Covid-19 related restrictions on creditor action?                          

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action? 

Making insolvency filings

The Department of Trade and Industry 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.    

These remain in place and have not been revoked. 

An order granting a residential eviction can be obtained, but they cannot currently be executed upon unless specifically ordered by a Court on the basis that it is not just and equitable to suspend the order. 

No formal suspension of insolvency filing duties has been implemented as yet. Furthermore, restrictions on access to courts have been lifted.

A general extension was 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 did not run during the period 27 March 2020 until 16 April 2020 for business rescue proceedings that have not yet commenced. All timing has now reverted to normal.

CIPC 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.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

No restrictions on creditor rights as yet.                                                                                                                                                                                                                                                                                                                              

The temporary inflation of the minimum threshold for creditors to issue a statutory demand on a company (from $2,000 to $20,000) has now lapsed as at 31 December 2020

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

On 23 March 2020, the Commonwealth Government introduced a new insolvent trading 'safe harbour' comprising a six-month moratorium on insolvent trading liability for directors in respect of debts incurred "in the ordinary course of the company's business". 

The 'safe harbour' has now lapsed as at 31 December 2020.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

No restrictions on creditor rights as yet.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

• No statutory restrictions on creditor rights as yet.

• By notifications dated 27 March 2020, 17 April 2020 and 23 May 2020  the Reserve Bank of India (the “RBI”) had permitted banks, all India financial institutions and non-banking financial companies (the “Lending Institutions”) to (i) declare moratorium on payment of instalments (including principal and interest amounts, credit card dues and equated monthly instalments) in relation to term loans which become due between 1 March 2020 and 31 August 2020, subject to interest continuing to accrue during the moratorium period, and (ii) declare a moratorium on interest on working capital facilities availed of in the form of cash credit or overdraft falling due between 1 March 2020 and 31 August 2020 and permit such interest to be paid immediately after the completion of the moratorium period. The moratorium has since ended on 31 August 2020 and RBI has not issued an extension yet.
  

• Indian courts have taken note of the economic disruption caused by COVID-19 and various courts have interpreted the RBI notifications differently, though the general trend has been to grant some form of relief to the borrowers. While the language of the RBI notification suggests that the moratorium and related benefit are discretionary on the part of the Lending Institutions, owing to the lack of a formal clarification from the RBI, the cases in relation to the RBI notifications before the courts had been proceeding on the basis that such moratorium was applicable to all Borrowers. The RBI later clarified, during the proceedings in one of the cases that the moratorium was indeed discretionary. The courts have, however, gone on to interpret the RBI notifications to exclude the time period of the moratorium for asset classification purposes. In one recent judgment, the court prohibited a company from suspending payments on its non-convertible debentures which had been subscribed by a mutual fund since the moratorium under the RBI notifications did not cover mutual funds, debentures, bonds or capital markets investors. Separately, courts had also previously granted interim injunctions against lenders from enforcement of security and even encashment of bank guarantees in light of the COVID-19 situation. However, this has not been a uniform trend and courts have also been reluctant in some cases to deviate from established principles for granting injunctions. 

• Presently, a petition for the waiver of interest payment during the moratorium period and the extension of the moratorium, is sub-judice before the Supreme Court of India.

• The Central Government on 24 March 2020, has increased the threshold for the minimum amount of default to initiate corporate insolvency resolution process (“CIRP”) from INR 100,000 to INR 10,000,000. The move was aimed at preventing triggering of CIRP against medium, small and micro enterprises.
• The Government of India by way of the Insolvency and Bankruptcy (Amendment) Ordinance, 2020 (which has since been replaced by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2020) has amended the provisions of the Insolvency and Bankruptcy Code 2016 to restrict filing of an application to initiate a CIRP on account of any default arising on or after 25 March 2020 until six months thereafter (which was extended up to 24 December 2020 and subsequently up to 24 March 2021 (being the outer limit for such extension under the amendment Act)).

No suspension as yet                                                                                                                                                                                                                                              

-
                                                                                                                                                                                                                                                                                     

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

No restrictions on creditor rights as yet.

• No restrictions on creditor insolvency filings as yet.
• Although not COVID-19 related, it is worth noting that in January 2020 the Indonesian Supreme Court issued guidance on the commencement of bankruptcy and suspension of payment (“PKPU”) cases. The Supreme Court guidance restricted a secured (but not unsecured) creditor from filing a PKPU petition at the Commercial Court. This guidance has now been revoked (April 2020) however and under the new guidelines the filing for PKPU can be made by all class of creditors (including secured creditors).Under the PKPU process, the court will grant a suspension period in respect of the debtor (including a moratorium on security enforcement). It enables the debtor and its creditors to reach an agreement on payment, including through a debt restructuring avoiding a value destructive bankruptcy filing.

•  No suspension as yet.
                                                                                                                                                                                                                           
  

-
                                                                                                                                                                                                                                                                                     

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

No binding restrictions on creditors’ rights "as yet".

