Eversheds international-guide-to-company-insolvency

The Eversheds international
guide to company insolvency

3
Introduction 4
Austria 5
Belgium 9
England & Wales 13
Estonia 17
Finland 21
France 25
Germany 29
Hong Kong 33
Hungary 37
Ireland 41
Italy 45
Latvia 50
Lithuania 54
Netherlands 58
Poland 62
Qatar 66
Romania 70
Saudi Arabia 74
Singapore 77
South Africa 82
Spain 86
Sweden 90
Switzerland 94
UAE 98
Other jurisdictions 102
Glossary 103
CONTENTS

4
Paul de la Peña
Partner and UK head of restructuring
+44 20 7919 0706
pauldelapena@eversheds.com
The information contained in this document is intended as a guide only. Whilst the information is believed to be correct at the time of
printing, it is not a substitute for appropriate legal advice. Eversheds can take no responsibility for actions taken based on the information
in this document.
Local contacts for each of our offices are contained within this guide. If you have any questions or need case-specific advice, please
do not hesitate to contact them.
INTRODUCTION
Although companies trade in an increasingly global market
and despite advances in the recognition of foreign insolvencies
in many jurisdictions, insolvency remains essentially national
and the relevant law varies significantly from jurisdiction to
jurisdiction. Eversheds has expert lawyers across the world to
help you cut through the complexity.
The purpose of this booklet is to provide a quick reference
guide to company insolvency laws and procedures in a range
of jurisdictions. It summarises the law relating to corporate
insolvency and restructuring on a country by country basis
and answers some of the questions most likely to be asked by
distressed companies or their creditors. Following the country
profiles, there is a glossary of insolvency concepts that explains
some common concepts found in more than one jurisdiction.
This guide only considers the rules that apply to general company
insolvency. It does not address the insolvency procedures that
apply to individuals or special insolvency regimes (for example,
those applicable to credit institutions, investment banks or
insurers). If you have a query in relation to such matters, please
ask one of the Eversheds contacts named in the guide.
Eversheds’ restructuring and insolvency practice
Eversheds is one of the largest full service law firms in the world,
with 55 offices across 29 countries. Our restructuring and
insolvency practice covers key jurisdictions across the world and
includes many lawyers listed as insolvency experts in the leading
legal directories, Chambers and Legal 500.
“Varied practice with notable expertise
in restructuring and insolvency matters.”
“Represents an impressive range of
leading financial institutions.”
“Particularly strong choice for cross-
border transactions”
Chambers Europe 2014

5
Insolvency procedures
What are the main insolvency
procedures applicable
to companies in your
jurisdiction?
• Bankruptcy (Liquidation)
• Restructuring with self-administration
• Restructuring without self-administration
• Reorganisation
Bankruptcy (Liquidation) – A company or its creditor(s) can petition for bankruptcy of the
company on grounds of insolvency or over-indebtedness. The court will appoint an insolvency
administrator who is responsible for realising the company’s assets and dividing the proceeds
amongst the creditors. On conclusion of the bankruptcy the company is liquidated and removed
from the register.
Restructuring with self-administration - A company initiates a restructuring proceeding with
self-administration by presenting a restructuring plan to the court along with the application
for opening the insolvency proceeding. The plan must provide for repayment of at least 30%
of the company’s debts within two years and be approved by the company’s creditors. As well
as the restructuring plan, the company must also submit a financial plan setting out how the
company will finance its continued trading for the next 90 days. Once the court has approved
the restructuring plan, the company’s directors continue to manage the company. Day-to-day
business will be conducted by the company’s directors, while more important decisions must be
approved by the administrator or the court.
If the company makes the repayments set out in the restructuring plan, the remainder of its debts
are written off.
Restructuring without self-administration - Where the restructuring plan provides for the
repayment of only 20% to 30% of the company’s debts, a restructuring without self-administration
can be opened with the approval of the company’s creditors. The court will appoint an
administrator who manages and represents the company in all respects. If the company makes
the repayments set out in the restructuring plan, the remainder of its debts are written off.
Reorganisation – Reorganisation is a court administered insolvency proceeding that aims to
avoid insolvency proceedings by restructuring at an early stage. Reorganisation is rarely used as
companies favour restructuring.
AUSTRIA
Can a company obtain
a moratorium whilst it
prepares a restructuring
plan?

No - Austrian law does not provide for a free-standing restructuring moratorium. A company
does not have the protection of a moratorium while formulating or preparing restructuring
proceedings.
AUSTRIA

6
To what extent do the
directors of the company
remain in control of its affairs
during any of the above
procedures?

In a restructuring without self-administration or a liquidation the powers of the directors cease
and the administrator takes control of the company.
In a restructuring with self-administration, the directors remain in control of the company,
although some actions require the approval of the administrator or the court (eg sale of real
estate property).
How quickly can a creditor
generally commence the
liquidation of an insolvent
company, assuming an
undisputed claim and no
opposition from the company?
Do your courts recognise
insolvency proceedings
commenced in the courts of
another jurisdiction?
Between four and six weeks.
Yes - insolvency proceedings commenced in the courts of other EU member states will be
automatically recognised under the EC insolvency regulation.
Insolvency proceedings commenced in another country can be recognised, if: (a) the centre of
the company’s main interest is in that country; and (b) the foreign insolvency proceedings are
compatible with Austrian insolvency proceedings, in particular Austrian creditors must be treated
equally to creditors domiciled in the country opening the proceedings.
Which classes of creditor are
given preferential status? Are
any classes subordinated?
All debts arising after the commencement of an insolvency procedure have preferential status.
Debts arising before commencement of insolvency proceedings are bankruptcy claims and do not
have preferential status. No other classes of creditor are given preferential status.
Sums due to shareholders of the company which can be characterised as a form of equity
replacement are subordinated to all other claims.
Position of creditors
What are the main forms of
security over movable and
immovable property?
Security over immoveable property is taken by mortgage.
Security over moveable property is taken by:
• assignments
• pledges
• liens
AUSTRIA

7
Are foreign creditors
treated equally to domestic
creditors?
Are contract terms
permitting termination of
the contract by reason of
insolvency valid?
Are retention of title clauses
effective?
Yes.
No (in principle).
In principle yes, providing that the clause is incorporated into the contract between the parties
and the goods in question can be identified. Retention of title can secure all monies due from the
company to the supplier and is not limited to sums due under the particular order in question.
The insolvency administrator can challenge:
• transactions at an undervalue
• unusual gifts
• preferences
• security granted in the 60 days prior to the opening of insolvency proceedings
• debts repaid in the 60 days prior to the opening of insolvency proceedings
Setting aside transactions
What are the main
transaction avoidance
provisions, and who can
challenge transactions?
Directors who fail to apply or delay applying for insolvency proceedings in respect of a company
that is insolvent (on a cashflow or balance sheet basis) can be held civilly liable for:
• losses caused by their failure or delay
• the costs of opening insolvency proceedings (approx. EUR 4,000)
Directors who are grossly negligent and causes losses to creditors by not applying for insolvency
proceedings in a timely manner can be held criminally liable and be imprisoned for up to two
years.
A director can also lose his trade licence if he is a registered agent under Austrian Trade Law.
Position of directors
What are the risks facing
the directors of an insolvent
company?
AUSTRIA

8
AUSTRIA
Silva Palzer
+43 15 16 20 12 5
s.palzer@eversheds.at
Jakob Leinsmer
+43 15 16 20 14 4
j.leinsmer@eversheds.at
For more information on
company insolvency in
Austria please contact

9
jurisdiction?
• Bankruptcy
• Judicial reorganisation
• Voluntary liquidation
Bankruptcy – If a company ceases to pay its debts and can no longer obtain credit, its directors, a
creditor, the public prosecutor, an administrator or other insolvency officer can apply to the court
for its bankruptcy. If the court declares the company bankrupt, it appoints a receiver who realises
the assets of the company (either as a going concern or piecemeal) and distributes the proceeds to
its creditors.
Judicial reorganisation – A financially distressed company can apply for a judicial reorganisation
with the object of rescuing the company. There are four types of judicial reorganisation, one
being a flexible out of court agreement with creditors and the others with more specific purposes
(consensual agreement, collective reorganisation plan, sale of all or part of enterprise) closely
supervised by the court.
Voluntary liquidation – This is an alternative to a court-controlled bankruptcy proceeding. In an
ordinary voluntary liquidation the shareholders control the liquidation.
Yes, in a judicial reorganisation, a moratorium of up to six months can be granted (starting on the
date of the court’s order for a judicial reorganisation).
In a bankruptcy the court appoints a bankruptcy trustee (curator/curateur) to manage the company,
subject to the supervision by a judge-delegate. In high value or complex cases a committee of trustees
is appointed.
In a judicial reorganisation, the directors remain in control of the company, however, the court
can appoint a ‘judicial agent’ (gerechsmandatari/mandataire de justice) to assist the company in
its reorganisation if a creditor (or a third party) demands it and the court finds this useful.
In a voluntary liquidation a liquidator appointed by the shareholders manages the company.
Three to four weeks.
BELGIUM
plan?
procedures?
undisputed claim and
no opposition from the
company?
BELGIUM

