An extract from GRR The European, Middle Eastern and African Restructuring Review 2018
Brief overview of insolvency proceedings
Enhanced by no less than five reforms over the past 10 years, French insolvency law now provides a comprehensive set of tools designed to efficiently handle the legal, economic and financial difficulties that companies are facing. The whole insolvency architecture hinges on the key concept of cessation of payments (ie, inability of the debtor to pay its debts as they fall due with its available assets).
On 28 November 2016 the German Federal Fiscal Court (FFC) (GrS BFH 1/15, published on 8 February 2017) held that the guidance on a reorganisation tax privilege (Reorganization Decree (Sanierungserlass)) issued by the German Federal Ministry of Finance (FMF) in 2003 was invalid. The ruling has created great uncertainty for the restructuring practice in Germany regarding the proper tax treatment of restructuring gains.
On 18 December 2018 the English Court of Appeal held in the case of OJSC International Bank of Azerbaijan that the rule in Gibbs is still a fundamental tenet of English insolvency law and not to be sidestepped by the Cross-Border Insolvency Regulations.
Facts
The facts in summary are these:
In a decision widely anticipated by investors in emerging market and distressed debt, the Court of Appeal has upheld the decision of the High Court to refuse to grant an indefinite moratorium on claims under certain English law debts under the Cross Border Insolvency Rules (“CBIR”). In doing so, the Court of Appeal has reaffirmed a long-standing principle of English common law that provides important protection to creditors; known as the Rule in Gibbs, the rule provides that a debt may only be discharged according to its own governing law.
Are CVAs on the rise?
News of famous high street names, particularly in retail, and the restaurant sector entering into CVAs is commonplace. Government Insolvency Service figures record 102 CVAs in the first quarter of 2018, an increase of 18%. Whilst the retail sector is undoubtedly feeling the pinch, CVAs are potentially open to any company. The impact on the owners of property occupied by such businesses, can be significant and highly prejudicial.
What exactly are CVAs?
The Court of Justice of the European Union (CJEU) has ruled today that the Pension Protection Fund regime does not satisfy European law requirements. The judgment is likely to have a significant impact on the PPF, and could have wider knock-on effects for many occupational pension schemes.
Background to the case
In accordance with EU legislation, Member States have the power to limit the obligation of public guarantee institutions to pay employees’ claims in the event of their employer’s insolvency. The Court of Justice found to be compliant a national provision (Bulgarian law) that confines the protection given by said guarantee institutions to those employment relationships that have not ended within the three months prior to the opening of insolvency proceedings.
1. El supuesto de hecho
Una sociedad eslovaca productora de bebidas alcohólicas, que había conseguido un aplazamiento de su deuda fiscal previa constitución de garantías, no pudo hacer frente a los pagos pactados y, en consecuencia, presentó la solicitud de iniciación de un procedimiento de convenio de acreedores ante el tribunal regional competente, proponiendo el pago del 35 % de la deuda, que ascendía a un total de 21,4 millones de euros, de los cuales 21,3 correspondían a la deuda fiscal.
Todos los supuestos de extinción en que ésta es adoptada por voluntad del trabajador, pero derivada de una decisión unilateral de la empresa, han de tener el mismo tratamiento por parte de los Estados miembros. Así lo señala el Tribunal de de Justicia en un reciente pronunciamiento en el que resuelve una cuestión cuya trascendencia práctica desborda el supuesto planteado específicamente.