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Cross Border Restructuring and Insolvency Update - April 2018

Sberbank of Russia v Ramljak [2018] EHC 348 (Ch)

The High Court held that "final determination" signifies the very last stage of any proceedings, without the chance to appeal. Sberbank were therefore still bound by their undertaking to take no further steps in an arbitration against the Company.   

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In Re Energy Coal SPA

The Delaware Bankruptcy Court held that comity outweighed the parties' contractual choice of jurisdiction. Although claims would be allowed to be brought in the US, any recoveries would need to be pursued in Italian insolvency proceedings.  

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Short Stories

Israel - Insolvency Law Reform

The Knesset has aimed to update the law on insolvency by passing the Law of Insolvency and Economic Rehabilitation. 

This has arisen as a result of the current insolvency laws being considered to be regulated under outdated legislation, being disorganised and having had a detrimental effect on debtors, creditors, and the economy. The incoming Law will take effect in 18 months' time and is designed to rectify the situation and provide the Israeli economy with modern legislation with respect to insolvency.

The Law has three primary objectives:

  • To promote the debtor’s economic rehabilitation as a primary concern
  • To maximise the debt repayment to creditors and to divide the debtor’s pool of assets in a more equitable manner between secured and unsecured creditors
  • To increase the certainty and stability of the law by streamlining processes and reducing the bureaucratic burden

Germany: cash-flow insolvency

The German Federal Court of Justice (Bundesgerichtshof) has taken the opportunity to clarify its position on section 17(2) German Insolvency Act (Insolvenzordnung, InsO). According to sec. 17(2) a debtor is deemed insolvent if he is unable to pay his debts as they fall due (Zahlungsunfähigkeit).

The Bundesgerichtshof assumed, in previous case-law, that a debtor was not insolvent if he was only temporarily unable to pay his debts (Zahlungsstockung). The Bundesgerichtshof required that the debtor was able to gain the necessary financial means to pay at least 90 percent of mature debts within three weeks. This led some lower courts and practitioners to false conclusions. To establish whether a person or company was insolvent they compared the debts that were due on a specific date with the financial means available on that date plus the estimated incoming payments for the next three weeks.

The Bundesgerichtshof has clarified that not only do you take into account the debts which were due at the beginning of the three week period but also the debts which became due during that period.

The clarifying judgment is to be welcomed as this section is a key part of German insolvency proceedings and directors’ liability cases.

Bundesgerichtshof, 19 December 2017, II ZR 88/16

More trouble for British High Street

There is more trouble for the British High Street as Toys R Us and Maplins have both entered Administration. Toys R Us' remaining stores are due to close once stock is sold as the Administrators have been unable to find a buyer. Maplins' stores remain open for now and the Administrators are still looking to secure a buyer, but so far have been unsuccessful. New Look has announced it will be closing 60 stores, and Carpetright has announced plans to close poorly performing stores. The US company behind Claire's Accessories is undertaking a restructure, but stores will remain open for now, and Mothercare is also seeking advice on refinancing. Restaurants are also struggling, with Prezzo, Chimichanga, and Jamie's Italian closing a number of their restaurants.

Even department store giants Debenhams and House of Fraser are facing difficulties. The owners of House of Fraser are injecting £15 million into the business and have asked EY to advise them. Debenhams have closed some stores and are downsizing others, whilst renting out additional space for gyms and entering into talks with an American company about using areas for hot-desking.