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«Debt Restructuring EDITION 2015 an alternative to insolvency proceedings Debt Restructuring an alternative to insolvency proceedings Jurisdictional ...»

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Debt Restructuring



an alternative to insolvency proceedings

Debt Restructuring

an alternative to insolvency proceedings

Jurisdictional comparisons First edition 2015

Foreword Alessandro Varrenti CBA Studio Legale e Tributario

Debt Restructuring: Ole Borch & Lars Lindencrone Petersen Bech-Bruun Belgium Glenn Hansen LAGA an alternative to insolvency Canada Justin R Fogarty, Jason Dutrizac & Pavle Masic proceedings Justin R Fogarty Professional Corporation Denmark Ole Borch & Lars Lindencrone Petersen Bech-Bruun Debt Restructuring: an alternative to insolvency proceedings Finland Pekka Jaatinen, Salla Suominen & Anna-Kaisa Remes is the essential reference guide for financial institutions, legal professionals and investors. Covering 20 major jurisdictions Castrén & Snellman Attorneys Ltd worldwide, it provides a clear overview of the law and

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While all reasonable care has been taken to ensure the accuracy of the publication, the publishers cannot accept responsibility for any errors or omissions.

This publication is protected by international copyright law.

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, or stored in any retrieval system of any nature without prior written permission, except for permitted fair dealing under the Copyright, Designs and Patents Act 1988, or in accordance with the terms of a licence issued by the Copyright Licensing Agency in respect of photocopying and/or reprographic reproduction. Application for permission for other use of copyright material including permission to reproduce extracts in other published works shall be made to the publishers. Full acknowledgement of author, publisher and source must be given.

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Contents Foreword Alessandro Varrenti, CBA Studio Legale e Tributario Lars Lindencrone Petersen & Ole Borch, Bech-Bruun v

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Germany Florian Gantenberg, LADM Liesegang Aymans Decker Mittelstaedt & Partner Rechtsanwälte Wirtschaftsprüfer Steuerberater 91 Hong Kong Philip Gilligan, Richard Hudson & Tiffany Cheung, Deacons 109 Italy Alessandro Varrenti & Daniela Sorgato, CBA Studio Legale e Tributario 123

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Foreword Alessandro Varrenti, CBA Studio Legale e Tributario Lars Lindencrone Petersen & Ole Borch, Bech-Bruun The financial crisis that started quite dramatically with the bankruptcy of Lehman Brothers in 2008 has been historic. Several other financial crises have been confined to a certain area and have been quite short lived, but the one that started in 2008 has affected all parts of the world to varying degrees and is not fully over more than eight years later. It has not only stress-tested undertakings and banks; it has also tested countries and the entire way of perceiving the financial structure.

At the outset of the financial crisis, quick fixes were desperately needed.

During this phase, countries had to ensure that their banking sectors did not collapse. At the same time, undertakings in crisis had to be handled, and in this process an adjustment of the set of rules available to such situations has taken place. These sets of rules could be said to have many similarities, but if you look at the finer details quite a few differences become apparent. As an experienced specialist in the law of your own country, you have not been able to rely on your experience and judgement to figure out how a specific situation would be handled in another country.

With this in mind, Thomson Reuters asked one of the grand old men of the world of insolvency, Jacques Henrot of De Pardieu Brocas Maffei, to lead a project in which Jacques and we – Alessandro Varrenti of CBA Studio Legale e Tributario (Milan), and Lars Lindencrone Petersen and Ole Borch of Bech-Bruun (Copenhagen) – were to work together to prepare an easily accessible yet detailed presentation of the sets of rules applicable to restructuring and distressed undertakings in a number of countries.

Jacques undertook the task and was a driving force during the start-up phase, and this in spite of the fact that Jacques was quite seriously ill. Sadly, Jacques passed away in the summer of 2014 and thus before the book was ready for publication. We are dedicating this book to Jacques in honour of his huge effort with the book and a number of similar projects in the past.

We hope that the readers of the book will share our enthusiasm about the finished project and that the book may contribute to understanding and decision-making in cross-border situations where there is a need to understand at least the fundamental principles of the rules of other countries.

We would like to extend our thanks to all the contributors for their efforts on the project. The dialogues we have had with the contributors from the various countries in the course of the project have confirmed the great expertise involved as well as the high level of enthusiasm for the project. We would also like to take this opportunity to express our respect – which is perhaps done too rarely – for the legislators of the


Debt Restructuring many countries. Restructuring legislation is quite difficult to draft as it requires decisions according to which some parties are to relinquish rights to the advantage of other parties for the sake of the bigger picture. It is the quality of such legislation which determines the possibilities of obtaining successful restructuring – and this applies to both in-court and out-of-court restructuring. Out-of-court restructuring will typically reflect the possibilities of the in-court options, as the rights holders will hardly be willing to contribute to an out-of-court solution providing them with a poorer result than an in-court process. At the same time, in-court restructuring is presumably still the very last thing you want. Professor Lawrence P King was quoted as saying that the American rules on restructuring, Chapter 11, may well be effective, but for him they are the equivalent of using a hammer to put out the fire in your hair. We believe that this book will demonstrate that it is not quite that bad, either in the US or in other countries.

1 November 2014

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As mentioned in the foreword, this book has been dedicated to our partner, Jacques Henrot. No better tribute could be paid to Jacques, who, until the very end of his long fight to overcome his terminal illness, remained strongly committed to ensuring the publication of what he considered to be a significant contribution to the merging into a single instrument an analysis and description of the complexities of a wide variety of policy and legal issues in the work-out and restructuring areas across many countries.

