Welcome to the February edition of the INSOL News Update. As the carnival feast is approaching in certain Latin American and European countries, we hope that this wide celebration and a heightened sense of social unity may inspire both individuals, companies and countries to overcome their difficulties. 

On the theme of overcoming difficulties, our highlight article this month comments on the modernisation and revision of the rules of insolvency and bankruptcy in Latin American countries including Brazil, Chile and Argentina. The article analyses the trends in amendment to local legislation, which aims to assist companies in overcoming financial crisis and in turn aid the recovery of the national economies of such countries from periods of recession.

Another article reviews eight cases from the BVI Commercial Court and BVI Court of Appeal from the past year demonstrating the significant progress made in the recovery of the British Virgin Islands from the category five hurricanes that hit its territories in September 2017.  From the US, we have a case note on a Chapter 15 case – where the concept of comity trumped contractual choice of law and venue provisions.  Also from the U.S. the results of an annual survey on the predicted insolvency trends for 2018. From India we have a case study analysing how to potentially structure and conduct a pre-packaged reorganisation of an Indian company using the corporate insolvency resolution process under the new Insolvency and Bankruptcy Code 2016.  Another great article looks at the Scandinavian legal landscape with regard to cross-border insolvency proceedings, discussing the effects of the Nordic Bankruptcy Convention and the singularities of the application of the recast European Insolvency Regulation to some of these countries.

We hope you enjoy the information and ideas shared in the articles and case studies in this month’s newsletter and we invite and encourage all of you to contribute details of new developments in insolvency practice from your respective regions and share your commentary and articles with our editorial board.

Fábio Rosas
Partner
Cescon, Barrieu, Flesch & Barreto Advogados, Brazil

Developments in Insolvency Legislation in the Latin American Region 

The highlight article this month looks at how recent economic and political crises in certain Latin American countries have drawn attention to the insolvency regimes of these countries and their effectiveness in assisting companies to restructure and in turn facilitate economic recovery.  In Brazil, a government working group has made recommendations for amendments to the Brazilian Bankruptcy Law (BBL) to include: allowing creditors to offer an alternative reorganisation plan; establishing regulations to incentivise financiers to provide finance to the debtor during a reorganisation proceeding; and incorporating cross-border recognition and cooperation in reorganisation and liquidation proceedings.  The proposed alteration of the BBL follows the modernisation and revision of the rules of insolvency and bankruptcy in other countries of Latin America, such as Chile and Argentina. The revision of the legislation across the region has as its common objective the facilitation of corporate rescue and reorganisation-centred rules. It is hoped that these amendments will increase investment and assist countries in the region to preserve their dynamic economies.

By

Fábio Rosas
Partner
Cescon, Barrieu, Flesch & Barreto Advogados, Brazil

To read the full article please click here

Cases

USA

Chapter 15: U.S. Creditor Required to Seek Recovery in Foreign Main Proceeding

In re Energy Coal S.P.A., No. 15-12048 (LSS), 2018 Bankr. LEXIS 10 (Bankr. D. Del. Jan. 2, 2018 

In this, one of the first decisions issued in 2018 in a Chapter 15 case, the U.S. bankruptcy court allowed a U.S. creditor to liquidate its claim in a lawsuit brought against an Italian debtor in the U.S., but required the creditor to seek collection from the debtor in Italy, the country where the foreign main proceeding was filed.  Judge Silberstein’s decision hinged on whether the choice of law and venue clauses in the parties’ contracts should yield to the concept of comity embedded in chapter 15.  The upshot of the decision is that respect for the foreign main proceeding and the concept of comity trumped contractual choice of law and venue provisions.

For a case note please see Patterson Belknap Webb & Tyler Bankruptcy Update, 9 January 2018 

For the case decision please click here

Articles

British Virgin Islands

BVI Dispute Resolution & Insolvency Update January 2018

This Update reviews eight cases from the BVI Commercial Court and BVI Court of Appeal from the past year.  In September 2017, the British Virgin Islands were hit by category five hurricanes Irma and Maria which caused considerable devastation. The BVI Commercial Court temporarily relocated to St Lucia and impressively got back on its feet quickly in order to support the international financial services business of the BVI. This month the Commercial Court moved back to the BVI, marking significant progress in the recovery of the islands. The decisions referred to demonstrate the strength and breadth of the jurisdiction during difficult times.