10
creditors?
Are contract terms
insolvency valid?
effective?
Insolvency proceedings commenced in the courts of other EU members states will be automatically
recognised under the EC insolvency regulation.
A foreign insolvency procedure commenced in a jurisdiction that is not an EU member state can
be recognised and enforced by the Belgian courts if:
• it is not contrary to public policy to do so
• rights of any defendant are safeguarded
• the foreign judgment is final
• the assumption of jurisdiction by the foreign court is not contrary to principles of Belgian law
The fees and expenses of the bankruptcy are super secured and rank ahead of all other creditors
including secured creditors.
The costs of contracts entered into during judicial reorganisation rank ahead of other unsecured
creditors.
Unpaid wages, employee compensation, social security contributions and taxes have general
privilege and rank ahead of other unsecured creditors.
Yes.
Yes.
A retention of title clause is effective if it is agreed in writing prior to delivery and the goods:
• are still in the physically possession of the company
• are not fixed to land such that they have become immoveable property
• are not mixed with other goods
immovable property?
Security over immovable property is taken by a mortgage.
Security over movable property is taken by:
• a specific pledge over that property
• a general pledge over a company’s business
BELGIUM

11
BELGIUM
What are the main
The bankruptcy trustee can challenge any fraudulent transactions that are prejudicial to the
interests of the company’s creditors regardless of when they occurred.
The bankruptcy trustee can only challenge other transactions if they were entered into during the
‘suspect’ period. The suspect period is the period from when the company ceases to pay its debts
until the time when the court declares the company bankrupt. There is a rebuttable presumption
that these dates are the same, however, the court can decide that the company ceased to pay its
debts on an earlier date. In which case the following types of transaction can be avoided on the
application of the backruptcy trustee:
• gift
• transaction at an undervalue
• grant of security in respect of pre-existing indebtedness
• any transaction where the counterparty was aware that the company had ceased to pay
its debts at the time of entering into the transaction
• payment of a debt not yet due
• any payment made by means other than cash or cash equivalent, eg payment in kind
company?
Directors can be held civilly liable for the following actions:
• breach of their mandate to manage the company
• breach of fiduciary duties owed to the company
• breach of the Belgian Company Code
-- failure to hold a shareholders meeting when the company’s net assets fall below 50%
of share capital
-- failure to present annual accounts to a shareholders meeting
• breach of the company’s articles of association
• serious fault which contributes to the company’s insolvency
• failure to pass on social security contributions deducted from employee wages to the state

12
BELGIUM
Koen Devos
+32 27 37 93 60
koendevos@eversheds.be
Lieven Devos
+32 47 87 29 18 8
lievendevos@eversheds.be
Directors can be held criminally liable for:
• concealment or destruction of the company’s assets
• concealment or falsification of the company’s books and records
• causing the company to make unauthorised gifts
• reckless transactions to postpone insolvency
• false accounting
• abuse of the company’s assets
The court can disqualify a person from acting as a director if he is found liable for:
• fraudulent bankruptcy
• serious fault contributing to the company’s insolvency
• any bankruptcy related criminal offence
Belgium please contact

13
jurisdiction?
• Administration
• Liquidation
• Company voluntary arrangements (“CVAs”)
• Schemes of arrangement
Administration – A flexible procedure that can be used to achieve a range of outcomes for a
distressed company, from a restructuring to a liquidation of the company’s assets. It is frequently
used in order to achieve a sale of the business of the company as a going concern (the terms
of which have often been agreed in advance of the administrators being appointed, known as
a “pre-packaged” sale or “pre-pack”). In order to protect the business and preserve its value,
the company is protected by a statutory moratorium whilst in administration. Administrators
can be appointed by the company itself or a creditor holding a floating charge filing a notice of
appointment at court; alternatively, an application for an administration order can be made to the
court by the company or by any creditor.
Liquidation – Intended to facilitate the realisation of the company’s assets, the fair assessment
and payment of the claims of its creditors and, in the case of a solvent liquidation, the division of
any surplus among the shareholders. It can be commenced by an order of the court (compulsory
liquidation) – generally on the petition of a creditor – or by a resolution of the company’s
shareholders (voluntary liquidation).
CVAs – Allow the company to propose a restructuring plan to its creditors which will be binding
on those creditors if approved by the relevant majority of them (75% by value including at least
50% of creditors unconnected with the company). Secured or preferential creditors cannot be
bound without their consent. A creditor can apply to court to challenge a CVA that it considers
to be unfair.
Schemes – Like CVAs, the schemes allow the proposal of a restructuring plan to creditors, but
they are also used to effect a wide range of other compromises and arrangement between the
company and its creditors or shareholders. Unlike CVAs, schemes can bind secured creditors.
Creditors or members whose interests are similar are divided into classes, and the scheme only
becomes effective if approved by the relevant majority (at least 75% by value and 50% in number)
of the members of each class.
ENGLAND AND WALES
ENGLANDANDWALES