Our partner and friend Jacques passed away late this summer. Above all, Jacques was a very talented lawyer, dedicated to the long tradition of the practice of law rooted in the old cultural values of a general practitioner and combining those values with a remarkable understanding of the diversity of legal cultures and conceptual diversities between the continental legal tradition and the common law approach. Often those skills turned out to be material in bridging the gap between the different cultures prevailing in those different environments, paving the way to consensual approaches to resolving difficulties in complex matters.

He combined unequalled expertise in the property area with a unique practice in the insolvency sector and a strong understanding of the needs of the financial services industry. Moral integrity and compliance with the highest ethical standards were among his key attributes.

Jacques had a great sense of human relationships, and was most sensitive to the needs and aspirations of our younger professionals. He was a great team builder, dedicated to training his assistants and colleagues towards excellence and achievement of the highest standards in the practice of law.

In the pursuit of that goal, he has paved the way to the emergence of a younger generation to develop a practice based on those values.

Before leaving us, Jacques has passed the torch on to that new generation sharing those values to continue to develop a practice rooted in the high standards he advocated.

For those accomplishments he will be forever remembered.

Antoine Maffei De Pardieu Brocas Maffei

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Portugal Gómez-Acebo & Pombo (Portugal) Mafalda Barreto & Carlos Soares




The Portuguese Insolvency Act provides court-monitored restructuring pre-insolvency proceedings, named Special Revitalisation Process (Processo Especial de Revitalização, PER), which was introduced by Act No. 16/2012, dated 20 April.

Failing business entities may also engage in an out-of-court pre-insolvency procedure, called SIREVE (Sistema de Recuperação de Empresas por Via Extrajudicial).

1.1 What is the objective of the proceedings?

The PER is a pre-insolvency in-court procedure whereby a financially distressed (or imminently insolvent) debtor (that is not in an actual state of insolvency and that has not yet been held insolvent) with realistic prospects for revitalisation may, under the supervision of a court-appointed administrator (the Provisional Judicial Administrator), establish negotiations intended to devise a restructuring plan for a maximum period of three months to avoid the opening of insolvency proceedings and its effects.

1.2 Do all kinds of businesses entities qualify?

The PER can be applied to all kind of business entities, with the exception of:

• public entities;

• insurance companies;

• credit institutions;

• financial companies;

• investment firms; and

• collective investment undertakings.

Is there a threshold related to indebtedness, turnover or asset value?

No threshold is defined by law or applied by the courts.

Is a court agent necessarily appointed to assist the company? If so, how is it chosen?

During the PER, the debtor is assisted by the Provisional Judicial Administrator appointed by the judge. The debtor is entitled to suggest to the judge one name among the public list of judicial administrators.

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1.3 What are the necessary approvals?

Only the board of directors’ approval is required to initiate the process.

The power to initiate the process lies exclusively with the debtor together with at least one of its creditors.

1.4 What is the procedure?

Must a petition be filed? Must it be ex parte?

The PER begins with a petition filed by the debtor together with at least one of its creditors before the commercial court with jurisdiction over the location of the company’s registered office.

Are there any other procedural documents? Must supporting documentation be filed with the application?

The debtor shall attach to its petition the following documents:

• a list of its creditors and the amount of each claim;

• annual accounts for the prior three financial years;

• a brief summary of the current status of the company and of its chances of recovery;

• a list of its assets;

• a list of its employees; and

• a written and signed statement in which the debtor declares that it complies with all the conditions required for its recovery.

Are creditors invited to participate? If so, how are they notified? What influence do they have, if any?

All the creditors are invited to file their claims and take part in the negotiations of the restructuring agreement. Creditors are notified both directly by the debtor, by means of a registered letter, and through a publication on the official website (www.portalcitius.pt).

Creditors who filed their claims and those who were listed by the debtor will be allowed to vote on the restructuring agreement.

Publicity/confidentiality? Access to petition + documents? How?


The restructuring process is entirely public.

Any lawyer may have access to the proceedings’ file, which includes the petition and all supporting documents. Lawyers may consult the proceedings’ file before the court at any time after the announcement of the appointment of the Provisional Judicial Administrator by the court.

The main events of the PER are published on the official website, which is publicly accessible online.

1.5 Is there recourse against the opening judgment?

In the event that the judge rejects the opening of the proceedings, the debtor is entitled to appeal against that decision to the second instance (appellate) court (Tribunal da Relação). The grounds of the appeal shall be compliance with the legal requirements to apply for the PER.

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The decision of the appeal would take approximately one to three months.

Conversely, the decision to open the PER is not appealable.

1.6 What are the substantive tests/definitions?

If being still solvent is the test, what constitutes insolvency? Is there a pure cash-flow test? Is there a mix?

Under Portuguese law, restructuring may only be filed if the company is in a difficult economical situation or imminent distress but not yet insolvent.

Under the Portuguese Insolvency Act, a company is in distress/state of insolvency whenever it is unable to meet its obligations (cash-flow criteria) or whenever its assets are insufficient to satisfy its liabilities (balance sheet or assets criteria).

1.7 What is the role of a court-appointed agent?

According to the law, the Provisional Judicial Administrator has the

following main role and powers:

• receiving the claims and preparing a provisional list of all the creditors and the amount of their claims;

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