The Supreme Court has held that, where a company had been the victim of wrong-doing by its directors, the directors’ wrong-doing could not be attributed to the company to prevent it (or its liquidators) from bringing claims against the directors.
The Hungarian government has recently introduced a new restructuring tool with the aim of supporting companies suffering from financial difficulties due to COVID-19.
Financially distressed companies will receive an automatic stay while the company puts together a reorganisation plan, which will be supervised by a court and evaluated by a court-appointed expert.
I am delighted to present the third edition of The Issues, an annual publication brought to you by our team at CMS Prague. As is tradition, the articles will look at general legislative developments as well as new opportunities and legal issues that you will be facing in the year ahead. We also look at sector specific topics from across industries such as consumer products, energy, financial services, hotels & leisure, lifesciences, real estate and technology, media & telecoms.
The Corporate Insolvency and Governance Bill was published on 20 May 2020 and went through an accelerated parliamentary process, receiving Royal Assent on 25 June 2020 (with the provisions coming into force on 26 June 2020).
The Corporate Insolvency and Governance Act 2020 (“CIGA”) introduces a mixture of permanent and temporary “debtor friendly” measures to restructuring and insolvency law in England and Wales and in Scotland, jurisdictions which have historically been viewed as being “creditor friendly”.
Shareholders who fail to intervene to stem the losses in a company they control may be held personally liable for the company’s debts if it is subsequently liquidated, according to the Supreme Court.
Under Hungarian law, a shareholder’s liability (in a limited liability company) is usually limited to their capital contribution. The corporate ‘veil’ can only be pierced (making the shareholder personally liable for the company’s debts) in special circumstances.
On 1 January 2021, an Amendment to the Czech Act on Business Corporations came into effect, which introduced changes in the area of corporate governance. These include changes to the liability of statutory body members in case of corporate insolvency, and changes to the conditions for disqualification of statutory body members from the performance of their office or from serving as shadow directors.
Liability of statutory body members in the event of corporate insolvency
Share purchase agreements often include indemnities or covenants to pay designed to protect the buyer for a period after completion where some unquantifiable liability is anticipated that will impact on the value of the company being acquired. This is particularly so in the case of unpaid tax.
The UK Government has issued secondary legislation extending the period of applicability of certain temporary provisions of the Corporate Insolvency and Governance Act 2020 (“CIGA”).
In a bid to assist struggling companies amid the uncertainty brought on by the pandemic, Hungary issued Government Decree No. 249/2020, which amends the Bankruptcy Code and gives companies breathing space while they explore options for rescue.
The changes created by the decree, which came into force on 29 May 2020, will be in effect only during the state of the emergency and include the following:
On 18 May 2020, the same date that Romania switched to a state of alert that will expire on 17 June 2020, Law no. 55/2020 entered into force, which contains amendments to legal provisions for regular insolvency during the state of alert.
The most important amendments include a deferral of the obligation to file for insolvency, an increase in the threshold for petitioning for insolvency, extension of the duration for the reorganisation plan and an extension of other procedural deadlines.
The following is a list of the major amendments contained in the law: