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Restructuring & Insolvencyin 53 jurisdictions worldwideContributing editor: Bruce Leonard 2012
®
Published by Getting the Deal Through
in association with:Andreas Neocleous & Co LLC
Bloomfield – Advocates & SolicitorsBofill Mir & Alvarez Jana
The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer–client relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of December 2011, be advised that this is a developing area.
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LawBusinessResearch
Global Overview James Watson Freshfields Bruckhaus Deringer LLP and 3 Alan W Kornberg Paul, Weiss, Rifkind, Wharton & Garrison LLP
AFRICABotswana Kwadwo Osei-Ofei Osei-Ofei Swabi & Co 56Nigeria Dayo Adu Bloomfield – Advocates & Solicitors 329South Africa Claire van Zuylen Bowman Gilfillan 427AMERICASBrazil Thomas Benes Felsberg and Paulo Fernando Campana Filho 61
Felsberg, Pedretti e Mannrich Advogados e Consultores Legais
Canada E Bruce Leonard, David S Ward and Larry C Ellis Cassels Brock & Blackwell LLP 72Chile Octavio Bofill, Jorge Lembeye and Edder Cifuentes Bofill Mir & Alvarez Jana 88Mexico Darío U Oscós C and Darío A Oscós Rueda Oscós Abogados 309Peru Guilhermo Auler and Michelle Barclay Jorge Avendaño & Forsyth Abogados 343United States Alan W Kornberg and Claudia R Tobler Paul, Weiss, Rifkind, Wharton & Garrison LLP 480Venezuela Carlos Dominguez Hoet Peláez Castillo & Duque 488ASIA-PACIFICAustralia Scott Foreman and Lucas Arnold Lipman Karas 4China Melissa Thomas and Christian Zeppezauer Freshfields Bruckhaus Deringer LLP 96India Sakate Khaitan, Sangeeta Jhunjhunwala and Mahrukh Umrigar Clasis Law 230Japan Kazuki Okada, Takahiko Itoh and Mariko Inoue Freshfields Bruckhaus Deringer 253Korea Sang Goo Han, Hyung Bae Park and Yoori Choi Yoon & Yang LLC 267Malaysia Peh Lee Kheng, Khoo Kay Ping and Effendy bin Othman Zaid Ibrahim & Co 296Philippines Ricardo Ma PG Ongkiko and Russel L Rodriguez SyCip Salazar Hernandez & Gatmaitan 351Thailand Chinnawat Thongpakdee, Suntus Kirdsinsap and Bongkarn Jiraboonsri 465
Weerawong, Chinnavat & Peangpanor Ltd
EUROPE AND MIDDLE EASTAustria Friedrich Jergitsch, Michael Raninger and Florian Knotzer Freshfields Bruckhaus Deringer LLP 15Bahrain Harnek S Shoker Freshfields Bruckhaus Deringer LLP and 33
Grahame Nelson Qays H Zu’bi Attorneys & Legal Consultants
Belgium Charles-Antoine Leunen and Jan-Willem Geeroms Freshfields Bruckhaus Deringer LLP 45Croatia Vladimir Mamic and Goran Jujnovic Lucic Mamic Peric Reberski Rimac Law Firm 104Cyprus Maria Kyriacou and Elias Neocleous Andreas Neocleous & Co LLC 110Czech Republic Ružena Trojánková and Tomáš Osicka Kinstellar 118Egypt Motaz El-Dreny Sarie-Eldin & Partners 133England & Wales Ken Baird, Anne Sharp, Victoria Cromwell and Kathryn Bruce Freshfields Bruckhaus Deringer LLP 140Estonia Indrek Leppik, Martti Peetsalu and Olga Harlamova Law Firm Glimstedt 156European Union Catherine Balmond, Victoria Cromwell and Wolf Harlfinger Freshfields Bruckhaus Deringer LLP 164Finland Lauri Peltola and Timo Lehtimäki Waselius & Wist 175France Alan Mason, Nicolas Morelli and Alexandra Szekely Freshfields Bruckhaus Deringer