supervising the bankruptcy proceedings and assisting the insolvency administrator in managing the insolvent debtor’s matters.
What is the method for the filing of claims?
One of the duties held by the insolvency administrator is to notify and invite all creditors included in the relevant list drafted by the debtor, to announce and thereafter validate their claims. The claims will then have to be verified individually by the insolvency administrator before the Insolvency Court Judge.
What is the timing for the filing of claims?
In announcing and validating their claims, creditors are given a time limit of 3 months, commencing from the date of the public notification of the decision declaring the debtor bankrupt. Thereafter, creditors that failed to make the relevant announcement on time are entitled to file an application before the court for verifying their claim.
How will claims rank?
The following priority applies for claims during the bankruptcy proceedings 1. Cost incurred in the bankruptcy proceedings
2. Preferential claims (employee remuneration, taxes and social security contributions) 3. Secured claims
4. Unsecured claims.
Are there other complex issues arising by virtue of the insolvency, for example an insolvency officer prescribed method for claims filing?
N/A
Do cram-down procedures exist?
Both the rehabilitation and the re-organization procedures have cram-down effect and accordingly are binding for all dissenting or non-participating creditors.
How is the procedure formally concluded?
See above
What is the outlook for creditor classes?
See above
Are there non-formal procedures available to the company?
The conducting of negotiations may be employed as an informal procedure in cases of restructuring. Such an alternative method though can only be successful under certain circumstances and is also subject to various statutory limitations.
Are there accelerated processes available?
The GRBC provides for an accelerating bankruptcy procedure. The procedure, however, can only be applied if two cumulative criteria are met. Namely, that the debtor’s assets value does not exceed the amount of €100,000 (One hundred thousand euros) and that no immovable properties are included therein.
GREECE
5. claims issues and procedures
6. conclusion of insolvency procedure
7. Alternative
forms of
restructuring
What international framework of rules apply to the company?
Further to the established national legal framework, Greek law also incorporated EU Regulation 1346/2000. Additionally, the text of UNCITRAL Model Law on Cross –border Insolvency, is, to a large extent, reflected in Law N.3858/2010.
What is the approach of the company’s jurisdiction in respect of recognition of foreign proceedings?
Greek courts have widely recognized foreign insolvency proceedings.
GREECE
8. International
Interaction
How might a creditor take security over assets?
A creditor can create a security in a number of ways under Indian law. The most common way of taking security is by creating a charge over the assets of a debtor. A charge can be ‘fixed’ (over certain specific property) or ‘floating’ (over underlying assets that are subject to change). A floating charge does not affect the ability of the debtor to use the underlying asset – only if the debtor fails to repay the loan, or suffers any other specified event of default, does the floating charge become ‘crystallised’ or converted into a fixed charge.
Alternatively the creditor may require the debtor to hypothecate, mortgage, pledge or grant a lien (as appropriate) in favour of the creditor, over the assets of the debtor.
Certain specific charges (including a mortgage) on movable property and immovable property of a company have to be registered with the relevant Registrar of Companies under Section 125 of the [Indian] Companies Act, 1956, as amended (the “Companies Act”)1in the prescribed form. These compulsorily registrable charges include, inter alia, a charge on any immovable property.
Can transactions entered into by the company be vulnerable to attack?
The debtor company must have due capacity by virtue of its constitutional documents to enter into any debt and security transactions.
In addition, certain past transactions entered into by a company that is being wound-up can be set aside. Pursuant to Section 531 of the Companies Act, any transfer of property, moveable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within a period of six (6) months prior to the commencement of its winding up, shall be deemed a fraudulent preference of its creditors and be invalid. The essence of ‘fraudulent preference’ is the giving of an improper benefit to a few creditors in preference to others, leading to inequality between them. So, it should be established that the dominant motive in the mind of the Company (acting through its directors) was to prefer one creditor in preference to other creditors.
Further, as per Section 531A of the Companies Act, any transfer of property, moveable or immovable, delivery of goods made by the company not being a transfer or delivery made in the ordinary course of business or in favour of a purchaser or encumbrancer in good faith, made within one (1) year from the passing of a resolution for voluntary winding up shall be deemed to be void against the liquidator. The purpose of Section 531A is to preserve the assets of the company and to enable the company to carry out transactions that might be for the benefit of those interested in the assets of the company. An application under this section for setting aside a transfer can be allowed where it is either proved that there was no consideration for the transaction or that the consideration was so inadequate as to raise a presumption of want of good faith.
INDIA
1. Issues arising when a company is in financial difficulties
India
Mr. siddhartha George, Partner / Mr. vishnu Jerome, Partner, Poovayya & co., Advocates & solicitors
www.poovayya.net/home.html, email: [email protected] / [email protected], tel: +91 98803 55883 / +91 98199 72712
1 It may be noted that the Companies Bill, 2012, which contains comprehensive amendments to the Companies Act, has been passed by India’s lower house of Parliament and is now being considered by the upper house of Parliament.