However, on 7 April 2020, the Financial Services Agency (the "FSA") announced its requests to the financial institutions which includes the following:

• to flexibly amend the conditions of existing loans, such as payment schedule and period of loans;

• not to treat the cases automatically and formalistically, where companies breach any covenants of the loans, more specifically, to (i) understand the business conditions of the borrower and avoid demanding immediate debt recovery and (ii) promptly and sincerely respond to each company's consultations concerning an amend or waiver of covenants;

• to accept the request of grace period of the loan from the borrower who is adversely impacted by COVID-19 and not to report such cases as arrearage to credit information agencies.

• Subsequently, on 22 May 2020, the FSA published a list of practice examples for the FSA’s request on 7 April 2020 above. The FSA also published the current status of the amendment to the conditions of existing loans (to be updated from time to time and the latest update has been made on 25 December 2020). 
• Furthermore, the FSA has made several requests to the financial institutions relating to facilitation of finance and cash flow support (which include a flexible amendment to the conditions of existing loans) (the latest one was published on 19 January 2021).
  
   
  
  

No binding restrictions on creditor insolvency filings as yet.

No suspension as yet

• For more information with respect to the measures taken by the FSA, see its website (Japanese page and English page).

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

The Covid-19 (Temporary Measures) Act introduced the ability for a non-performing party, during certain the prescribed periods, to obtain a temporary stay on certain all creditor actions for non-performance.

As of January 2021, this applies in respect of (amongst others):

• any performance bond in respect of a construction contract or supply contract; or
• any construction contract and my supply contract.

in both cases, where, (i) amongst others the relevant obligations are due to be performed on or after 1 February 2020 under contracts entered into or renewed before 25 March 2020 and (ii)the inability to perform is to a material extent caused by a COVID-19 event. The relevant prescribed period for this stay will end on 31 March 2021.                                                                          

• The relevant period for general relief measures relating to bankruptcy and insolvency filings has expired.
• However, there is a stay on certain creditor actions in respect of specified categories of contracts (see column on the left). These actions include commencing insolvency/restructuring related proceedings. 

There is no obligation to file for insolvency, though delay can give rise to liabilities for the directors. However, the draft law includes a temporary suspension of wrongful trading rules aimed at assisting directors to keep businesses going without the threat of personal liability – provided that debts are incurred in the ordinary course of business.

Directors remain criminally liable for fraudulently incurred debts.

Client alert:
What you need to know about the COVID-19 (Temporary Measures) Act 2020                                                                                                                                                                                                             

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

• There is no change to the regulations in respect of calling defaults, acceleration, termination or enforcement however:

(B) The Thai Government has issued the Emergency Decree prescribing the financial support measures for SMEs affected by COVID-19 situation B.E. 2563 (2020) (the “Thai Emergency Decree”) which came into effect on 19 April 2020. The measures prescribed under the Thai Emergency Decree are, among others, (i) granting of soft loan through banks and special financial institutions to qualified SMEs for a period of 2 years together with the government’s partial subsidy to such qualified SMEs and (ii) granting of 6 months grace period for loan repayment to qualified SMEs.                                                                      

• There is no change to the regulations in respect of making insolvency filings                                                                                                                                                                      
  

• There is no change to the regulations in respect of suspension of director/company insolvency filing duties
  

• The notification specifies the calculation of default interest under the facility under which repayment is made in instalments and revolving facility made to SMEs or retail debtors. The default interest charged in addition to the normal interest must not be over three percent per annum subject to maximum interest rate specified by other relevant regulations. The default interest can only be calculated based on the amount which has become due and payable (i.e. specific instalments, not the whole outstanding amount which will be due in the future).
• The requirement upon application of repayment proceeds also applies to facilities made to large corporations in addition to the SMEs and retail debtors. The repayment proceeds shall be applied to (i) the fee, (ii) the interest and (iii) the principal amount respectively.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

Commercial banks have been instructed by the State Bank of Vietnam to issue internal rules and decide on restructuring debt repayment terms, exemption and reduction of interests and fees, and retention of debt groups for their customers affected by Covid-19 in accordance with the State Bank's regulations. Notable regulations of the State Bank include:

• Restructuring debt repayment terms: (i) This is applicable to debt (including principal debt and/or interest) arising from lending or finance leasing activities that has to be repaid in the period from 23 January 2020 to the next day after three months have expired from the date the Prime Minister declares that the Covid-19 epidemic has ended; (ii) The extended payment term shall not exceed twelve months from the last day of the original term. 

• Exemption and reduction of interests and fees: This is applicable where the obligation to repay the principal debt and/or interest arises in the period from 23 January 2020 to the next day after three months have expired from the date the Prime Minister declares that the Covid-19 epidemic has ended.
• Retention of debt groups: Commercial banks shall retain the original debt groups as classified pursuant to the State Bank's regulations at the closest time prior to 23 January 2020 for the outstanding debts that are restructured or the outstanding debts on which interest is exempted/reduced as mentioned above. 

