Our tracker contains an overview of changes made in light of the Covid-19 outbreak which impose restrictions on creditor rights, relax debtor obligations to file for insolvency or concern other insolvency-related issues.
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.
Explore each jurisdiction for further information.
Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
The Department of Trade and Industry issued regulations to:
These remain in place and have not been revoked. |
No restrictions on creditor insolvency filings have been implemented. |
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. |
The national state of disaster was extended on 15 August 2020 to 15 September 2020. The country was placed on Alert Level 2 from 18 August 2020 (down from Alert Level 3). |
Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
No restrictions on creditor rights as yet. |
The current minimum threshold for creditors to issue a statutory demand on a company has also been increased from $2,000 to $20,000 for the next six months.
Companies will have six months to respond to a statutory demand (a significant increase from the previous 21 day timeframe), the precursor to winding up proceedings being commenced by creditors.
The temporarily increased threshold and response period will be extended by regulation to 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' was due to lapse after six months, but this insolvent trading relief will now be extended by regulation to 31 December 2020. |
The Treasurer has been given instrument making power to amend provisions of the Corporations Act 2001 (the Act containing the significant provisions regarding insolvency procedures and directors duties), to provide relief from, or modify, obligations under that Act. The power is intended to allow the Treasurer the flexibility to deal quickly with unforeseen circumstances arising from Covid-19, without the need for legislation with its attendant delay. |
Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
No restrictions on creditor rights as yet. |
No restrictions on creditor insolvency filings as yet. | N/A – no obligation and no concept of “wrongful” or “insolvent” trading (only fraudulent trading which is rare) | - |
Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
No statutory restrictions on creditor rights as yet.
However, 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 situation. However, in recent judgments, the encashment of bank guarantees have been allowed, in light of the specific facts of these cases. Owing to the varying decisions of different courts on the implementation of the RBI notifications, it remains a challenge to conclude on what the final interpretation on the applicability of the moratorium would be. Since most of the court orders on the RBI notifications are interim in nature, the final judgements in these cases may shed more clarity on this aspect.
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 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 may be extended up to one year).
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No suspension as yet |
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
No restrictions on creditor rights as yet.
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
No binding restrictions on creditors’ rights "as yet".
However, on 7 April, the Financial Services Agency (the "FSA") announced its requests to the financial institutions which includes the following:
Subsequently, on 22 May, the FSA published a list of practice examples for the FSA’s request on 7 April above. |
No binding restrictions on creditor insolvency filings as yet. |
No suspension as yet |
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
The Covid-19 (Temporary Measures) Act introduced the ability of a non-performing party, during the prescribed period, to obtain a temporary stay on all creditor action for non-performance, in respect of (among others):
in each case, where such obligations due to be performed on or after 1 February 2020 under contracts entered into or renewed before 25 March.
The prescribed period is a period of 6 months commencing on 20 April 2020 (“prescribed period”). |
During the prescribed period:
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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: |
Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
(A) On 28 February 2020, the Bank of Thailand (“BOT”) has requested for cooperation from banks and financial institutions in order to urgently consider assisting qualified debtors that have been affected by the COVID-19 situation with pre-emptive funding and liquidity enhancement measures.
These measures are, among others, (i) approving additional working capital loans and (ii) approving debt restructuring through extending payment terms for all types of credit facilities including packing credit or trust receipts, renewal/ maintenance of credit limit, conversion of a short-term loans to long-term loans, granting of temporary grace periods, reduction of interest, liquidated damages or fees and charges, reduction of interest rate (i.e. lower than the market rate), allowing repayment of principal before interest or any other measures as may be appropriate.
Note: Qualified debtors are debtors whose credit facilities are classified as either (i) non-NPL (stage 1 or stage 2) as at 1 January 2020 or (ii) NPL as at 1 January 2020, unless banks or financial institutions are able to prove that the NPL before 1 January 2020 was caused by the COVID-19 situation.
(B) The Thai Government has issued the Emergency Decree on 7 April 2020 prescribing the financial support measures for SMEs affected by COVID-19 situation B.E. 2563 (2020) (the “Thai Emergency Decree”). 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.
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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 |
Suspension of director/company insolvency filing duties? | Other notes |
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:
Other than above, no restrictions on creditor rights as yet. |
No restrictions on creditor insolvency filings as yet. |
No suspension as yet |
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
No restrictions on creditor rights as yet. |
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
No restrictions on creditor rights as yet (note restrictions on enforcement over pledged assets in “Making insolvency filings” column). |
The Prime Minister has instructed the state bodies to postpose (until 1 May) any bankruptcy petitioning in relation to their debtors.
