In several Commonwealth jurisdictions, the corporate legislation allows creditors to petition a court to order the winding up of a debtor in circumstances where that debtor is unable to pay its debts as they fall due. Such legislation generally presumes that the debtor is insolvent if it has failed to comply with a statutory notice requiring the debtor to pay a certain debt within a given period of time (a statutory demand).
Although the challenges brought by the COVID-19 pandemic have, and continue to, put exceptional pressure on supply chains, the reality is that the insolvency of a business partner is a risk even in normal times. When that business partner is on the other side of pending arbitration proceedings, questions arise as to how the insolvency affects the substantive claim as well as the underlying procedure.
Another Hong Kong court decision has questioned whether the judgment in the leading case of Lasmos Limited v. Southwest Pacific Bauxite (HK) Limited [2018] HKCFI 426, may have gone too far when it suggested that an arbitration clause in an agreement should generally take precedence over a creditor's right to present a winding-up petition.
The French government, using the powers conferred upon it by law n°2020-290 of 23 March 2020 to counter the Covid-19 epidemic urgency, adopted order n°2020-341 of 27 March 2020 in order to adapt the rules for companies in difficulty in the light of the health crisis (the “Order”).
The Order was supplemented by a circular of the Ministry of Justice n°CIV/03/20 dated 30 March 2020 (the “Circular”).
The Hong Kong Court of Appeal has suggested that a previous Court decision may have overstepped the mark by suggesting that an arbitration clause in a client agreement should generally take precedence over a creditor's right to present a winding-up petition.
On 2 March 2018, the Hong Kong Court of First Instance (“CFI“) issued a notable decision which signifies a development of Hong Kong law in the contexts of insolvency and arbitration. The CFI held in Lasmos Limited v Southwest Pacific Bauxite (HK) Limited [2018] HKCFI 426 that a winding-up petition issued on the ground of insolvency should generally be dismissed if there is an arbitration clause contained in an agreement giving rise to a debt relied on to support the petition.
Section 133 of the Companies Act 71 of 2008 provides for a general moratorium on legal proceedings against a company in business rescue.
I wrote an article published in the June issue of Without Prejudice in which this question was considered. I criticised the then binding judgment of Chetty t/a Nationwide Electrical v Hart NO and Another (12559/2012) [20141 ZAKZDHC 9 (25 March 2014), as it was held in that case that arbitration proceedings do not constitute legal proceedings for purposes of section 133 of the Act.
A Hong Kong court has stayed a petition presented on the just and equitable ground to arbitration, on the basis of arbitration agreements found within what the petitioner described as quasi-partnership agreements formed in 2007. The court also dismissed claims that the appointed arbitrator lacked the requisite qualifications and experience, and that a stay would lead to further costs and duplication of resources.
Singapore is getting serious about becoming the region’s international insolvency hub. In this inaugural podcast from the International Insolvency Institute, Hon. Kevin Carey (Ret.) of Hogan Lovells discusses Hon. Christopher S. Sontchi‘s forthcoming move from Delaware bankruptcy judge to International Judge of the Singapore International Commercial Court (SICC).
An unfortunate but inevitable consequence of the economic downturn induced by COVID-19 is that an increasing number of construction companies will enter into insolvency. In Bresco Electrical Services Ltd (in liquidation) v. Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25, the Supreme Court has provided some respite to contractors in liquidation by finally confirming their unfettered right to refer construction disputes for resolution by adjudication.