Other than above, no restrictions on creditor rights as yet.

No restrictions on creditor insolvency filings as yet.                                                                                                                                                                                                                                            

No suspension as yet                                                                                                                                                                                                                                              

-
                                                                                                                                                                                                                                                                                     

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

• No restrictions on creditor rights as yet with the except of the credit payment holiday provisions:
• This mechanism provides for suspension of the repayment of loans, mortgage loans and credits, for a period of up to 3 months, without charging any interest and other fees. The provisions apply to those who lost their job or other main source of income after 13 March 2020. The suspension occurs automatically upon the submission of an appropriate application to the lender.
  

• No restrictions on creditor insolvency filings as yet.

• The obligation of directors of a company that has fallen into a state of insolvency to file for bankruptcy is deferred for the duration of an epidemic. The company will be obliged to file such a motion within 30 days from the date of cancellation of the state of epidemic threat.
• A company that has fallen into a state of insolvency during the time of the epidemic is to be deemed insolvent due to the COVID-19 epidemic. The burden of rebutting this presumption would lie with the creditor.

Any time limits that relate to the effects of the provisions regarding insolvency and the filing of a motion for bankruptcy shall be extended by the number of days between the date of filing the motion for bankruptcy and the last day on which the motion should have been filed under the general provisions.

• Poland has introduced new solutions to tackle the COVID-19 situation.

1) On 24 June 2020, a simplified restructuring proceeding (uproszczone postępowanie restrukturyzacyjne) entered into force. 
To open the proceedings, the debtor shall:

a) execute a relevant contract with a licensed restructuring advisor;

b) prepare an arrangement proposal and a list of claims and disputed claims;

c) set a date for the arrangement, which must be no earlier than 7 days before and no later than 7 days after the filing of the request for an announcement published in the Court and Commercial Gazette (Monitor Sądowy i Gospodarczy);

d) open the proceedings by way of the announcement published in the Court and Commercial Gazette – the day of publication in the Court and Commercial Gazette marks the formal commencement of proceedings for approval of the arrangement; 

e) collect ballots from creditors and apply to the court for approval of the arrangement within 4 months from the date of the publication of the announcement.

• In order for the arrangement to be approved, a majority of the voting creditors holding at least two-thirds of the total amount of claims owed to the voting creditors must vote "in favor". The court shall issue an approval for the arrangement within two weeks from the date of filing the application.
• During the proceedings, the debtor is prohibited from providing the payments covered by the arrangement and is restricted in making set-off of claims. From the date of opening the simplified restructuring proceedings to the date of their completion or discontinuance, the enforcement proceedings conducted against the debtor are suspended by law, and new ones cannot be initiated. In order to protect creditors, without the consent of the arrangement supervisor, the debtor may not perform actions exceeding ordinary management activities. This is supposed to eliminate the possibility of reduction in the value of assets. Moreover, it is prohibited to terminate, without the consent of the arrangement supervisor, key agreements concluded with the debtor, including lease, rent or credit agreements.
• The declaration for the proceedings may be submitted only once, until 31 July 2021.

2) On 11 August 2020, the Act on Granting Public Aid to Rescue or Restructure Entrepreneurs came into force. The act provides three types of public aid for enterprises in difficulties: rescue aid, temporary restructuring support and restructuring aid.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

No restrictions on creditor rights.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

• In 2020, the Russian Government brought in a moratorium on making insolvency filings in respect of certain debtors. This is no longer in force, having expired in January 2021.
  

• The obligations of an insolvent debtor to file for bankruptcy were postponed during the moratorium period but have since been reactivated.

• The PM has asked the Government to facilitate the review of another draft bill which streamlines existing restructuring procedures in Russia                                                                                                                                                                                                                                                                           

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

• The Belgian financial sector committed to suspend the payment of loan instalments under existing credit lines for viable non-financial Belgian businesses with payment difficulties due to the COVID-19 crisis until 31 December 2020 without charge (the “First Payment Moratorium”). Under the second payment moratorium (the “Second Payment Moratorium”), an additional payment moratorium can be requested until 31 March 2021 for payment dates in January, February and March to the extent that the overall moratorium under the First and Second Payment Moratorium does not cover more than nine months in total.  
• The following measures were applicable between 24 April and 17 June 2020 to enterprises whose continuity is threatened due to the Covid-19 pandemic and which had not yet ceased making their payments on or before 18 March 2020: 

• No enforcement measures can be taken against these enterprises, with limited exceptions;
• the enterprise cannot be summoned in proceedings to have it declared bankrupt, except (i) by summons issued by the Public Prosecutor, (ii) by declaration of the court-appointed administrator, or (iii) with the agreement of the debtor;
• the payment terms laid down in a judicial reorganisation plan pertaining to the company are suspended until the end of the measures; and 
• agreements entered into before the entry into force of the measures cannot be terminated for payment defaults, with the exception of employment agreements.

