Chair: Justice Barbara Romaine, Alberta Court of Queen’s Bench, Canada Speakers: Dr. Janis Sarra, University of British Columbia Patrick Ang, Rajah & Tann Singapore LLP, Singapore Dr. Ignacio Tirado, UNIDROIT/UAM, Italy/Spain Hélène Bourbouloux, FHB, France Chief Justice Geoffrey Morawetz, Ontario Superior Court of Justice, Canada Judge Louise De Carl Adler, U.S. Bankruptcy Court, S. District of California Javier Armando Lorente, Estudio Lorente & Lopez, Argentina Debra Grassgreen, President III
INTRODUCTION JANIS SARRA Photo licensed creative commons
ASIA PATRICK ANG A. SINGA NGAPORE Circuit breaking measures in April and May 2020 • • All stay at home except for essential businesses • COVID19 Temporary Measures Act 2020 • Legislation to allow meetings and court hearings by video conference. Financial aid and schemes by Government. • B. B. COVID19 Tem empor orary M Mea easures A Act 1. Relief for inability to perform scheduled contracts due to COVID19 2. Increase debt thresholds and period for personal and corporate insolvency 3. Implementation of assessor system
ASIA C. C. Sche hedul uled c d contracts • Leases of non-residential property • Construction contracts • Tourism or events related contracts • Hire purchase • Secured facilities for SME D. D. Gover ernmen ent s schem emes es • Job support scheme • Property tax rebates • SME loans - backed by government • Lower interest • deferment of loan installments till end 2020
E. Malay aysia • Central bank directive on loan deferment, and provision of support for restructuring. • Increased threshold in amount and period before insolvency can be commenced • Targeted financial help for tourism and hospitality F. F. CHINA NA • Reduced tax obligations and social insurance contributions • Policy for banks to defer loan repayment for affected industries • Employment policies to reduce unemployment H. H. Pos ost C COVI VID • Which companies will survive? • How to help viable companies who have a debt overhang from the debt relief measures? • Should insolvency and restructuring laws be simplified to deal with large number of cases?
EU U AND ND S SELECTE TED COUNTRI TRIES IGNACIO T TIRADO DO
European Un Union • Not unified action in terms of legal reform • DG Justice, focal point for info. Imp re temporary national measures concerning cross border judicial action • Informally: forbearance concerning state aid restrictions during crisis and immediate aftermath • Economic measures: EIB, ESM, possible joint fund Measures es at Member er S State L e Lev evel el Prior: Italy has postponed entry into force of major reform until Sept 2021; Spain has accellerated its reform process • Opening of Proceedings • A) Duty to file : • Germany , suspension until 30 sept, possible extension 31 March 2021, only if (i) not already cash flow insolvency by 31 Dec 2019, (ii) insolvency caused by Covid (pressumption), (iii) situation can be objectively overcome • Spain , until 31 Dec 20, no duty to file, applicable also during out of court negotiation period • B) Petition by creditors, Spain suspension until 31 Dec 2020; Italy, until 30 June, except filings by Prosecutor if precautionary measures requested to protect assets or the company. • C) The Italian case: no duty to file, but possible liability for late action. Suspended 30 June (extendable). Debtors not allowed to file successfully. Court of Rimini modifying rule
• Spe pecial m measures t to f foster c r credi dit • A) No Subordination of financing from specially related parties • Germany , for loans granted/guarantees provided during suspension period, until 30 Sept 2023 • Spain, for loans granted during state of alarm and for 2 years, in insolvency proceedings opened within those 2 years • Italy, no subordination of intra-group/shareholder loans granted until 31 Dec 2020 • B) Protection of credit thru indirect actions • Germany , limitations to liability of directors for payments in context of continuation of activity or restructuring measures. Payments protected from avoidance. Similar rules in Italy • Other measures • A) Flexibility to restructure work force: eg, Spain temporary dismissals • B) Softening corporate law duties and their timinig, flexibility in the form: Germany, Italy, Spain • C) Protection of consumers ( Germany ) and of specialy vulnerable creditors re mortgage loans ( Spain ) • D) Suspension/postponement of duty to pay tax/social security: Italy, Spain • E) Postponement of terms of compliance with insolvency plans ( Italy, Spain ) • The special case of the Netherlands : No suspension of the duty to file, “as this risks to keep unviable enterprises alive”. They “focus on facilitating speedy restructuring”. No other measures apart from tax deferrals.