14
immovable property?
Security over immovable property is taken by:
• fixed charges including mortgages
• floating charges
• fixed charges
Security over tangible property is taken by possessory security:
• pledges
• liens
Yes - insolvency proceedings commenced in the courts of other EU members states will be
Insolvency officeholders appointed in other jurisdictions can obtain recognition under the Cross-
Border Insolvency Regulations 2006 (which implements the UNCITRAL model law) or section 426
Insolvency Act 1986.
Note, however, that judgments obtained in actions arising from insolvency proceedings (such as
claw-back claims) abroad will not generally be enforceable against a defendant in England unless
the defendant has submitted to the foreign jurisdiction.
procedures?
In an administration or liquidation the powers of the directors cease, and the administrator or
liquidator takes control of the company.
In a CVA or scheme the directors remain in control of the company (although, in the case of a CVA,
subject to supervision by an insolvency practitioner).
company?
Between six and ten weeks, depending on the process followed.
ENGLANDANDWALES
plan?
No - English law does not provide for any “free-standing” restructuring moratorium and a
company does not have the protection of a moratorium while formulating or awaiting the
creditors’ approval of a CVA or scheme (with the limited exception of CVAs proposed by small
companies). As a result, where a company needs a moratorium to protect it from creditor action
whilst a restructuring is effected, it will generally go into administration, with the administration
being discharged once the restructuring plan has been approved.

15
Preferential debts rank after debts secured by fixed charges and ahead of detbs secured by floating
charges:
• contributions to occupational pension schemes
• unpaid wages up a maximum of £800 per employee
• accrued holiday pay
Sums due to the shareholders of the company in their character as shareholders are subordinated
to the claims of unsecured creditors.
creditors?
Yes.
Are contract terms
insolvency valid?
Yes.
effective?
In principle yes, providing that the clause is incorporated into the contract between the parties
and the goods in question can be identified. Retention of title can secure all monies due from the
company to the supplier and is not limited to sums due under the particular order in question.
What are the main
An insolvency officeholder can challenge:
• transactions at an undervalue (concluded in the two years prior to the commencement of
insolvency proceedings)
• preferences (concluded in the six months prior to the commencement of insolvency
proceedings (two years where the preferred creditor is connected to the company))
• floating charges granted in respect of pre-existing indebtedness (in the year prior to the
commencement of insolvency proceedings (two years where the chargeholder is connected
to the company))
• transactions defrauding creditors (no time limit on bringing a challenge)
ENGLANDANDWALES

16
company?
Directors can be held civilly liable for:
• wrongful trading - once the directors know or ought to know that the company cannot
avoid insolvent liquidation, failing to take every step with an eye to minimising the losses
to creditors
• fraudulent trading – trading while insolvent with the intention of defrauding creditors (this
is difficult to prove)
• misfeasance – any breach of directors’ fiduciary duties, including causing the company to
enter into avoidable transactions, that causes a loss to the company
In theory directors can be held criminally liable for a number of insolvency related offences
including fraudulent trading, but in practice prosecutions are very unusual.
Directors whose conduct indicates that they are unfit to be company directors can be disqualified
from acting as such or being involved in the management of a company for up to 15 years.
Paul de la Peña
+44 207 919 0706
pauldelapena@eversheds.com
England and Wales please
contact
Jamie Leader
+44 207 919 4756
jamieleader@eversheds.com
ENGLANDANDWALES

