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Covid-19

Relaxation of obligations to file and other insolvency-related reforms/proposals

Covid-19: Relaxation of obligations to file and other insolvency-related reforms/proposals

Our tracker contains an overview of any changes made to applicable insolvency-related filing duties, the introduction of any related moratoria and other insolvency-related issues. As you will appreciate, this is a dynamic situation, and both the measures announced and applicable legal framework will continue to evolve in the coming days, weeks and months.

The tracker is intended merely to highlight legal issues and not to be comprehensive, nor to provide legal advice.

Should you have any questions on the issues reported here or on other areas of law, please contact one of your regular Linklaters contacts.

Last updated: 27 March 2020

Explore each jurisdiction for further information.

Belgium

Last updated: 19 March 2020
Covid-19 related moratorium on creditor action?                           Suspension of insolvency filing duties? Other notes
 - No suspension as yet (duty to file within 1 month of cash flow insolvency). View currently seems to be that this offers sufficient flexibility. We continue to monitor.

France

Last updated: 23 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties?                                    Other notes

The Ministry of Justice issued an information notice on [19/20] March 2020 whereby it announced that in light of the exceptional measures decided (and the limited availability of courts and court-appointed trustees in the current situation), neither insolvency proceedings (i.e. safeguard, judicial reorganization, judicial liquidation proceedings) nor conciliation proceedings should be opened, to the exception of:

 

  • the approval of a sale of the business plan in the framework of insolvency proceedings if it has an impact on jobs;
  • the approval (homologation) of conciliation agreement potentially to the same extent; or
  • the opening of mandat ad hoc proceedings.
No suspension as yet (duty to file within 45 days of cash flow insolvency unless conciliation filed for in the meantime).                                                                                                                                                                          We await an official ministerial decree to make the proposals binding. In any event, the judicial and social treatment of the companies’ financial difficulties will need clarification in this context - e.g. will the activation of the “State wage fund” to cover certain employees’ wages and indemnities still be possible outside formal insolvency proceedings? To what extent could the enforcement of security interests be suspended in such a context?

Germany

Last updated: 25 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes
For an insolvency petition filed by a creditor to be successful, the insolvency of the debtor must have occurred before 1 March 2020.

 

The rules on the suspension of the duty to file for insolvency (see right) do not apply for the filing by a creditor.                                                                                                                              

 

The draft bill suspends the otherwise criminal liability for failure to file when required. There is a temporary suspension of the duty to file for insolvency (usually within 21 days of cash-flow insolvency and/or over-indebtedness) until 30 September 2020.

 

The suspension does not apply in the following events:

 

  • the insolvency has not occurred due to the impacts of the Covid-19 pandemic; or
  • there is no prospect of resolving an existing illiquidity.

If the debtor was not illiquid on 31 December 2019, a rebuttable assumption is established that the insolvency has occurred due to the Covid-19 pandemic and that there are prospects of resolving an existing illiquidity.

The draft bill proposing the amendment of civil, insolvency and criminal proceedings law is still subject to potential changes and still requires the approval by the Federal Council (Bundesrat), for which a meeting is scheduled on Friday, 27 March 2020.

 

The draft bill also clarifies the impact of the suspension to file for insolvency on payment restrictions:

 

  • payments made in the ordinary course of business are deemed to comply with the care required by a prudent management; and
  • this applies in particular to payments serving the maintenance or resumption of business, or the implementation of a restructuring plan.

Subject to conditions, the draft bill also relaxes the rules on lender liability, facilitates the provision of new finance (including by way of shareholder loans) and exempts new financing from claw-back rules.

 

 

Italy

Last updated: 19 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes
 - N/A - no obligation, though delay can give rise to liabilities.  -

Luxembourg

Last updated: 26 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes
No, but general principles of acting in good faith and reputational questions to be considered                                                                                                                                                                                                                                                                                            A Grand-Ducal Regulation dated 25 March has suspended the statutory requirement for directors to file for bankruptcy proceedings (aveu de faillite) within one month of the Luxembourg bankruptcy conditions being cumulatively met.                                                                                                                                                                                                                   

The following matters are being maintained by the courts:

 

  • bankruptcies and liquidations of companies on special grounds of urgency
  • bankruptcy oppositions

Bankruptcy writs are maintained as follows:

 

  • Commercial matters referred by the 2nd chamber: Tuesday 9 AM (6th chamber) and Monday 3 PM (15th chamber)
  • Bankruptcy cases referred by the 2nd chamber: Monday 3 PM (15th chamber)
  • Winding-up of companies: Thursday 9 AM (6th chamber) 

All other matters are being adjourned.

 

Prudent to provide to the court registry the name of any Lux entity who wishes to file for bankruptcy to avoid any liability risks for the managers.

 

Service by a bailiff shall not be done in person but through the deposit of a copy of the document in a sealed envelope. On the same day or at the latest on the first working day following the day of service, the bailiff shall send a copy of the document by postal mail to the address indicated in the document.

 

The Luxembourg Bar, the Luxembourg Courts and the Ministry of Justice are currently working on a draft grand-ducal decree aiming at suspending all legal timeframes until the situation gets back to normal. The draft is likely to address procedural timeframes, contractual timeframes and other applicable timeframes (eg the timeframe to ask or provide the motives of a dismissal).

 

The ability to submit a third-party opposition or appeal against a declaration of bankruptcy are suspended (Grand-Ducal Regulation dated 25 March).

Netherlands

Last updated: 24 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes
-                                            N/A - no obligation, though delay can give rise to liabilities.                                                                                     

Dutch courts are closed but remain open for ‘urgent matters’, including for the handling of insolvency proceedings.

