With growing competition and global market uncertainties in recent years, businesses may experience operational and financial challenges, resulting in debt defaults. A creditor is entitled to petition for the bankruptcy and liquidate the debtor’s assets in order to try to achieve a maximum recovery. Statistics published by the Official Receiver’s Office noted 7,062 petitions for compulsory liquidation and bankruptcy between January and October 2019. In this client alert, we discuss two significant and recent judgments in respect of insolvency law given by the Hong Kong* courts.

Proposed changes in Italian law mean that it should become easier to create certain types of security in Italy and to recover debt. The relevant law is Decree-law no. 59/2016 (“Urgent provisions on insolvency and executive procedures’’) which came into force on 4 May 2016 and which should be converted into binding law by early July.

The main changes introduced by the Decree are as follows:

There has been a considerable amount of interest from clients recently on putting Jersey companies holding UK real property and other assets into English administration. Where a Jersey company and its creditors intend to rescue the company as a going concern, or English administration would achieve a better realisation for creditors than a désastre or a winding up, it may be advantageous to commence English administration.

In the current economic environment, there are a number of entities that are being restructured. Our current experience has been that such restructurings fall into two areas, namely a debt for equity swap or a release of “toxic” assets from a group structure in order to minimise exposure to this asset class.

Debt for Equity Swap

Introduction

If a fund is insolvent, it is either not able to pay its debts as they fall due, or its assets are less than its liabilities. An investor/creditor will have the ability to put the fund into a formal insolvency procedure and, in most cases, appoint an independent third party to take control of the assets and investigate the conduct of the fund’s directors, managers and other controlling functionaries. Defined terms in this article are the same as the terms which were defined in the potential causes of action article.  

The credit crunch has put pressure on a wide range of structures and, as a result, lenders, borrowers and other counterparties are looking more closely at the impact of possible insolvency proceedings. As Jersey companies have often been used in cross-border finance transactions, it is important to be aware of the differences between Jersey and English insolvency procedures for companies.  

What are the main Jersey insolvency procedures for a Jersey company?

These are:-  

RESTRUCTURING - COURT PROCEDURES

Formal, court-driven restructuring proceedings are available into Luxembourg law, but for practical reasons, these are rarely used in practice.

Reprieve from payment procedure (sursis de paiement)

INTRODUCTION

Luxembourg is one of the leading domiciles worldwide for international investment vehicles. This leading position has arisen from the combination of the following core factors:

IMMOVABLES

There are two principal insolvency procedures by which a lender can bring about the realisation of a property in Jersey, namely dégrèvement and désastre. 

A debtor who fears that his property is going to be taken for his creditors either by way of a dégrèvement or by way of a désastre can apply to the Royal Court for a "Remise de Biens".  A remise grants a debtor time to get his affairs in order and effect an orderly sale of all or some of his property thereby enabling him to retain that which he can afford.

This case considers the ability of the Court to ensure that similarly ranked creditors of a debtor are treated equally prior to the commencement of any insolvency procedure including a just and equitable winding up application.

Background

Mr Breifne O'Brien lives in Ireland. In 2008 and 2009 a number of creditors in that jurisdiction obtained judgments against him in the Irish High Court. The Irish Court injuncted Mr O'Brien from dealing with his assets within or without the jurisdiction below €20,000 million.