17
jurisdiction?
• Bankruptcy
• Reorganisation
Bankruptcy – Provides for the company’s assets to be realised and the proceeds distributed to
creditors in accordance with the Bankruptcy Act. A bankruptcy is commenced by a petition,
filed by either the company or one of its creditors. If a creditor has filed the petition, there will
be a preliminary hearing at which the court will appoint an interim trustee. If the court finds
the company to be “permanently insolvent”, the court will declare the company bankrupt and
appoint a bankruptcy trustee. When determining whether the company is permanently insolvent,
the court will take into account the balance sheet and cash flow insolvency of the company,
Estonian law and court practice.
Reorganisation – A flexible procedure under which a company can restructure its financial obligations
to compromise its debts, reschedule its debts so they are repaid over a longer period or both, with the
aim of restoring the company to solvency. A reorganisation is commenced by the company making an
application to court.
ESTONIA
plan?
procedures?
On commencement of a reorganisation the court will stay enforcement proceedings against the
company until a reorganisation plan is approved or the reorganisation proceeding is terminated.
On being declared bankrupt the powers of directors cease and the bankruptcy trustee takes control
of the company’s assets.
On a reorganisation the powers of the directors continue subject to supervision of a court
appointed reorganisation adviser while drafting and implementing the reorganisation plan.
company?
Between six months and one year, depending on the court process, the bankruptcy trustee and
the judge involved in the matter.
Yes - insolvency proceedings commenced in the courts of other EU member states will be
Insolvency proceedings commenced in a non-EU jurisdiction will be recognised in Estonia unless
recognition would be contrary to Estonian law or public policy.
ESTONIA

18
creditors?
Are contract terms
insolvency valid?
effective?
The order of priority of payment on a bankruptcy is:
• secured debts, less the expenses of the bankruptcy up to a maximum of 15% of the proceeds
of the sale of the secured asset. Any shortfall can be claimed as an unsecured debt
• unsecured debts where the creditor has filed their claim with the bankruptcy trustee within
two months of the date of publication of the bankruptcy notice in the official publication
Ametlikud Teadaanded
• unsecured debts filed after the two months deadline
Debts owed to directors and shareholders are subordinated.
Yes.
Yes – although terms that provide for termination on commencement of reorganisation
proceedings or approval of a reorganisation plan are void.
Yes. The trustee will return property (which the company has not paid for at the time the
bankruptcy commences) to a supplier who can prove he has a retention of title over that property.
Security is taken over real estate by way of a mortgage.
Security is taken over tangible property by a:
• possessory pledge
• commercial pledge
• lessor’s right of security
Security is taken over intangible property by pledge.
immovable property?
ESTONIA

19
ESTONIA
What are the main

The bankruptcy trustee can challenge transactions that impair the rights of other creditors and
were entered into in the five years prior to the appointment of an interim trustee.
The courts deal with applications on a case by case basis. The courts are more likely to avoid
transactions if:
• the counterparty knew or should have known that the transaction would impair the interests
of the creditors
• the counterparty was a connected party
The court will avoid security granted:
• after the appointment of an interim trustee
• in the six months prior to the appointment of an interim trustee where that security was
granted in respect of pre-existing debts or at a time when the company was insolvent
• in the two years prior to the appointment of an interim trustee where the security was
granted in favour of a connected person
Directors can be held civilly liable for losses caused to the company as a result of a director’s
breach of duty.
Directors can be held criminally liable and fined or imprisoned for up to three years for:
• knowingly causing the company to become insolvent
• causing the company to prefer one creditor over others
• concealing the company’s property
company?

20
ESTONIA
Randu Riiberg
+372 6 141 990
randu.riiberg@eversheds.ee
Tarmo Repp
+372 6 141 990
tarmo.repp@eversheds.ee
Estonia please contact

21
FINLAND
jurisdiction?
• Bankruptcy
• Business restructuring
• Voluntary arrangement
Bankruptcy – In a bankruptcy an administrator is appointed by the court to assist the creditors to
realise the assets of the company and distribute the proceeds to themselves.
Business restructuring – In a business restructuring an administrator is appointed by the court
to prepare a restructuring plan that requires the approval of the creditors. The restructuring plan
can:
• extend the term of debts
• reduce the rate of interest on debts
• compromise unsecured debts
A restructuring plan that is unanimously approved by the company’s creditors is not subject to
these restrictions and can compromise secured debts.
Voluntary arrangement – An alternative to a court sanctioned business restructuring is for the
company and its creditors to agree a contractual restructuring out of court, although such a
voluntary arrangement will only bind those creditors who are party to it.
FINLAND
plan?
Yes. On commencing a business restructuring a moratorium on debt repayments and creditor
enforcement automatically arises. In certain circumstances a company can apply to the court for
a moratorium in anticipation of commencing a business restructuring proceeding.
procedures?
Business restructuring - the directors remain in control subject to the supervision of the
administrator and, if one is formed, the creditors’ committee. Certain acts, such as the disposition
of property, require the administrator’s consent.
Bankruptcy - the directors’ powers cease and the estate is controlled by the creditors as assisted
by the administrator.
undisputed claim and no
opposition from the company?
Five to six weeks.