LLP 181Germany Franz Aleth and Wolf Harlfinger Freshfields Bruckhaus Deringer LLP 190Greece Stathis Potamitis, Ioannis Kontoulas and Eleana Nounou PotamitisVekris 204Iceland Erlendur Gíslason, Ólafur Eiríksson, Heiðar Ásberg Atlason and Heiðar Örn Stefánsson Logos Legal Services 221Italy Raffaele Lener and Giovanna Vigliotti Freshfields Bruckhaus Deringer LLP 239Lithuania Emil Radzihovsky, Giedrius Kolesnikovas and Beata Kozubovska Motieka & Audzevicius 275Luxembourg Marc Kleyr Kleyr Grasso Associés 285Netherlands Michael Broeders and Thijs Flokstra Freshfields Bruckhaus Deringer LLP 319Poland Michał Barłowski Wardynski & Partners 362Portugal Nuno Pena, Joaquim Shearman de Macedo and Andreia Moreira 374
Rui Pena, Arnaut & Associados – Sociedade de Advogados RL
Romania Lavinia Olivia Iancu SCP Miriana Mircov Relicons SPRL 384Russia Dmitry Surikov, Maria Zaitseva and Svetlana Tolstoukhova Freshfields Bruckhaus Deringer LLP 393Scotland Claire Massie Dundas & Wilson 406Spain Eduard Arruga and Natalia Gómez Freshfields Bruckhaus Deringer LLP 437Sweden Odd Swarting and Niklas Körling Setterwalls 446Switzerland Christoph Stäubli Walder Wyss Ltd 453United Arab Emirates Pervez Akhtar, Tarek El-Assra and William Coleman Freshfields Bruckhaus Deringer LLP 471OFFSHOREBahamas Leif G Farquharson Graham Thompson & Co 24Barbados Trevor Carmichael and Lauren McIntosh Chancery Chambers 40Cayman Islands Graham F Ritchie QC and Rebecca Hume Charles Adams Ritchie & Duckworth 79Dominican Republic Mary Fernández and Hipólito García Headrick Rizik Alvarez & Fernández 127Hong Kong Mark Fairbairn, Ashley Bell and Bronwen May O’Melveny & Myers 213Panama Ivette E Martínez S Patton Moreno & Asvat 335Singapore Sean Yu Chou, Manoj Pillay Sandrasegara and Mark Choy WongPartnership LLP 420
Quick Reference Tables 495
IndIa Clasis Law
230 Getting the Deal Through – Restructuring & Insolvency 2012
IndiaSakate Khaitan, Sangeeta Jhunjhunwala and Mahrukh Umrigar
Clasis Law
1 LegislationWhat legislation is applicable to bankruptcies and reorganisations?
BankruptcyPersonal insolvency (individuals and partnership firms):• ProvisionalInsolvencyAct1920;and• PresidencyTownsInsolvencyAct1908(applicableinBombay,
StatutorycorporationsmayalsobeexcludedfromtheprovisionsoftheCompaniesAct,includingtheprovisionsrelatingtowinding-up,providedthatthestatuteunderwhichtheyareformedspecificallystipulatesthatthecompanywillnotbegovernedbythewinding-upprovisionsoftheCompaniesAct.Special state specific legislation, such as the BombayRelief
UndertakingAct1958,mayalsoprovideacloakofprotectiontodebtorcompaniesfromclaimsbythecreditorunderexpressnotifica-tions from the government.
3 Secured lending and credit (immoveables)What principal types of security are taken on immoveable (real)
• banks,financialinstitutionsorconsortiumsofbanksorfinancialinstitutionscanapproachtheDebtRecoveryTribunal,undertheprovisionsoftheRecoveryofDebtsDuetoBanksandFinancialInstitutionsAct1993ifthedebtamountis10lakhrupees(1million) or more.
lender for security for costs under order XXV of the CPC.
6 CourtsWhat courts are involved in the bankruptcy process? Are there
restrictions on the matters that the courts may deal with?
