Last week, the European Commission (EC) announced that it has decided to further review Dexia’s restructuring plan under EC Treaty state aid rules to “establish whether the restructuring plan for the Dexia group will restore the group's long-term viability.” The plan includes a €6.4 billion capital injection, announced in
On 14 March 2008 the Court of First Instance (CFI) issued two orders rejecting applications for interim measures by two subsidiaries of a Polish steel producer (Buczek) to suspend the application of a Commission recovery decision pending the final judgment in the case. Between 1997 and 2003 Poland was granted a derogation from the general prohibition on restructuring aid to the steel sector. The derogation was conditional upon Poland implementing a restructuring plan. Aid was provided to Buczek, who failed to properly implement its restructuring plan and went bankrupt in 2006.
The German Government is required by the European Commission ("Commission") to seek repayment of €5.2 million in aid from the bicycle group, Biria. The aid comprised two guarantees and “silent participation” (investor received remuneration but no shares) by a public investment company and the German Land of Saxony to subsidiaries within the Biria group. Although Germany argued that the “silent participation” was provided upon market conditions, the Commission did not accept that it met the private market investor test.
The court provides guidance on liability if a subsidiary goes bankrupt because of the misconduct and careless management of its parent company.
Over the last few years, employees have increasingly sought to hold the parent companies of their employers liable for the subsidiaries’ actions by trying to demonstrate that the parent entity is the employee’s co-employer, i.e., that the employee has two employers: the company that hired him or her and its parent company.
To demonstrate this co-employment situation, the employee must prove either that
In July 2006, after a long and unsuccessful attempt to reach an out-of-court restructuring of the indebtedness of the Eurotunnel group of companies, the managers of the Eurotunnel group requested the opening of main insolvency proceedings for all the companies in France.
Tax treatment in the hands of the creditor
The tax treatment of the forgiveness of debt within a group of companies depends on whether or not such forgiveness is of a “normal nature”. In order to be considered as being of a normal nature, the ‘advantage’ granted by a parent/creditor to its subsidiary/debtor must involve valid business reasons.
A recent ruling of the German Federal Civil Court (Bundesgerichtshof (“BGH”)) is a reminder of the risks which shareholders of a German company can face in an insolvency of their German subsidiary.
Directors beware – unless you are careful to maintain a subsidiary’s independence, the parent company may be liable for the debts of its subsidiary.
That is the effect of a recent High Court decision invoking a rarely used provision in the Companies Act.
We analyse the judgment and draw some practical advice from it.
Section 271
Section 271(1)(a) of the Companies Act 1993 (the Act) has been used only rarely and is unique to New Zealand law, although Ireland has a similar provision.
Poland’s Supreme Court in a recent ruling found a grant of security for parallel debt to be invalid.