Background
In Germany, corporate entities are not allowed to act as insolvency administrators (sec 56 I 1 Insolvency Code). Instead, the insolvency court selects and appoints experienced individuals.
The Federal Court of Justice (BGH) continued with its extensive interpretation of the rules for contesting transactions under insolvency law in a judgment dated 21 February 2013 (BGH IX ZR 32/12). In the case before the court, direct shareholder A in company T sold a claim under a loan to B at below par value. Following assignment, T repaid the loan to B at the nominal amount plus interest. Insolvency proceedings were opened around two months later in relation to T’s assets. The BGH’s decision covers three aspects:
German Parliament passes “Act for the Further Facilitation of the Restructuring of Companies“ (Gesetz zur weiteren Erleichterung der Sanierung von Unternehmen, ESUG)
Last month, the German Ministry for Justice and Legal Affairs (Bundesjustizministerium) published a draft law proposal aimed at further "facilitating the restructuring of businesses".
Due to the ongoing financial crisis and the economic downturn accompanied therewith, many German companies are or will be struggling with default and insolvency problems.
In 2008, the catastrophic effect of the credit crunch spread to most world economies. As in previous recessions, insolvency has affected increasing numbers of individuals and companies, and parties to agreements to arbitrate are increasingly likely to find themselves dealing with insolvent companies. What are the issues to bear in mind?
1/ Prior insolvency
Given the current worldwide economic climate, the number of companies facing insolvency that have assets in multiple jurisdictions around the world has increased dramatically. It is not unusual in today’s global economy for a corporation to have commercial offices, production plants and/ or research facilities in many different countries. A company that is faced with the bleak picture of insolvency may be forced to make decisions on whether to seek protection under a number of different statutory structures.
1 Advantages to aircraft financiers
For an aircraft financier, the virtues of the Cape Town Convention and its Aircraft Equipment Protocol (together Cape Town) are that it aims to:
KWL Advertising Limited (in liquidation) ("KWL") -v- Kountouris & Kountouris, Guernsey UnreportedJudgment, 18 October 2006
Where a company purported to enter into a loan and security transaction with a bank where the transaction displayed clear issues of conflict of interest issues in relation to the company's CEO, held that the bank could not assert that the CEO had apparent authority to enter into the transaction.