FRANCE HÉLÈNE BOURBOULOUX, The French State’s support measures: - preservation of cash in the immediate future : deferral of social security and tax debts, loan deferrals, day-to-day expenses, reinforced short-time work scheme paid by the State… - 1 exception => SMEs benefit from automatic cash payout => financial aid of up to €1,500 for the 1st tranche up to 5,000 for the 2nd => only for smaller SMEs, the self-employed and independent professions, “micro entrepreneurs” - Very unequal access to the PGE (state guarantee of up to 90% of the face value of bank loans; capped at 25% revenues/twice payroll) => banks are the final decision makers and give priority to companies to which they have exposure; distressed companies’ applications are denied, most of the time => French aid system = debt creation => what solvency capacity can be expected? Legal tools for dealing with difficulties: - No new proceedings created - Strongest adjustment of the French law = freeze the economic situation of companies on 12 March => the decrease in activity after 12 March is not taken into account, the suspension of payments is assessed based on the situation on 12 March - Contractual and procedural extensions of time limits => not to penalise litigants + extend the time taken to act in conciliation or collective proceedings (up to 6 ½ months)
FRANCE Judicial activity in France during lockdown: - Overall, commercial courts continued to function : online Registry, electronic hearings with widespread use of videoconferencing, our offices are still working remotely => great adaptability Inside cases => all pending files have become more intense ; huge prevention cases or - collective proceedings already opened in the most exposed sectors (retail with La Halle, automotive with Novares, press distribution with Presstalis…) State-financed "life-support“ (postponement of social security charges, loans, short-time working) = the - peak of the crisis is ahead of us => consolidation of all sectors is expected (competitors, investment funds…) How to prepare for this (we strongly suggest the following) - Measures to promote financing granted to buyers Creation of a State-guaranteed loan to finance takeovers and working capital • requirements Creation of a post-money privilege in order to finance continuity plans • - Drastically speed up the adoption of plans by removing unconstructive formal deadlines - Allow a viable company that is unable to repay its debts to be sold to its manager or shareholder
CANADA CHIEF JUSTICE MORAWETZ • Order granted to Superintendent of Bankruptcy (OSB) pursuant to the Bankruptcy and Insolvency Act (BIA): Re Stephen Francis Podgurski 2020 ONSC 2552 (Ont. S.C.J.). • “Period of the emergency” March 13, 2020, to June 30, 2020 • “Period of suspension” April 27, 2020 to June 30, 2020 • Order applies to all “active commercial proposals” (Division I, BIA ) and all “active consumer proposals” (Division II, BIA ) and all “active bankruptcy files” filed up to end of period of the emergency, excluding bankruptcy discharges on or before the date of order. • Order abridged time for service and filing of the motion and dispensed with notice to every active insolvency file and creditors in Ontario affected.
CANADA For activ ive c commercia ial l pr proposals ls The time for holding creditors’ meeting that is to take place during the period of the emergency, as provided by s.51 BIA , is to be extended by the time of the suspension period, April 27 to June 30, 2020. For active c e consumer p proposals The time for holding creditors’ meeting that is to take place during the period of the emergency, s.66.15 BIA , is to be extended to June 30, 2020. An active consumer proposal shall not be deemed annulled pursuant to section 66.31 BIA unless the consumer debtor is in default: • where payments made monthly or more frequently, default of 3 payments, plus additional of 3 payments for defaults occurring period March 13, 2020 to December 31, 2020; • where payments made less frequently than monthly, default is 3 months after consumer debtor in default, except for payments due between March 13, 2020 to December 31, 2020, now six months after the day on which the consumer debtor is in default.
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