 

A number of major Dutch banks (ABN AMRO, ING, Rabobank, Volksbank and Triodos Bank) have announced that they intend to grant a 6 month extension for repayments and interest payments in respect of commercial loans of up to EUR 2.5m. The 6 month extension will commence as of April 2020.

Poland

Last updated: 19 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes
 - No suspension as yet.                                                                    -                                     

Portugal

Last updated: 24 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes

No moratorium on creditor action as yet.

 

However, law imposing a moratorium on some tax debts has been approved. 

 

Also, recent news suggests that measures related to a moratorium on bank loans and on social security debts could be approved in the coming days.                                         

No suspension as yet (duty to file within 30 days of cash flow insolvency).                                                                                                                                          

Proceedings in the Portuguese courts are generally suspended, except in cases of some urgent proceedings. Although insolvency proceedings are qualified as urgent proceedings, at this stage it is not clear whether any acts will take place during the state of emergency period.   

 

A number of relevant banks have announced that they are willing to consider a 6 month extension for repayments of principal amounts in respect of housing credit and other types of loans.

 

Additional measures are expected to be approved by the Portuguese Government in the coming days. 

 

Russia

Last updated: 23 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes

As a preliminary step the Prime Minister has instructed the state bodies to postpone (until 1 May) any bankruptcy petitioning in relation to their debtors.

 

The Russian Prime Minister has ordered the preparation of a law imposing a moratorium on insolvency proceedings for Russian companies. 

 

The draft bill provides that the moratorium will last for up to six months from when enacted and shall only be effective for certain legal entities (as specified by the Government). Bankruptcy petitions filed during the moratorium period shall be disregarded by the courts. The courts shall also stay existing bankruptcy proceedings for the period of moratorium provided it has not already introduced any bankruptcy procedures (e.g. financial rehabilitation, liquidation, etc).

Draft bill suggests that obligations of insolvent debtors to file for bankruptcy will be postponed during the proposed moratorium period.                                                                                                                                                                                                                                         The PM has asked the Government to facilitate the review of another draft bill which streamlines existing restructuring procedures in Russia.                                                                                                                                       

South Africa

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Last updated: 27 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes

No moratorium on creditor action as yet.

 

The Department of Trade and Industry has issued regulations to:

 

  • exempt a category of agreements or practices between designated retail tenants and the retail property landlords from the application of certain sections of the Competition Act, in order to facilitate discussions regarding rent relief/payment holidays and to avoid the eviction of retail tenants, which would otherwise be contrary to the Competition Act;

 

  • exempt a category of agreements or practices between Banks, Banking Association of South Africa and/or Payments Association of South Africa to prevent an escalation of the disaster, minimise the negative impact of the disaster and to manage the banking infrastructure.                                                                                                                                                                                                                                                       

No formal suspension of insolvency filing duties has been implemented as yet. Furthermore, access to courts has been restricted to any urgent matter, bail applications, Maintenance and Domestic Violence related matters and cases involving Children issues. In our view, insolvency procedures will not fall into these categories.  

 

A general extension has been provided by the Companies and Intellectual Property Commission for business rescue proceedings which commenced, but which did not complete the procedure as stated with in section 129 of the Companies Act, 71 of 2008 (the Act), until 30 April 2020. The time periods set out in the Act will not run during the period 27 March 2020 until 16 April 2020 for business rescue proceedings that have not yet commenced.

 

CIPC has issued a notice stating that it will not invoke its powers under section 22 of the Act. Section 22 of the Act empowers CIPC to issue notices to a company, where it has reasonable grounds to believe that the company is trading or carrying on business recklessly, with gross negligence or for a fraudulent purpose. In the circumstances, where companies are temporarily insolvent and still carrying on business or trading  and where the reason for this is due to business conditions caused by the Covid-19 pandemic, CIPC will not issue a section 22 compliance notice. The notice issued by CIPC in this regard will lapse within 60 days after the declaration of a national disaster has been lifted.

 

 

 
 -                                                                                                              

Spain

Last updated: 19 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes
Creditors’ petitions for compulsory liquidation will not be allowed until two months have passed after the state of emergency has ended, and debtors’ own filings will be given priority even if submitted later. While the state of emergency is in effect, debtors are not required to file for insolvency proceedings (within 2 months of insolvency), even where they applied for protection from creditors under Spanish insolvency law (article 5 bis) and the stipulated negotiation period has elapsed.  -                                                                                                              

Sweden

Last updated: 24 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes
No moratorium on creditor action as yet.                                                                                                                                                                                  

No suspension as yet. An insolvent company should enter in to bankruptcy procedures if it cannot pay its debts and the liquidity issues are not temporary, i.e. there is no duty to file within a certain time. However, delay can give rise to liabilities by continuing the business or through other means aggravating the insolvency.

View currently seems to be that this offers sufficient flexibility. We continue to monitor.                                                                                                             

United Kingdom

Last updated: 25 March 2020
Covid-19 related moratorium on creditor action? Suspension of insolvency filing duties? Other notes

BEIS, the relevant Government department, is currently considering various proposals that would deter hostile creditor action and assist the directors of businesses negatively impacted by Covid-19. It is expected that this will result in some form of statutory relaxation/protection.

 

For now, there is a form of de facto moratorium for winding-up petitions. The High Court is giving a blanket adjournment to any creditor winding up petitions on foot requiring special pleadings to pursue a petition.

 
N/A - no obligation, though delay can give rise to liabilities.                                                                                                                                                                                        

On insolvency filings more generally, the court has said that while it will continue to aim to process all e-filing and hard copy work within the normal turnaround times, these might begin to come under more pressure if, as currently expected, more staff are required to self-isolate.

 

There will also be a core level of staff who are present in the Rolls Building to process hard copy filings and deal with queries. If there is a particularly urgent filing then, best to contact the relevant team dealing with the filing who will prioritise this taking into account other urgent work they are dealing with.