Thehighcourtwheretheregisteredofficeofthecompanyissituatedwouldhavejurisdictionoverthewinding-upproceedingsofsuchacompany.Thehighcourtmay,atitsdiscretion,transfertheproceed-ings to a district court or another high court.TheBIFRistheappropriateforumundertheSICAincasesrelating
tosickcompanies.ItispertinenttopointoutthatthegovernmenthassoughttorepealSICAbyenactingtheSickIndustrialCompanies(Spe-cialProvisions)RepealAct2003(SICRA)andtheCompanies(SecondAmendment)Act2002.Asperthislegislation,thegovernmentispro-posingtodissolvetheBIFRanditsappellateauthorityandentrusttherevivalandrehabilitationofcompaniestotheNationalCompanyLawTribunal(NCLT)andtheNationalCompanyLawAppellateTribunal(NCLAT).However,bothenactmentsareyettobenotifiedandthushavenotyetcomeintoforce.Accordingly,SICAcontinuestobethemain legislation governing reorganisations of companies.PartIoftheCPCprovidesprovisionsrelatingtocourtjurisdic-
7 Voluntary liquidationsWhat are the requirements for a debtor commencing a voluntary
liquidation and what are the effects?
Acompanycanbevoluntarilywoundupiftheperiodfixedfordura-tion of the company or the event specified has occurred and on the occurrenceofwhichthearticlesprovidethatthecompanywillbedissolved,andthecompanyinageneralmeetingpassesaresolu-tionrequiringthecompanytobewoundupvoluntarily,orifthecompanypassesaspecialresolutionthatthecompanybewoundup voluntarily.
8 Involuntary liquidationsWhat are the requirements for creditors placing a debtor in involuntary
liquidation and what are the effects?
Creditorscanapplytothecourttoplaceadebtorcompanyininvol-untaryliquidationifthecompanyowesthecreditorasumexceeding1lakhrupees,thecreditorhasservedanoticetothecompanyforpayment of the sum due and the company has neglected to pay the sumforthreeweeksthereafter,orifanexecutionorotherprocessinfavourofthecreditorisunsatisfied,inwholeorinpart.Ifthecourtissatisfiedthatthecompanyisunabletopayitsdebts,itcanpassanorderforwinding-up,andappointanofficialliquidatorforcarryingoutthewinding-upprocessanddistributingtheassets.InadditiontotherightsundertheCompaniesAct,theSecuriti-
sationandReconstructionofFinancialAssetsandEnforcementofSecurityInterestsAct2002(SARFAESI)andSFCAgivepowerstospecifiedfinancialinstitutionsondefaultofpaymentofdebttotakepossession of the security and sell the same and also permit such specifiedfinancialinstitutionstotakeovermanagementandcontrolofthedebtorcompany.
9 Voluntary reorganisationsWhat are the requirements for a debtor commencing a financial
reorganisation and what are the effects?
Adebtorcancommencefinancialreorganisationundersections391to394oftheCompaniesActbypresentingareorganisationschemetothecourt.Thecourtwillthenorderameetingofthecreditorsandmembersofthedebtorcompany.Ifathree-quartersmajorityofthecreditorsandmemberspresentatthemeetingapprovethescheme,thenthecourt,ifitthinksfit,willsanctionthescheme.Duringthependencyofanysuchproceedingincourt,thecourthasthepowerto stay the commencement or continuation of any suit or proceeding against the company until the application is disposed off.UnderSICA,theBIFRisempoweredtotakeappropriatemeas-
uresforrevivalandrehabilitationofpotentiallysickindustrialunder-takingsandforliquidationofnon-viablecompanies.Acompany’sboardofdirectorshastomakereferencetotheBIFRwithin60daysof the date of finalisation of the accounts in the financial year in whichithasbecomesick,fordeterminationofthemeasuresthatneedtobeadoptedtorevivethecompany.UndertheCDRsystem,theconcernedcorporate,inaccordance
10 Involuntary reorganisationsWhat are the requirements for creditors commencing an involuntary
reorganisation and what are the effects?
AcreditorcanalsocommencereorganisationundertheCompaniesActbypresentingareorganisationschemetothecourt.Thecourtwillthenorderameetingofthecreditorsandmembersofthedebtorcompany.Ifathree-quartersmajorityofthecreditorsandmemberspresentatthemeetingagreetoit, thenthecourt, if it thinksfit,sanctionsthescheme.Duringthependencyofanysuchproceedinginthecourt,thecourthasthepowertostaythecommencementorcontinuation of any suit or proceeding against the company until the application is disposed off.UnderSICA,thereisnoprovisiondealingwithinvoluntaryreor-
11 Mandatory commencement of insolvency proceedingsAre companies required to commence insolvency proceedings in
particular circumstances? If proceedings are not commenced, what
liabilities can result?
