go in the re-pricing of non-prime assets. Some commentators are predicting that this re-pricing will take place through 2012 and into 2013, the hope being that we will start to see greater activity in the secondary market in the second half of next year.

The Court of Appeal has clarified in the case of Key2law (Surrey) LLP v Gaynor De’Antiquis [2011] EWCA Civ 1567 that administration proceedings do not constitute “insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor” in terms of regulation 8(7) of the TUPE Regulations 2006 and therefore fall outside the scope of regulation 8(7).

In its judgment of 11 October 2011, the English Court of Appeal analysed the terms of an aircraft purchase agreement (the “Agreement”) entered into by Gesner and the aircraft manufacturer Bombardier.  The Agreement was in Bombardier’s standard terms.  Gesner, the purchaser, sought to terminate the agreement on the grounds that Bombardier had delayed in fulfilling its contractual obligations.  Thereafter, Bombardier sought to retain certain monies as liquidated damages upon termination of the Agreement.  Gesner challenged this retention.

What information does the insolvency administrator have to provide to creditors?

Introduction