Chapter 11 focuses on preserving reorganization or going concern value over liquidation value. As a corollary, Chapter 11 assumes that the most efficacious way to achieve that result is to retain management and enable multiple outcomes either through a plan of reorganization, a series of going concern sales and even a liquidating plan. Chapter 11 enables a wide range of proposals to be put into a reorganization plan, including having the company and its management survive the process.

Article L 611-4 to L 611-15 of the French Commerce Code.

Act n° 2005-845 of 26 July 2005, as completed and amended, has created a new out-of-court settlement process known under French law as “Conciliation,” replacing the former amicable settlement or “règlement amiable.”

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Liquidation procedures

Eligibility

What are the eligibility criteria for initiating liquidation procedures? Are any entities explicitly barred from initiating such procedures?

The decision of Graham & Jackson v Arena Capital Limited (In Liquidation) concerned an application under the Companies Act 1993 by liquidators seeking direction on the application of liquidation funds.

The Court of Appeal has confirmed that if a secured creditor votes its secured debt in a liquidation meeting, the vote is invalid – and the security remains. 

Liquidation meetings are for unsecured creditors.  A secured creditor has no vote, except in respect of debt that is unsecured.

The case

In Strategic Finance Limited (in receivership & in liquidation) and Strategic Nominees Limited (in receivership) v Bridgman and Sanson CA 553/2011 [2013] NZCA 357 the Court of Appeal has, for the moment, settled what constitutes an "account receivable", and this provides certainty regarding the scope of the assets available to meet preferential creditor claims ahead of secured creditors with general security agreements.

Inland Revenue is now ahead of liquidators and receivers in the queue for payment where cash is available in liquidation and PAYE is owed.

Industry practice has been that PAYE is paid to the Commissioner of IRD only after the insolvency practitioners’ fees and employees’ wages have been paid but the Court of Appeal has accepted the IRD's argument that the Commissioner has first claim.¹

We picked the good faith defence in the voidable preference regime as one of the big five insolvency issues for 2013 and so it has come to pass, with a wealth of case law on the topic.

Voidable Transactions

Can be a significant risk for businesses

When an insolvent company goes into liquidation it’s accepted that not all creditors will get paid 100 cents in the dollar.However it often comes as a shock to creditors when the liquidator requires them to refund payments that had been made up to two years before the company was liquidated.

Three times in the last 12 months, liquidators have been told by the High Court that they cannot choose the “point of peak indebtedness” as the start of the “continuing business relationship” in an insolvent transaction claim. 

Of course, the three decisions are all from the High Court, and will not be binding in future cases.  The law will not be settled until the appellate courts hear the issue, and they may yet come to a different conclusion.