For the full article please see Carey Olsen Client Update, January 2018

USA

Alixpartners 2018 Annual Restructuring Experts Survey: A Bit of the Old Mixed with a Bit of the New

The retail and oil & gas sectors dominated the 2017 distressed landscape in the US.  Which industries in the US and abroad are most likely to face distress this year? What caused the record number of retail bankruptcies last year? Will there be even more restructuring activity in 2018?  More than 200 North American restructuring experts gave their opinions on those and many other critical questions facing the industry as highlighted in this annual survey.

For the full survey please see AlixPartners LLP Insight, January 2018
 

Legislation

Hong Kong

New Obligation for Unlisted Hong Kong Companies to Keep a Register of their Significant Controllers 

From 1 March 2018, companies incorporated in Hong Kong will need to maintain a register of persons having significant control over them, known as a “significant controllers register” or “SCR”. This register will not be made public and it will not need to be filed with the Companies Registry, but law enforcement officers can have access to it upon demand. This new obligation does not apply to overseas companies even if they have a Part 16 “non-Hong Kong company” registration status. Hong Kong companies with shares listed on the Hong Kong Stock Exchange will be exempt, as information on their significant shareholders is already disclosed to the public pursuant to the Securities and Futures Ordinance. However, their Hong Kong subsidiaries will still need to comply. 

For the full article please see Linklaters Asia Alert, 30 January 2018

Articles

India

(i) Pre-Packaged Reorganisations under the Insolvency and Bankruptcy Code 

This article provides, by way of a hypothetical case study, a high-level analysis of how to potentially structure and conduct a pre-packaged reorganisation of an Indian company using the corporate insolvency resolution process under the Indian Insolvency and Bankruptcy Code 2016.  Pre-packaged reorganisations are a popular tool for restructuring distressed companies in the US and the UK. In the shortest sense, Indian law does not provide for a classical UK pre-pack and this case study analyses the potential manner in which a pre-packaged reorganisation may be implemented in India. 

For the full article please see Khaitan & Co Article, February 2018

(ii) A Guaranteed Mess?

Recent news reports indicate that the State Bank of India, India’s largest corporate lender has decided to invoke all outstanding personal and corporate guarantees in relation to companies undergoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code 2016. The treatment of guarantees issued by and in favour of companies undergoing CIRP should be relatively straightforward under the IBC. But jurisprudence over the last few months in this context has introduced complexity. This note briefly sets out the key themes that have evolved so far.

For the full article please see AZB & Partners IBC Update, January 2018 

Cases

UK

The Ongoing Deconstruction of Carillion 

Since Carillion Plc entered compulsory liquidation on 15 January 2018, there has been a swathe of further Carillion group company liquidations, as follows:

• 16 compulsory liquidations of English registered companies
• an appointment of provisional liquidators over a Scottish company; and
• an Order made under the Companies Creditors Arrangement Act in Canada to protect 4 Canadian subsidiaries whilst they put forward a rescue plan.

For the full article please see Squire Patton Boggs eSquire Global Crossings, 31 January 2018

blications and News

INSOL International Special Report – PRC Enterprise Bankruptcy Law and Practice in China: 2007 to a Record-breaking 2017 

January 2018
 

The Enterprise Law of the PRC came into effect in 2007. It has been observed that the progress made so far has been staggering with a record number of bankruptcy cases filed and various new initiatives introduced.  The PRC Government, private sector officials, academics and insolvency practitioners have all cooperated in full and contributed significantly to achieve this success. Since 2008, the PRC Supreme People’s Court together with several other organisations has jointly organised an annual Bankruptcy Symposium to provide a platform for insolvency and related professionals to discuss matters of interest in an open forum.