• The same measures entered into force again between 24 December 2020 and 31 January 2021, for enterprises (i) that are required to close by the Ministerial Decree of 1 November 2020, (ii) whose continuity is threatened due to the Covid-19 pandemic and its consequences, and (iii) that had not ceased paying their creditors on or before 18 March 2020:
  
   

• Creditor insolvency filing was not possible from 24 April to 17 June 2020 in respect of enterprises whose continuity was threatened due to the Covid-19 pandemic and which had not yet ceased making their payments on or before 18 March 2020.

• Creditor insolvency filings in respect of such enterprises were again impossible from 24 December 2020 until 31 January 2021. However, a creditor can request that the President of the Enterprise Court lifts this moratorium for a specific enterprise, provided there are special circumstances which would justify it.
  

• The company insolvency filing duty was lifted from 24 April to 17 June 2020, and again from 24 December 2020 until 31 January 2021.

• On 29 January, the Belgian government has announced that it will no longer work with bankruptcy moratoria. Instead, there will be more flexible access conditions to the judicial reorganisation procedure. In addition, a silent pre-pack would be introduced. No official texts are available at this stage. The new rules are expected to only be applicable as of April.                                                                                                                           

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

Such clauses became effective again from 24 June (included) but only after the expiry of a ‘postponement period’ equivalent to: the time elapsed between 12 March 2020 (or, if later, the date on which the obligation arose) and the date on which the relevant obligation should have been performed, provided that the debtor had not performed its obligation in the meantime.
Theoretically, this postponement period could be of a maximum of 104 days (i.e. until 6 December 2020).

Note that all financial obligations and related financial collateral referred to in Articles L-211-36 et seq. of the French Monetary and Financial Code are expressly excluded from the scope of the suspension regime. Even though loans between a bank and a corporate do not fall within the scope of Articles L 211-36, it does mean that loan facilities granted to certain qualifying parties (e.g. credit institutions, public entities (établissements publics) and local authorities (collectivités territoriales) are excluded from the suspension regime.

The temporary suspension and adaptation of the obligation to file for insolvency proceedings lapsed on 23 August 2020.

The state of cash-flow insolvency triggers an obligation for the debtor’s legal representative to apply for the opening of reorganization or judicial liquidation proceedings within 45 days of the debtor becoming cash-flow insolvent, unless it has filed for (pre-insolvency) conciliation proceedings in the meantime.

As noted in the previous column, since 24 August 2020, the ordinary statutory provisions and obligations in respect of cash-flow insolvency are back in force. 

Until 23 February 2021, or, as the case may be, 23 31 December 2021:

• Various deadlines related to pre-insolvency and insolvency proceedings (e.g. duration of conciliation proceedings, safeguard and reorganisation plans or the intervention of the wages/statutory redundancy payments coverage) are relaxed (pursuant to ordinance No 2020-341 and ordinance No 2020-596 and Law No 2020-1525). As a result, certain proceedings and processes are still ongoing, by exception to the standard statutory provisions.

Further amendments of French insolvency law have been introduced by Ordinance No 2020-596 and continued by Law No 2020-1525 and are still in force:

• improving the debtors’ protection as part of pre-insolvency proceedings (possible individual stay of a creditor’s rights refusing to suspend the maturity of its claim during the conciliation proceedings and relaxation of the conditions to benefit from grace periods, applicable until 31 December 2021);
• facilitating the implementation of restructuring plans in certain circumstances (until 31 December 2021, all debtors are eligible to file for accelerated safeguard and accelerated financial safeguard; until 31 December 2021 challenged claims are not taken into account in the draft plans, and creditors’ individual consultation deadline can be shortened);
• aiming at facilitating the financing of the observation period (and beyond) as wellas the restructuring plans (creation of a safeguard and a reorganisation privilege, applicable until 31 December 2021). For further detail, please see our client alert.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

Temporary suspension of the landlord’s right to termination of leases (commercial and residential) due to rent arrears up until 30 June 2022, if: (i) the arrears were accumulated between 1 April and 30 June 2020; and (ii) the rent arrears were caused by the Covid-19 pandemic.

Temporary suspension of lender’s right to termination under consumer loan agreements in case of payment defaults between 1 April and 30 September 2020 due to the Covid-19 pandemic.

Consumers’ rights to temporarily suspend ongoing contractual payments until 30 June 2020.

Insolvency petitions filed by a creditor between 28 March and 28 June 2020 could only have been successful, if the insolvency of the debtor occurred until and including 1 March 2020.

Temporary suspension of the duty to file for insolvency (usually within 21 days of cash-flow insolvency and/or over-indebtedness) applied until 30 September 2020. Only for the reason of over-indebtedness (and the debtor is not illiquid at the same time) the suspension of the filing obligation was extended until 31 December 2020 unless:

• 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.
• In January 2021 filing duties for illiquidity and/or over-indebtedness were suspended again, if the debtor had applied for Covid-19 state aid in November/December 2020 or was hindered to apply but was entitled to apply. Filing duties are further suspended from 1 February until 30 April 2021 for debtors that apply for Covid-19 state aid until 28 February 2021 or are hindered to apply but are entitled to apply.