What director liabilities might arise from the company trading while in distress?
Indian law does not, in general, distinguish between the duties of the directors of a solvent company and the directors of a company that is “in distress” or is being wound-up.
A director under Indian law owes certain fiduciary duties to the company, including the duty to act in good faith, and to ensure proper use of such director’s powers. These duties are in addition to such director’s duties of administration and compliance as required under the Companies Act. The directors of a company being wound-up will have additional responsibilities, including calling shareholders and creditors meetings and filings returns and statements.
What formal procedures are available for the company?
The shareholders of a debtor company can resolve to have the company voluntarily wound-up by passing a special resolution under Section 484(1)(b) of the Companies Act.
The directors of a company pursuant to a “member’s voluntary winding up” are required, inter alia, to make a declaration that the company is able to pay its debts in full (Section 488(5)). If the company cannot make such declaration, the resultant voluntary winding-up is referred to as a “creditors’ voluntary winding-winding-up”.
The Company’s creditors would be involved to a large degree in a creditor’s voluntary winding up process. The creditors may decide the appointment of the liquidator, and may also decide whether to appoint a committee of inspection, whose members would be nominated by the Company (subject to the creditors’ consent) (Section 503 of the Companies Act).
In principle, once the winding up resolution is passed and the creditors’ meeting is held, wherein the winding up is approved, the role of the Board of the Company diminishes significantly. Practically, upon the appointment of the liquidator, the liquidator would essentially undertake the process of winding up the Company and carrying on the business of the company only to the extent as is beneficial to the winding-up process, and there would be little or no responsibility on the part of the Board or other officers of the Company.
Which procedures are creditor-friendly/debtor-friendly?
As set out above, the creditors of a company have a bigger role in a creditors’ voluntary winding up.
What are the triggers for insolvency?
In addition to the voluntary winding up provisions referred to above, a company may be wound up by the tribunal2under Section 433 of the Companies Act:
i. if the company has, by special resolution, resolved that the company be wound up;
ii. if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting;
iii. if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;
iv. if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two;
INDIA
2. Taking action
2 In practice, since the national companies law tribunal has not yet been set up, the state High Courts continue to exercise jurisdiction in such matters.
v. if the company is unable to pay its debts;
vi. if the tribunal is of the opinion that it is just and equitable that the company should be wound up;
vii. if the company has made a default in filing with the Registrar its balance sheet and profit and loss account or annual return for any five consecutive financial years; or viii. if the company has acted against the interests of the sovereignty and integrity of
India, the security of the State, friendly relations with foreign States, public order, decency or morality.
A company shall be deemed to be unable to pay its debts (Section
434)-i. If a creditor has made a claim exceeding Rupees One Lakh Only (INR 100,000/-) and the company has failed to satisfy the claim for a period of three (3) weeks;
ii. If the execution or other process issued in favour of a creditor is returned unsatisfied; or
iii. if it is proved to the satisfaction of the tribunal that the company is unable to pay its debts.
What is the process for filing?
In the event that a petition for compulsorily winding-up a company is made before the tribunal under Section 439, the tribunal may, inter alia, make an order for winding up the company (Section 443). The tribunal will notify the Official Liquidator (Section 444), who is required to submit a report to the tribunal within six (6) months setting out particulars of the capital, assets and liabilities of the company. The Official Liquidator has wide powers under Section 457, including, inter alia, to sell any assets of the company being wound up. When the affairs of the company are completely wound-up, the tribunal may make an order dissolving the company (Section 481).
In the case of a voluntary winding up, the company is required to pass a special resolution and appoint a liquidator. The liquidator will then, subject to the provisions of the Companies Act, proceed to wind-up the company and realize all of its assets, pay its liabilities and distribute any surplus share capital.
Who can place the company into insolvency proceedings?
In addition to the voluntary winding-up procedure set out above, certain persons may apply to the tribunal to compulsorily wind-up a company. An application to the Court for winding up of a company can be made:
i. by the company; or
ii. by any creditor or creditors, including any contingent or prospective creditor or creditors; or
iii. by any contributory or contributories3; or
iv. by all or any of the parties specified in clauses (i), (ii) and (iii), whether together or separately; or
v. by the Registrar of Companies.
INDIA
3 The term “contributory” means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid up; and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory (Section 428 of the Companies Act.)
What is the extent of court involvement?
As set out above, the tribunal may, upon a winding-up petition being presented before it, order a company to be compulsorily wound-up. In addition, the tribunal has wide powers to “make any interim order” (section 443(c)). The tribunal will also oversee the exercise of the liquidator’s powers (Section 458, 460 and 462).
Even in voluntary winding-up proceedings, the tribunal has the power to appoint a liquidator where no liquidator is acting, or to remove a liquidator for cause (Section 515) and to settle any questions (Section 518).