This paper discusses some of the key issues that were discussed at the 8th Symposium which included – the judicial interpretation of the law; analysis of the reasons as to why bankruptcy is not used in the PRC; the development of the administrator system and bankruptcy reorganisation and practice including cross-border considerations.

INSOL International sincerely thanks Prof. Wang Xin Xin, Dean of Bankruptcy Law Research Centre of Renmin University, Beijing; Prof. Xu Yang Guang, Vice Professor of Renmin University, Beijing and Mr. Alan CW Tang, Head of SHINEWING Specialist Advisory Services, Hong Kong for jointly writing this excellent paper. The information contained in this report, which is not generally available elsewhere, will no doubt be very helpful to INSOL members.

To view the special report please click here

INSOL International Technical Paper Series – Avoidance of Antecedent Transactions and Cross-border Insolvency in the Czech Republic

January 2018

This paper provides members with a detailed overview of Czech insolvency law governing the avoidance of payments and other transactions (and the consequences of that avoidance) effected before and during insolvency. The paper also examines issues of avoidance and recovery of transactions in a cross-border context.

INSOL International sincerely thanks Petr Sprinz, partner, HAVEL & PARTNERS for providing us with this country study and excellent technical paper. 

To view the technical paper please click here

If you would like to send an article for inclusion in one of our forthcoming issues please contact our Technical Officer, Louise Jennings at louise@insol.ision.co.uk

If you would like to introduce a new member to INSOL International please contact our Database Manager, Tony Ashton, at tony@insol.ision.co.uk

American Bankruptcy Institute  
Asociación Argentina de Estudios Sobre la Insolvencia  
Asociacion Uruguaya de Asesores en Insolvencia y Reestructuraciones Empresariales  
Association of Business Recovery Professionals - R3  
Association of Restructuring and Insolvency Experts  
Australian Restructuring, Insolvency and Turnaround Association  
Bankruptcy Law and Restructuring Research Centre, China University of Politics and Law 
Business Recovery and Insolvency Practitioners Association of Nigeria  
Business Recovery and Insolvency Practitioners Association of Sri Lanka  
Canadian Association of Insolvency and Restructuring Professionals  
Canadian Bar Association (Bankruptcy and Insolvency Section)  
Commercial Law League of America (Bankruptcy and Insolvency Section)  
Especialistas de Concursos Mercantiles de Mexico  
Finnish Insolvency Law Association  
Ghana Association of Restructuring and Insolvency Advisors  
Hong Kong Institute of Certified Public Accountants (Restructuring and Insolvency Faculty)  
INSOL Europe  
INSOL India  
INSOLAD - Vereniging Insolventierecht Advocaten 
Insolvency Practitioners Association of Malaysia  
Insolvency Practitioners Association of Singapore  
Instituto Brasileiro de Estudos de Recuperação de Empresas  
Instituto Brasileiro de Gestão e Turnaround  
Instituto Iberoamericano de Derecho Concursal  
International Association of Insurance Receivers  
International Women’s Insolvency and Restructuring Confederation  
Japanese Federation of Insolvency Professionals 
Korean Restructuring and Insolvency Practitioners Association   
Law Council of Australia (Business Law Section)  
Malaysian Institute of Certified Public Accountants  
National Association of Federal Equity Receivers  
Nepalese Insolvency Practitioners Association  
NIVD – Neue Insolvenzverwaltervereinigung Deutschlands e.V.  
  Recovery and Insolvency Specialists Association (BVI) Ltd  
 Recovery and Insolvency Specialists Association (Cayman) Ltd 
Restructuring and Insolvency Specialists Association of Bermuda 
REFOR–CGE, Register of Insolvency Practitioners within "Consejo General de Economistas, CGE"  
Restructuring Insolvency & Turnaround Association of New Zealand  
Russian Union of Self-Regulated Organizations of Arbitration Managers  
Society of Insolvency Practitioners of India  
South African Restructuring and Insolvency Practitioners Association   
Turnaround Management Association do Brasil
Turnaround Management Association (INSOL Special Interest Group)