In addition to the suspension of filing duties, the law also clarifies the impact of the suspension in respect of the liability of the management:

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

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

As of 1 January 2021 a new German restructuring law came into force implementing the preventive restructuring directive (EU) 2019/1023. The draft of the new German law foresees various pre-insolvency restructuring tools available for companies in the stage of impending illiquidity. Hereby, the German legislator intends to provide a seamless transition from the aforementioned Covid19 related suspensions to the new restructuring law and to create a stabile legal framework for debtors, creditors and other involved stakeholders.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement 

Covid-19 related restrictions on creditor action?

Making insolvency filings

SMEs: moratorium on loans

Law Decree no. 18 issued on 17 March 2020, converted into the law no. 17 of 24 April 2020 (so called “Cura Italia”), as amended pursuant to the Law of 30 December 2020 No.178 provides that:

• freely revocable credit facilities (aperture di credito a revoca) and receivables financings (anticipi su crediti) cannot be revoked (and the available commitment cannot be reduced), in full or in part, until 30 June 2021;
• loans with bullet repayment expiring before 30 September 2020 are extended at the same terms and conditions until 30 June 2021; and
• repayment of instalments of loans or leasing is suspended until 30 June 2021 and then the repayment profile is postponed accordingly. Borrowers may request to suspend the principal component only of the instalments.

These measures apply only to small and medium-sized companies (so called “SMEs”) whose exposure is not classified as non performing exposure as at the date of filing of the relevant request, and are automatically extended pursuant to the Law of 30 December 2020 No. 178 to the SMEs which already requested the moratorium pursuant to the Law of 24 April 2020 no, 17.

• Provisions regarding compositions with creditors (concordato preventivo), debt restructuring agreements, automatic stay and entry into force of the new code of insolvency

Law Decree no. 23 issued on 8 April 2020 (the “Liquidity Decree”), converted into the law 5 June 2020 No. 40, provides that:  

• any deadline for the fulfilment of the obligations arising from compositions with creditors (concordato preventivo) and debt restructuring agreements homologated by the Court, falling in the period between 23 February 2020 and 31 December 2021, is automatically extended by six months;
• in case of any proceeding for the homologation of a composition with creditors or a debt restructuring agreement which is pending as at 23 February 2020, the debtor is entitled to file a petition with the competent Court to obtain a new term up to 90 days for the presentation of a new plan and a new proposal of a composition with creditors or a new debt restructuring agreement. The assigned term runs from the issuance of the relevant Decree by the Court and cannot be extended. The relevant petition can be filed until the date of the scheduled trial for homologation and it will not be admissible if the creditors' meeting has occurred and the majorities set out under Italian bankruptcy law have not been reached;
• the debtor may also ask only for the postponement of the deadlines for the fulfilment of the obligations arising from compositions with creditors or debt restructuring agreements (up to six months), by filing a brief including the indication of the new proposed deadlines together with evidence of the necessity to amend the relevant terms;
• in the case of a pre-application for a composition with creditors, which has already been extended by the competent Court, the debtor is allowed to file a petition for a further extension - up to 90 days - of the deadline for the filing of the relevant proposal, even if the filing for bankruptcy already occurred. The petition shall include specific references to the circumstances which make necessary the extension of the term as a consequence of the Covid-19 emergency. The extension of the term will be granted by the Court in the presence of concrete and justified reasons;
• the same petition for an extension of the relevant term can be presented by the debtor in case of a pre-application of a debt restructuring agreement. In this case the Court shall also verify the existence of the requirements to reach a debt restructuring agreement with the majorities required by the law; and
• the entry into force of legislative decree no. 14 of 12 January 2019 providing for the new Italian code of insolvency has been postponed to 1 September 2021 (originally it should have entered into force on 15 August 2020).

• In case of bankruptcy, the calculation of the periods set out under Italian bankruptcy law for the purpose of bringing claw-back actions shall not take into account the period between 9 March 2020 and 30 June 2020.

• The rules on civil and criminal liabilities applicable to the management of distressed companies (and whoever is aiding and abetting the management) - quite severe in Italy – have not been changed. Particular care is therefore to be paid to distress situations where filing is delayed only because of the non-admissibility set out in the Liquidity Decree.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

No restrictions on creditor rights.                                                                                                                                                                                                                                       

No restrictions on creditor bankruptcy filings.                                                                                                                                                                                                                                                                              

• A law dated 25 November 2020 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 aforementioned obligation is suspended until 30 June 2021 (included).                                               

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

No restrictions on creditor rights as yet. 