ThereisnomandatoryrequirementperseundertheCompaniesActfor a company to commence insolvency proceedings in circumstances statedabove,ie,toavoidpersonalliabilitytodirectorsandofficersorotherwise.Usuallywhenthecompanydoesnotonitsowninitiatethewinding-upproceedings,thecreditorsmayinitiatethewinding-upiftheyareseekingtorecovertheirlegitimatedebts.TheCompaniesActprovidesthatacompanymaybewoundupbycourt:• ifthecompanybyspecialresolutionhasresolvedtobewoundup;
InIndia,sincethereisnoobligationonthepartofthedirectorstocommencewinding-up,usuallynopersonalliabilitiestodirectorsandofficerscanarisefornon-commencementofproceedings.Theaboveisontheassumptionthatthereisnoevidencetosuggestthatanactionoromissionbythedirectorwasmalafideorundertakentoperpetrate a fraud against the company or its employees.
12 Doing business in reorganisationsUnder what conditions can the debtor carry on business during a
reorganisation? What conditions apply to the use of assets and to
creditors who supply goods or services after the filing? What are
the roles of the creditors and the court in supervising the debtor’s
business activities?
UndertheCompaniesAct,afterthecommencementofthewinding-upprocess,notransferofpropertyincludingactionableclaimscanbedonewithoutthepermissionofthesupervisingcourt.Duringthecontinuanceofwinding-upproceedingstheincumbentmanagementisusuallypermittedtocontinuetooperatethecompany.However,onawinding-uporderbeingmadethemanagementandcontrolofthecompanyshiftstotheofficialliquidator.Theofficialliquidatoracts under directions of the court.UnderSICA,thedebtorcompanycancarryonitsbusinessonly
SFCApermitsuchspecifiedfinancialinstitutionstotakeoverman-agementandcontrolofthedebtorcompanyondefaultbysuchcom-panyinpaymentofdebt.Accordingly,thespecifiedinstitutionshavea statutory right of running the company once the company has defaultedonitsdebtobligations.
13 Rejection and disclaimer of contracts in reorganisations Can a debtor undergoing a reorganisation reject or disclaim an
unfavourable contract? Are there contracts that may not be rejected?
What procedure is followed to reject a contract and what is the effect
WhenaschemeunderSICAisgoingon,nosuitfortherecoveryof money or for the enforcement of any security against the industrial companyorofanyguaranteeinrespectofanyloans,oradvancegrantedtotheindustrialcompany,shalllieorbeproceededwith,exceptwiththeconsentoftheBIFRor,asthecasemaybe,theappro-priateappellatetribunal.TheBIFRhastheauthoritytosuspendtheoperation of any contract during the time a matter is under its con-sideration.Suchasuspensioncanbemadeforamaximumperiodofsevenyears.Ontheexpiryofdeclarationallcontractssosuspendedarerevivedandenforceable.UndertheCDRsystem,thedebtorandcreditorscan,intheir
thesickindustrialcompanynottodisposeofanyofitsassetsdur-ing the period of preparation or consideration of the scheme under section18;andduringtheperiodbeginningwiththerecordingoftheopinionbytheBIFRforthewinding-upofthecompanyuptocommencementoftheproceedingsrelatingtothewinding-upbeforethe relevant high court.TransfersunderSARFAESIandSFCAvestinthetransfereeall
15 Stays of proceedings and moratoriaWhat prohibitions against the continuation of legal proceedings or
the enforcement of claims by creditors apply in liquidations and
reorganisations? In what circumstances may creditors obtain relief
from such prohibitions?
Afterthecourthaspassedanorderforwinding-up,andbeforeanofficialliquidatorisappointed,alllegalproceedingsagainstthecom-panyaresuspended,andallattachmentsandexecutionsagainstthecompanyputintoforceafterthecommencementofwinding-uparevoid.After a schemeof compromise, arrangement, amalgamation
or reconstruction is applied for and until the application is finally disposedoff,thecourtcan,undertheCompaniesAct,staythecom-mencement or continuation of any suit or proceeding against the companyonsuchtermsasthecourtthinksfit.