The Companies Act does not place any restriction on the powers of the High Court in relation to winding up proceedings. In fact, the courts have wide powers to commence winding up proceedings e.g. if the court is of the view that it is “just and equitable” to commence the same.
How long will the insolvency process take?
Depending on the size of the company, the liabilities and the number of creditors, it could take a minimum of six (6) months, with no maximum time limit to wind up a company.
What other steps, such as notices, are required?
In the case of a voluntary winding up, the company shall within fourteen days of passing a resolution for voluntary winding up, provide notice of the same in the Official Gazette and in a newspaper being circulated in the same district as the registered office of the company. The company is also required to make statutory form filings in respect of the appointment of the liquidator. The liquidator is also required to make filings in respect of the winding-up process, including yearly reports.
Is there anything resembling a debtor in possession process?
No.
Are there any political factors which may come into play?
No.
How are unsecured creditors affected?
The right of an unsecured creditor to make a claim on the property would depend on the provisions of various legislations such as the Companies Act, the Transfer of Property Act, 1882 and the Limitation Act, 1963.
If the debtor is insolvent, an unsecured or secured creditor will be required to obtain a judgment and decree in its favour for the purposes of enforcing its claim on the property.
An order for the attachment of property will be executed in accordance with the provisions of the Order XXI of the Code of Civil Procedure 1908 which inter alia contains provisions relating to notice of garnishment, etc.
In the event that a debtor company is already in winding-up, a creditor (secured or unsecured) will have to prove its debt against the liquidator.
How might a secured creditor enforce its security?
If the debtor company is solvent, the procedure for enforcement by a secured or unsecured creditor will require the decree of a competent court against the debtor company. Secured creditors have the additional right of receiving preferential payment in the event of winding up of a company (subject to satisfaction of workmen’s dues).
INDIA
3. creditor issues
Will set-off apply and if so do any issues arise from this?
The tribunal may, pursuant to Section 469 at any time after making a winding up order, make an order on any contributory, in the manner directed by the order, any money due to the company, from such contributory or from the estate of the person whom such contributory represents, exclusive of any money payable by such contributory or the estate by virtue of any call in pursuance of the Companies Act, and may allow such person to set-off any money (including dividend or profit) due to such contributory as a member of the company.
Is creditor recourse available in respect of any company affiliates?
No.
Will a creditor committee be established and if so what is its role?
As set out above, in the case of a creditor’s voluntary winding up the creditors may appoint the liquidator and also appoint committees of inspection.
Who controls the company in a given procedure?
In the event of winding up of a company, a Liquidator shall conduct the proceedings in winding up of company and perform such duties in reference thereto as the tribunal may impose.
How is the company financed?
Once a liquidator is appointed in respect of the company, the company’s business is carried on only to the extent that it is beneficial to the winding-up of the company. The Liquidator does, however, have the right to raise any money required by creating a security over the company’s assets.
Is it possible to arrange DIP funding (or similar)?
Not applicable under Indian law.
How will proceedings affect employees and what rights do they benefit from?
The Companies Act protects the rights of the workmen of a company by providing preferential payment of workmen’s dues over all other dues payable by the company.
How will proceedings affect contracts or other commercial arrangements entered into by the company?
Please see our responses in respect of ‘fraudulent preference’ and ‘avoidance of certain transactions’ set out above.
What is the method for the filing of claims?
In winding up proceedings instituted by a creditor, the creditor will petition the court to commence winding up proceedings with respect to a company, where such company has been given notice of the debt due to the creditor, and the debt has remained unpaid for three (3) weeks from the date of the notice. Please also see our earlier responses in respect of compulsory and voluntary winding-up procedures.
What is the timing for the filing of claims?
The official liquidator is required to provide fourteen (14) days’ notice to fixed creditors of the company to prove their debts or claims and to establish any title they may have to against the assets of the company.
INDIA
4. continuing the business
5. claims issues
and procedures
How will claims rank?
The priority of charges in winding up proceedings is as follows:
1. Dues owed to employees;
2. Dues owed to secured creditors;
3. Dues owed to the government; and 4. Dues owed to unsecured creditors.
Are there other complex issues arising by virtue of the insolvency, for example an insolvency officer prescribed method for claims filing?
Indian law requires various notices, filings and returns to be filed and issued at specific times during winding-up proceedings. A creditor should obtain specific advice in respect of what filings are required to be made by it.
Do cram-down procedures exist?
No cram down procedures exist in Indian law.
How is the procedure formally concluded?
Cases pertaining to liquidation or winding up are concluded by an order of the High Court of the state in which the registered office of the company is situated. Cases pertaining to restructuring of a company are concluded by the Board for Industrial and Financial Reconstruction (“BIFR”), which approves the scheme of reconstruction.
What is the outlook for creditor classes?
A secured creditor may enforce its security outside the winding up proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security
A secured creditor may enforce its security outside the winding up proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security