• However, the large Dutch banks have indicated that SME borrowers that were otherwise performing will not be required to amortise in certain scenarios, but banks now tend to treat non-performing borrowers on a case-by-case basis. The market expects that banks will increasingly transfer accounts of certain non-performing borrowers to their intensive management (bijzonder beheer)/insolvency departments.
• Furthermore, emergency legislation regarding a temporary suspension of enforcement and other measures in support of companies during the Covid-19 crisis (Tijdelijke Betalingsuitstelwet 2020) has been adopted. These measures apply to companies (other than regulated entities) whose continuity is threatened due to the Covid-19 pandemic. When a petition for bankruptcy or an attachment is filed or a security right is being enforced, such company can request the court to grant a moratorium of two months (which can be extended twice for a two-month period) vis-à-vis the creditor filing such petition/enforcing such right. The court will basically grant such moratorium if:
  (i) the shortage in liquidity is temporary and mainly caused by the limiting measures of the Dutch government due to Covid-19; and
  (ii) the moratorium does not substantially or unreasonably prejudice the interest of the creditor involved.

No restrictions on creditor insolvency filings as yet.

A legislative proposal has been submitted which establishes a temporary suspension on i.a. insolvency petitions, See under ‘Calling defaults, acceleration, termination or enforcement’.                                                                                                                                                                                                                                                                            

• Insolvency proceedings are conducted through written submissions and telephone/video conferences as much as possible.
• Dutch courts will consider all relevant circumstances to determine whether an insolvency filing constitutes an abuse of the current situation. This expressly includes consideration of the impact of COVID-19 and the resulting economic situation. Dutch courts have expressed that they will exercise restraint in granting enforcement actions or insolvency petitions where liquidity problems are primarily caused by Covid-19.
• Dutch insolvency judges are being requested to consider referring insolvency applications to mediation where appropriate, e.g. where a resolution between the debtor and its (main) creditors would take away the need for insolvency proceedings.
  •  
• As of 1 January 2021, the Dutch scheme called ‘WHOA’ came into effect. Until now (end of January) the WHOA has been confirmed by the courts several times, mainly in SME related matters, and expectations are that it will be considered a useful restructuring tool to be used across the (Dutch) market. The WHOA is a Dutch pre-insolvency restructuring procedure allowing for, amongst others:
  
  - a scheme to be offered to the company’s creditors and shareholders (which can be considered a cross-class cram down), including the right to request the appointment of a restructuring expert with the exclusive right to offer a scheme; 
  
  - adequate protection of the creditors’ interest if the court orders a moratorium (including the possibility for the court to approve DIP financings if this serves the creditors’ interests); and 
  - the restructuring expert to request the court to issue special orders in the creditors’ interests.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

• Moratorium on loans until 30 September 2021, provided that the moratorium was requested until 31 March 2021. This entails:
  
  - a restriction on Lenders’ acceleration or termination rights;
  
  - an extension of    financings with bullet repayments; and 
  
  - deferral of all payment obligations.

• Insolvency adjudication, the submission to special revitalization proceeding or to the extrajudicial company recovery scheme of the borrower shall not affect the Lender’s rights, in accordance with applicable legislation.

• Moratorium on tax obligations.                                    

No restrictions on creditor insolvency filings as yet.

Suspension of judicial surrender procedures for the family home.

Insolvent can request suspension of acts to be carried out in the course of insolvency proceedings relating to sales and judicial deliveries of real estate that are likely to cause damages to the insolvent’s subsistence.

• Deadline of 30 days related to the duty for the debtor to file for insolvency due to cash flow insolvency is currently suspended.                                                                                                                                                    

• A new law established a new and more expedient type of recovery proceeding (processo extraordinário de viabilização de empresas) for companies in difficult financial situation due to the Covid19 pandemic. This legislation also temporary amends insolvency provisions (e.g., introducing more flexibility to adapt insolvency plan proposals to Covid19 effects and imposing the distribution to creditors of proceeds exceeding EUR 10,000 emerging from the sale of the assets in insolvency proceedings).

• A new law establishing the suspension of judicial deadlines in connection with non-urgent judicial proceedings (which is not the case of insolvency proceedings) is expected to become effective soon, but with no retroactive effects.

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

1. Spanish government-ordered moratoria (moratoria legal):

• Moratorium of three months on mortgage payments for habitual residence for borrowers experiencing difficulties in making mortgage payments as a result of the Covid-19 crisis (in the cases of economic vulnerability described in the emergency law: unemployment, substantial loss of income etc.). The initial period of the moratoria was three months. This has been extended, for a moratorium granted after 30 September 2020, up to a total of nine months calculated jointly with the private payment moratoria (moratoria convencional) explained below. Debtors were initially entitled to apply for this moratorium until 29 September 2020 but this deadline has been extended until 30 March 2021 (inclusive).
  
  This moratorium has also been extended to:

(i) natural persons who are professionals or entrepreneurs (with regard to the premises where their professional activity is carried out); and

(ii) mortgages for the acquisition by natural persons of housing to be rented (when the owner ceases to receive the rent as a result of the COVID-19 crisis).

• During the moratorium, lenders cannot demand mortgage payments or any repayments of principal or interest. No interest or late payment interest will accrue. The same measures apply to guarantors and sureties of the main debtor, in respect of their habitual residence and with the same terms as for the mortgage borrower.   