WhenaproceedingisgoingonintheBIFR,oraschemesanc-tionedbyitisunderway,noproceedingsforthewinding-upoftheindustrialcompanyorforexecution,distressorthelikeagainstanyof the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company orofanyguaranteeinrespectofanyloans,oradvancegrantedtotheindustrialcompany,shalllieorbeproceededwithfurther,exceptwiththeconsentoftheBIFR.UndertheCDRsystem,oneofthemostimportantprovisionsin
17 Set-off and nettingTo what extent are creditors able to exercise rights of set-off or netting
in a liquidation or in a reorganisation? Can creditors be deprived of
the right of set-off either temporarily or permanently?
Set-offisallowedininsolvencyproceedingsundertheCompaniesAct,inthesamewayasundertheProvincialInsolvencyActandPresidencyTownsInsolvencyAct, if theclaimsare ‘mutual’and‘commensurable’.However,set-offisnotallowedforclaimsthatarenoteasilyascertainable.Anexceptiontothisruleofset-offisthatadebtowedbyacompanytoitsdirectorcannotbesetoffagainstanycontributionheisliabletomaketothecompany’sassets.
18 Intellectual property assets in insolvenciesMay an IP licensor or owner terminate the debtor’s right to use it
when an insolvency case is opened? To what extent may an insolvency
administrator continue to use IP rights granted under an agreement
with the debtor? May an insolvency representative terminate a
debtor’s agreement with a licensor or owner and continue to use the
19 Post-filing creditMay a debtor in a liquidation or reorganisation obtain secured or
unsecured loans or credit? What priority is given to such loans or
credit?
UndertheCompaniesAct,theliquidatorhasspecificauthoritytoobtainsecuredcreditandabroadpowertodoallthatisnecessaryforwindingupthecompany,whichinourviewwouldincludeobtainingunsecured credit and giving priority to such loans and credit.UndertheSICA,theschememayprovideforfinancialassistance
Creditors are classified as secured and unsecured for the purposes of the reorganisation plan.UndertheCompaniesAct,theplanisapprovedbythecourtif
three-quartersofthemembers,orclassofmembers,orcreditorsorclass of creditors approve of the scheme. UnderSICAthereareseveraldetailsthatarerequiredtobepro-
berevivedorrehabilitatedanddoesnotapproveoftheplansubmit-tedbytheoperatingagency,itcanmodifyit.Butifadebtorfailstoperformtheplanofrevival(reorganisation),theBIFRcanpassanorderforwinding-upthedebtorcompany.Furthermore,personsinchargeoftheconductofbusinessofthecompanywillbeliabletobeimprisoned and fined. Under the CDR system, a proposed reorganisation can be
defeated if theCDRempoweredgroupdoesnotaccept it,or iftherequisitenumberofcreditorsisnotoftheopinionthat,aftertheintroductionofthescheme/package,theaccountsarelikelytobecomefunctional.Ifthedebtorrefusedtoperform,itwouldbeinbreachoftheagreementsexecutedandaccordingly,thedebtorcouldbesuedforbreachthereof.
