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.

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

Can’t get no satisfaction? Sometimes you can! Would you prefer to have security to cover a debt or the cash in the bank, challenges?

Obtaining Decree

In most circumstances, court proceedings will need to be raised by creditors to recover outstanding sums owed. Depending on the amount due, the action will be a Small Claim (up to and including £3,000) a Summary Cause (over £3,000 and up to and including £5,000) or an Ordinary Action (over £5,000). 

After obtaining a Decree (or judgement in England) there are a number of steps that can be taken, if the debtor does not make payment, to recover the outstanding debt. In Scotland this process is known as “diligence”. 

It was anticipated that more radical thoughts would emerge from Lord Justice Jackson’s latest speech last night to the Insolvency Practitioners’ Association on the subject of rolling out more fixed costs, and so it proved.

In the case of Bibby Factors Northwest Limited v HFD Limited and MCD Group Limited the Court of Appeal has ruled that there is ordinarily no duty on a company whose debt has been purchased (the Debtor) to inform the purchasing company (the Funder) of any pre-existing contractual arrangements it has with the company assigning the debt (the Assignor).  If the Funder wants this information it must directly request it.

Implications

The Croatian Consumer Bankruptcy Act (Zakon o stečaju potrošača; "ZSP")[1], which entered into force on 1 January 2016, for the first time introduces the legal concept of consumer bankruptcy into the legal system.

The Hungarian Ministry of Justice acknowledged the recent criticism aimed at the difficulties regarding the enforcement of monetary claims in the country and plans to amend the relevant laws to make creditors' lives easier. As currently envisaged, these amendments will in the near future change such fundamental laws as the Civil Code, the act on court enforcement, and the act on insolvency and bankruptcy proceedings. This article provides a summary of the envisaged amendments.
 
Civil Code