• Moratorium of on repayments for consumer credit and other non-mortgage loans (including leasing agreements) for natural persons experiencing difficulties in making payments as a result of the COVID-19 crisis (in the cases of economic vulnerability described in the emergency law). The initial period of the moratoria was three months. This has been extended up to a total of nine months for a moratorium granted after 30 September 2020.
  No interest or late payment interest will accrue. The same measures apply to guarantors and sureties of the main debtor and with the same terms as for the borrower. Debtors were entitled to apply for this moratorium until 29 September 2020 but this deadline has been extened until 30 March 2021 (inclusive).
  
   

2. Private payment moratoria (for mortgages and non-mortgage loans) (moratoria convencional):

• Specific rules have been introduced for payment deferrals agreed voluntarily between lenders and their customers under a sector-wide initiative by Spanish lenders’ associations. The rules set out the requirements for lenders to benefit in terms of the treatment of these payment moratoria for accounting and prudential regulatory purposes under European Banking Authority guidelines (EBA/GL/2020/02).
• Notwithstanding the interest due under the original loans, lenders and borrowers can agree for deferred payments to be made by

(i) changing the repayment calendar, without changing the termination date, or

(ii) extending the termination date by the same number of months as the moratorium lasts.

• The procedures for arranging moratoria have been relaxed and made simpler (simplified pre-contractual information, relaxation of the requirement to sign documents in the presence of notaries etc).

3. Moratorium on mortgage payments within the tourism sector:

Relief is available for self-employed workers and firms registered in Spain: (i) that have mortgage loans subject to Spanish law on properties used in the tourism sector in Spain (a hotel, tourist accommodation, travel agency or other related activities), taken out before the state of emergency; and (ii) that have been caused financial difficulty by COVID-19; and (iii) provided they have not already benefited from another type of moratorium on payments under the loan for a period of more than 12 months. 

The moratorium consists on a deferral of up to 12 months in payment of the principal of the mortgage debt relating to the property used for the tourism business. Payments that would be due from the borrower if the moratorium was not applied will not be considered in arrears. However, the principal of the loan of which payment is deferred while the moratorium applies will accrue loan interest at the rate stated in the original agreement.
Legal entities that benefit from the moratorium cannot distribute profits, repay capital, buy back own shares or pay out returns on capital in any way until the moratorium has ended.
Applications can be made from 7 July 2020 to 30 September 2020.

4. Moratorium within the transport sector:
Self-employed workers and firms that have been caused financial difficulty by COVID-19 can request a moratorium consisting on a deferral of up to 6 months in payment of the principal of the loan, leasing or renting agreements for the acquisition of the vehicles for the transport of passengers by bus or for the freight transport.

The principal of the loan/agreement of which payment is deferred while the moratorium applies will accrue interest at the rate stated in the original agreement.

• Until 31 December 2021 (inclusive), judges will not agree to process petitions for compulsory insolvency proceedings filed by creditors after the state of emergency was declared (i.e. 14 March 2020). If a debtor voluntarily files for insolvency on or before 31 December 2021, this will be processed as a priority even if it comes after creditors petition for compulsory insolvency proceedings.                                                                                                      

• Until 31 December 2021 (inclusive), insolvent debtors will not be under a duty to file for insolvency proceedings, whether or not they have submitted the pre-insolvency notice on initiation of negoatiations with creditors.
• If debtors file for the pre-insolvency notice on initiation of negotiations with creditors on or before 31 December 2021 they will not be under a duty to file for insolvency until 6 months have elapsed from such notice (instead of the general rule of 4 months).
  
   

• Until 31 December 2021, those debtors whose refinancing agreement has been sanctioned by the court can amend that agreement or reach a new one, even if the legal deadline of a year has not elapsed since the previous application for court approval.
• Creditors applications for a declaration of breach of a court-sanctioned refinancing agreement: Courts will communicate to the debtors the applications filed: (i) between 31 October 2020 and 31 January 2021; and (ii) between 31 January and 30 September 2021 but will not process any of them until one month has elapsed from the last date under (i) or (ii). During this month, the debtor may inform the courts of the initiation of negotiations with creditors to amend the agreement or to reach another one. Debtors will have 3 months from the notice to the court to reach the new agreement or amendment of the existing one.
• Similar measures (although with different deadlines) are established for compositions or arrangements with creditors within the insolvency proceedings (convenios).
• In insolvency proceedings that are opened within the 2 years after the state of emergency was declared (i.e. until 14 March 2022), loans and finance provided to debtors by persons closely connected with them (personas especialmente relacionadas) after the state of emergency began will be treated as ordinary claims (and not as subordinated), without prejudice to the privileges to which they may be entitled.

Measures related to the obligation for winding-up:

• The winding up of a company due to the expiry of its duration has been extended for two months after the end of the state of emergency.

