On 13 June 2019 the new Insolvency Law(DIFC Law No. 1 of 2019) and the associated Insolvency Regulations 2019 (the “Law”) came in to effect in the Dubai International Finance Centre (“DIFC”) repealing and replacing the DIFC’s Insolvency Law of 2009 (the “Old Law”).

A recent High Court decision considered the duty of Law of Property Act (LPA) receivers when selling secured property to an associated company of the creditor. The LPA receivers were chartered surveyors, appointed by the creditor in respect of a cider factory over which it had security and were alleged to have acted in bad faith by preferring the interests of the creditor over the interests of the debtor company.

A real, as opposed to remote, risk of insolvency is not necessarily enough for the duties of a board of directors to switch from being owed to its shareholders to being owed to its creditors.

A Court of Appeal decision last week has broadly upheld previous TCC guidance as to the ability of companies in liquidation or those subject to CVAs to commence and enforce adjudication proceedings against their creditors. Although theoretically possible, adjudication proceedings commenced by companies in liquidation are now liable to be restrained by a court injunction.  Adjudications by companies subject to a CVA are more likely to be appropriate and, depending on the circumstances, may be enforced without a stay of execution.

Insolvency set-off: a recap

The Chancellor announced in his budget that the Crown is to be re-instated as a preferential creditor in insolvency, reversing the changes brought in by The Enterprise Act 2002.

In the wake of increased competition stemming from the recent liberalisation of the Bulgarian electricity market, more and more electricity players and major electricity traders such as Future Energy and Energy Financing Group are now facing serious financial difficulties.

According to reports, some are now fighting to stay afloat after the initiation of insolvency proceedings. Given this increased market pressure, analysts state it is likely these and other energy traders may declare bankruptcy and face eventual liquidation.

A draft government ordinance amending the Romanian insolvency law was published on September 12. The bill is intended to increase recoverability of state receivables from insolvent companies and to reduce the debtor’s control over the proceedings.

One of the main changes relates to denying the existing right of the insolvent debtor to nominate an insolvency practitioner to be appointed as official receiver. Under the current procedure, it was mandatory for the insolvency court to follow debtor’s proposal, if the creditors did not make a proposal of their own.

The Court of Justice of the European Union (CJEU) has ruled today that the Pension Protection Fund regime does not satisfy European law requirements. The judgment is likely to have a significant impact on the PPF, and could have wider knock-on effects for many occupational pension schemes.

Background to the case

A recent TCC decision highlights the dangers of withholding payment against contractors with a view to pushing them into insolvency. The court allowed the recovery of insolvency professional fees as well as a substantial sum reflecting a reduced settlement reached with a third party on a separate project. The court’s decision has ramifications for any party seeking to withhold large payments under a construction contract against a party who is likely to suffer serious cash-flow pressure as a result.

A recent TCC decision has ruled that adjudication proceedings cannot be brought by companies in liquidation in relation to financial claims under a construction contract. The decision will have considerable ramifications for the practical management of liquidations for companies with exposure to construction contracts. The decision would appear to run contrary to current liquidator practice, both as to the use of adjudication proceedings in liquidations and as to the assignment of claims to third parties, but essentially only confirms the mandatory nature of insolvency set-off.