The Russian Government has enacted a six-months regime of a moratorium on insolvency filings of certain debtors pursuant to a recently enacted law on bankruptcy moratorium. The list of legal entities affected by the moratorium has been produced by the Government. It currently includes systemic entities and entities of strategic importance for the Russian economy as well as entities involved in certain economic activities.
Bankruptcy petitions filed during the moratorium period shall be disregarded by the courts. During the moratorium period any financial sanctions (fines, penalties) shall not accrue and in-court/out-of-court enforcement measures shall be postponed (in particular enforcement over pledged assets is not permitted).
Any transactions of an affected debtor - other than those entered into in the ordinary of course of the debtor’s business and whose value does not exceed 1% of the debtor’s assets - are void if entered into during the moratorium period. |
The obligations of an insolvent debtor to file for bankruptcy will be postponed during the moratorium period. An insolvent debtor will, however, retain its right to file for its bankruptcy. |
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 |
Suspension of director/company insolvency filing duties? | Other notes |
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
As a reminder, where their purpose was to sanction breach of an obligation within a set period of time, acceleration or termination clauses provided in contracts (including loan agreements between a bank and a corporate) were deemed not to have commenced or taken effect if that period expired between 12 March 2020 and 23 June 2020 (included) (the "Protected Period").
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. The effectiveness of acceleration or termination clauses sanctioning the breach of an obligation (other than the payment of a sum of money) which were to be performed at a date beyond the end of the Protected Period, have also been postponed by a period equivalent to: the time elapsed between 12 March 2020 (or, if later, the date on which the obligation arose) and 23 June (included) (i.e. 104 days maximum). Note that the parties were entitled to waive or set aside these provisions. 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.
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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 June, or, as the case may be, 23 August 2020:
Further amendments of French insolvency law have been introduced by Ordinance No 2020-596, and are still in force:
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
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 are accumulated between 1 April and 30 June 2020; and (ii) the rent arrears are caused by the Covid-19 pandemic.
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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:
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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:
As of 1 January 2021 a new German restructuring law shall 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, German legislator intents to provide a seamless transition from the aforementioned Covid19 related suspensions to the new restructuring law and creating a stabile legal framework for debtors, creditors and other involved stakeholders.
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
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”), provides that:
These measures apply only to small and medium-sized companies (so called “SMEs”) whose exposure is not classified as non performing exposure as at 17 March 2020.
The law decree No. 104 of 14 August 2020 has further extended the moratorium on loans for SMEs in paragraphs (a) to (c) above from 30 September 2020 to 31 January 2021.
Law Decree no. 23 issued on 8 April 2020 (the “Liquidity Decree”), converted into the law 5 June 2020 No. 40, provides that:
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
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 |
Suspension of director/company insolvency filing duties? |
Other notes |
No restrictions on creditor rights.
But a number of major Dutch banks (ABN AMRO, ING, Rabobank, Volksbank and Triodos Bank) granted a 6 month extension for repayments and, in some cases, interest payments in respect of commercial loans of up to EUR 2.5m (or up to EUR 50m in the case of ABN AMRO). The 6 month extension will commence as of April 2020.
A legislative proposal has been submitted which introduces the possibility to request a temporary suspension of insolvency petitions, enforcement action and other measures of up to 6 months. The proposed measures applies to debtors (other than regulated entities) whose continuity is threatened due to Covid-19. |
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’. |
N/A - no obligation, though delay can give rise to liabilities. |
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.
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
Moratorium on loans until 30 September 2021, provided that the moratorium was requested until 30 September 2020. This entails:
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. |
Duty to file within 30 days of cash flow insolvency is currently suspended. |
A recent 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).
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
1. Spanish government-ordered moratoria (moratoria legal):
(i) natural persons who are professionals or entrepreneurs (with regard to the premises where their professional activity is carried out); and
2. Private payment moratoria (for mortgages and non-mortgage loans) (moratoria convencional):
(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.
3. Moratorium on mortgage payments within the tourism sector: |
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Other measures related to pre-insolvency and insolvency (we highlight the key points):
Measures related to the obligation for winding-up:
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Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
No restrictions on creditor rights as yet. |
No restrictions on creditor insolvency filings 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. |
Covid-19 related restrictions on creditor action?
Calling defaults, acceleration, termination or enforcement; |
Covid-19 related restrictions on creditor action?
Making insolvency filings |
Suspension of director/company insolvency filing duties? | Other notes |
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