• In the case of legal or statutory compulsory winding up, the legal period for directors to call the shareholders meeting is suspended until the end of the state of emergency. If the legal or statutory grounds for winding up occur during the period of the state of emergency, the directors will not be liable for the corporate debts inccurred during such period.
• Losses in 2020 will not be considered in determining whether companies are legally required to be wound up due to the reduction of their net assets to less than half their share capital. If companies post losses for 2021 that reduce their net assets to less than half their share capital, directors must (or any shareholder may) call general meetings within two months from the year end to dissolve the company, unless capital is raised or reduced sufficiently.
  

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement                                         

Covid-19 related restrictions on creditor action?

Making insolvency filings

No restrictions on creditor rights as of yet.                                                                                                                                                                                                                                                     

• No suspension as of 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.

• A number of other regulatory measures have been taken by the Swedish Government in order to alleviate the effects of the pandemic, such as the introduction of various crisis packages containing, among other things, re-orientation aid based on loss of turnover, respite with tax payments and tax refunds, and temporary reductions and suspensions for amortisation payments to banks and borrowers                                                                                  

Covid-19 related restrictions on creditor action?

Calling defaults, acceleration, termination or enforcement;

Covid-19 related restrictions on creditor action?

Making insolvency filings         

• The Corporate Insolvency and Governance Act 2020 (introduced to Parliament on 20 May) (the “Act”) came into force on 26 June.
• The Act introduced a new standalone moratorium (initially for 20 business days but extendable) which is intended to give viable companies an opportunity to develop a business rescue plan, free from immediate creditor pressure. Given the extent of the eligibility exclusions, the standalone moratorium procedure is unlikely to be suitable for companies with complex financing structures. It may however be useful for SMEs.
• The extent of the moratorium is similar to the existing administration moratorium, but it also provides for a payment holiday for certain pre-moratorium debts and prevents the crystallisation of floating charges (there are carve-outs for financial collateral).
• However, debts or other liabilities arising under a contract or other instrument involving financial services are excluded from the moratorium payment holiday. Such liabilities would include amounts owed under loans, finance leases, security contracts and swaps. The company would therefore have to be able to pay all such amounts as and when they fell due, in order to use the moratorium process.
• The Act introduced a new prohibition on the enforcement of contractual termination rights which arise solely because a party has entered into an insolvency procedure. This may have significant consequences for some suppliers of goods and services, although its impact will be lessened by a long list of exceptions. For example, the prohibition does not apply to:
• contracts entered into by banks, insurers, investment banks or securitisation companies (whether such entity is the customer or the supplier); or
• contracts for the provision of financial services consisting of (i) lending (including the factoring and financing of commercial transactions), (ii) financial leasing and (iii) providing guarantees or commitments. The list of excluded contracts also includes swap agreements, derivatives, futures or forwards contracts, securities contracts and commodities contracts.

• The Act introduced temporary restrictions on creditors presenting winding-up petitions where the company’s inability to pay is due to the financial effects of Covid-19 on its business. A creditor may still present a petition if they can successfully show that they have reasonable grounds to believe that the company would still have been insolvent irrespective of the impact of Covid-19.
• These restrictions apply (retrospectively) to petitions presented between 27 April and and 31 March 2021 (extended from 30 September 2020 originally, then from originally, then from 31 December 2020).
• Landlords face restrictions on commercial lease forfeiture for non-payment of rent and from exercising Commercial Rent Arrears Recovery until 30 March 2021.
• A new court Practice Direction relating to the Act sets out a revised practice for dealing with winding-up petitions during this period. It involves a lengthier process - a pre-trial review and a preliminary hearing before, if appropriate, the petition can be heard at a winding-up hearing.

• There is no obligation to file for insolvency, though delay can give rise to liabilities for the directors.
• However, the Act provides that the Court should assume that a director is not liable for wrongful trading during the period between 1st March 2020 and 30th September 2020. Further legislation provides for a similar suspension for the period between 26 November 2020 and 30 April 2021.
• The blanket protection above does not, however, extend to the directors of banks and insurance companies (among others) or, in practice, to directors of most companies with complex finance structures involving bond debt. 
• It is important to note that while liability for wrongful trading may not apply, directors may still face liability for breach of other statutory and common law duties, including their duty to have regard to the interests of creditors and their duty to exercise due skill and care. Directors would also risk being disqualified for conduct which might otherwise have led to liability for wrongful trading.

• For more on the Corporate Insolvency and Governance Act see our client alert on the Bill (as originally published) here.
• A temporary Insolvency Practice Direction has been introduced with effect from 6 April 2020 to provide workable solutions for court users during the current COVID-19 pandemic. Its intention is to avoid, so far as possible, the need for parties to attend court in person and to take into account the likelihood of the Court needing to operate with limited staff and resources.
• Companies House paused its voluntary and compulsory strike off processes on 21 January 2021 but has since annunced that they will recommence from 8 March. This follows previous temporary suspensions in March 2020 which were subsequently lifted in the autumn.