23 Bankruptcy processesDuring a bankruptcy case, what notices are given to creditors? What
meetings are held? How are meetings called? What information
regarding the administration of the estate, its assets and the claims
against it is available to creditors or creditors’ committees? What are
insolvency administrators’ reporting obligations? May creditors pursue
On the company passing a special resolution for voluntary winding-up,suchresolutionispublishedintheOfficialGazetteandinatleastonenewspaperinthedistrictoftheregisteredofficeofthecompany.Atthemeetingoftheboardofdirectors,themajorityofthedirectorsofthecompanyarerequiredtogiveadeclarationofsolvencyverifiedbyanaffidavitandappointaliquidator.Ifatanytimetheliquidatorisoftheopinionthatthecompanyisunabletopayitsdebts,theliquidatorisrequiredtocallameetingofthecreditorsandlaybeforethemeetingastatementofassetsandliabilitiesofthecompany.Intheeventofthewinding-upcontinuingformorethanoneyear,theliquidatorisrequiredtocallameetingofthecreditorsat the end of the first year and every succeeding year thereafter and laybeforethemeetinghisacts,dealingsandpositionofthewinding-up.Onthecompanybeingfullywoundup,theliquidatorisrequiredto call for a meeting of the company and its creditors for laying the accountsbeforethemeetings.NoticeofsuchmeetingsisrequiredtobepublishedintheOfficialGazetteandsomenewspaperscirculatinginthedistrictwheretheregisteredofficeofthecompanyislocated.Withinoneweekofthemeetingtheliquidatorisrequiredtofilesuchaccountsandareturnofthemeetingwiththeofficialliquidatorandregistrarofcompanies.Creditorsatanytimehavetheabilityto
theICA,wherethecreditorscometogethertoformaconsortiumforthepurposeoffinancialrestructuringofthecompany.Thereisnoprovision for a group representing the interests of the creditors under CDR,sincetheythemselvesundertakethereorganisation.
25 Insolvency of corporate groupsIn insolvency proceedings involving a corporate group, are the
proceedings by the parent and its subsidiaries combined for
administrative purposes? May the assets and liabilities of the
companies be pooled for distribution purposes? May assets be
transferred from an administration in your country to an administration
topursuetheestate’sremediesandseekordersthatthefruitsbefirstdistributedtothecreditors.Thecourthasthediscretiontomakesuchorders as it deems fit and proper.
28 Claims and appealsHow is a creditor’s claim submitted and what are the time limits?
How are claims disallowed and how does a creditor appeal? Are there
provisions on the transfer of claims? Must transfers be disclosed
and are there any restrictions on transferred claims? Can claims
for contingent or unliquidated amounts be recognised? How are the
amounts of such claims determined?
Inacreditors’winding-up,thecreditorwillmakeapetitiontothecourttocommencewinding-upproceedingsifthecompanyhasbeengivennoticeofthedebtduetohimandthedebthasremainedunpaidforthreeweeksfromthedateofthenotice.Thereisnospecificpro-cedurefordisallowingcreditors’claims.Noristhereanyprovisionrelatedtothetransferofclaims.Anunsecuredcreditor,underIndianlaw,hastoprovehisclaimandsuchaclaimhastobedefinite(notcontingentorunliquidated).Itcannotbeaclaimthathastobedeter-minedbyacourtprocess.ThegeneralperiodoflimitationunderIndianlawisthreeyears;incertainspecificcasesitislonger.Aclaimisdisallowedifnotproved.Appealliestotheappellatebenchofthecourthearingthewinding-uppetitionandisrequiredtobemadeinthe same manner as any other appeal from an order of such court. Priortothemakingofthewinding-uporderthereisnorestrictiononthetransferofclaims.Itis,however,pertinenttomentionthatcham-pertyandmaintenanceareusuallynotpermittedunderIndianlaw.Onacompanybeingwoundupundersupervisionofthecourt
29 Priority claimsApart from employee-related claims, what are the major privileged and
priority claims in liquidations and reorganisations? Which have priority
over secured creditors?
Inliquidations,apartfromemployee-relatedclaims,revenues,taxes,cesses and rates due to the government have priority over secured creditors.Except for the above, no claims have priority over secured
additional financing shall have a preferential claim over the provid-ersofexistingfinancewithrespecttothecashflowsoftheborrowerfor their recoveries.
IndIa Clasis Law
236 Getting the Deal Through – Restructuring & Insolvency 2012
30 Employment-related liabilities in restructuringsWhat employee claims arise where employees are terminated during a
restructuring or liquidation? What are the procedures for termination?
Employeesareentitledtotheircontractualandstatutoryduesuponterminationofemploymentirrespectiveofwhethertheterminationiseffectedduringrestructuringorliquidationorotherwise.Liquidationand restructuring do not per se affect the procedure of termination of employees,excepttotheextentofthemannerofsettlementofdues.UndertheCompaniesAct,duringliquidationworkmen’sclaims
32 DistributionsHow and when are distributions made to creditors in liquidations and
reorganisations?
Duringliquidation,theassetsofacompanyaredistributedamongthe secured creditors pari passu and to the unsecured creditors on proof of their claim.Onceareorganisationprocess(underSICAortheCDRsystem)
Where an application for reorganisation is made under the CompaniesAct, the courtmay, at its discretion, stay anyother
proceedings against the company on such terms as it deems necessary.WhereanapplicationismadetotheBIFRunderSICA(until
thetimetheschemeunderSICAisinprogress)thereisatemporarysuspensionoftheproceedings.TheconsentoftheBIFRorAAIFRismandatory for proceedings against industrial companies.UnderCDR,oneoftheclausesundertheICAandDCAisthe
stand-stillclause,accordingtowhichthepartiestotheagreementcannotcommenceorproceedwithanylegalactionorproceedingagainsteachotherandobserveastand-stillpositionafterareferenceismadetotheCDRcellandduringtheperiodtheschemeisunderpreparation and implementation.Thus,althoughthereisnoannulmentofproceedingsinreor-
37 Corporate proceduresAre there corporate procedures for the liquidation or dissolution of
a corporation? How do such processes contrast with bankruptcy
proceedings?
Yes.Asmentionedabove,winding-upcanbe initiatedvoluntar-ily.Themajorwaysinwhichwinding-upproceedingsbythecourt(involuntarywinding-up)differfromvoluntarywinding-upbythecompany are that • theformerisconductedbythecourtwhilethelattermayormaynotbeconductedunderthesupervisionofthecourt;
38 Conclusion of caseHow are liquidation and reorganisation cases formally concluded?
Liquidationcasesareformallyconcludedbyanorderofthehighcourt,ie,thehighcourtofthatstateinwhichtheregisteredofficeof the company is situatedhas jurisdiction for suchwinding-upproceedings. ReorganisationcasesundertheCompaniesActareconcluded
39 International casesWhat recognition or relief is available concerning an insolvency
proceeding in another country? How are foreign creditors dealt with
in liquidations and reorganisations? Are foreign judgments or orders
recognised and in what circumstances? Is your country a signatory
to a treaty on international insolvency or on the recognition of foreign
judgments? Has the UNCITRAL Model Law on Cross-Border Insolvency
been adopted or is it under consideration in your country?
UndertheCPC,section44AdealswiththeenforcementbyIndiancourts of decrees passed by courts in ‘reciprocating territories’.Anotheroptionavailabletoaforeigncreditorwithaforeignjudg-mentistobringasuitinanIndiancourtupontheoriginalcauseofactionbasedonthesaidjudgment.Thisoptionisexercisedmostlyincaseswherethejudgmentisgrantedbyacourtotherthanthatofa reciprocating territory.TheCompaniesActdealswith the liquidationofcompanies
aforeigncreditorandeithercancommencewinding-upproceedingsinthecaseofinsolvency.ThoughthereisnospecificprovisionintheCompaniesActtodealwithforeigncreditorsandtheirclaimorcauseofactionarisingoutsideIndia,ithasbeenheldbytheSupremeCourtofIndiainRajah of Vizianagaram v Official Receiver,AIR1962SC500,thattheforeigncreditorsandcontributoriescanbringanactionandfileclaimundertheCompaniesAct.TheUNCITRALModelLawonCross-BorderInsolvencywas
The government passed the Companies (Second Amendment) Act 2002 (Amendment Act) on 13 January 2003. The act proposed setting up the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), a forum for reorganisation of sick companies. Subsequently, parliament passed the Sick Industrial Companies (Special Provisions) Repeal Act 2003 (SICRA) repealing the existing statute on sick companies. The Amendment Act and the SICRA are pending notification and will come into force only after being notified.
Also it is pertinent to note that the Companies Bill 2009 (Companies Bill) was introduced in August 2009. The Companies Bill, along with certain significant changes to the existing Companies Act, inter alia includes specific provisions with respect to NCLT. However, the Companies Bill has not yet been placed before parliament and information available in the public domain seems to indicate that in all probability this may be laid before parliament in the forthcoming winter session. Once the Companies Bill has been approved in parliament and notified it will become law.
Update and trends
RestRuctuRIng & Insolvency 2012 Issn 1468-3180
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