22
FINLAND
immovable property?
Security is taken over:
• company assets by a floating charge
• real estate by a mortgage
• goods delivered but not yet paid for by a contractual retention of title
• movable property by a pledge
• receivables by a pledge
Under the Nordic bankruptcy convention insolvency proceedings commenced in Denmark,
Iceland, Norway and Sweden are automatically recognised in Finland.
International law principles apply to the recognition of insolvencies commenced before the courts
of countries outside the EU or the Nordic bankruptcy convention.
Secured debts have specific preferential status and rank ahead of all other debts.
The following classes of debt have general preferential status and rank ahead of ordinary
unsecured debts:
• the fees and expenses of the insolvency
• claims arising from the continuation of the company’s business after the commencement of
insolvency
creditors?
Yes.
Are contract terms
insolvency valid?
Restructuring proceedings - a counterparty cannot terminate a contracts by reason of insolvency,
however the company has a right to terminate certain lease contracts.
Bankruptcy – a counterparty can request the bankrupt estate declare whether it commits to the
contract. If within a reasonable time the estate commits to the contract and posts acceptable
security for its performance, the contract cannot be terminated by reason of insolvency.

23
FINLAND
effective?
Yes, but not if the company has the right to:
• assign the assets to a third party
• attach the assets to other assets
• dispose of the assets as if it were the owner
What are the main
The creditors or the administrator can challenge the following transactions if they took place in
the five years prior to the commencement of insolvency and the company was insolvent at the
time of the transaction or became insolvent as a result of entering into the transaction:
• preferences
• transactions defrauding creditors
• increasing the company’s debt to the detriment of other creditors
There are also specific avoidance provisions relating to transactions including:
• gifts
• disproportionate fees
• payment of debts before the due date
• granting security
company?
Directors can be held civilly liable to pay damages to the company where they deliberately or
negligently cause loss to the company, its shareholders or creditors. Proceedings can be brought
by creditors or shareholders.
Directors can become personally liable to pay the losses of the company, its shareholders and
creditors if, on the company’s capital becoming negative, they fail to report that fact to the
company registrar.
A director can be held criminally liable for:
• dishonesty - causing the company’s insolvency or increases its indebtedness by:
- destroying property
- making a gift or surrendering property without good cause
- transferring property abroad to put it beyond the reach of creditors
- increasing the company’s liabilities without valid grounds
• preferring a creditor – procuring that the company, at a time when it is unable to pay its
debts:
- repays a debt before its due date
- gives security for pre existing debts
- makes a payment other than by cash or cash equivalent

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FINLAND
Jari Salminen
+35 81 06 84 16 51
jari.salminen@jbeversheds.com
Pekka Kokko
+35 81 06 84 16 28
pekka.kokko@jbeversheds.com
Finland please contact

25
FRANCE
jurisdiction?
• Safeguard
• Rehabilitation
• Liquidation
Safeguard – A company that has not ceased to be able to pay its debts as they fall due but is
nevertheless financially distressed can apply to court for safeguard proceedings, which provide
for a moratorium on enforcement by creditors while a debt restructuring plan is prepared.
The company has six months (extendable to 18 months) in which to negotiate and agree the
rescheduling or compromise of all or part of its debts with its creditors. If the plan is successfully
implemented the company returns to financial health.
Rehabilitation – An insolvent company can apply to court for rehabilitation proceedings, which
provides for a moratorium on enforcement by creditors while a restructuring plan is prepared.
The court approves the restructuring plan, which is binding on the creditors even though they
have no say in it. If the plan is successfully implemented the company returns to financial health.
Liquidation – The purpose of liquidation is the realisation of a company’s assets and the
distribution of the proceeds to its creditors.
FRANCE
plan?
A company can only obtain a moratorium while preparing a restructuring plan by applying for a
safeguard or a rehabilitation.
procedures?
Safeguard - the company’s managers remain in control subject to the supervision and assistance
of the court appointed administrator.
Rehabilitation – depending upon the terms of the order commencing rehabilitation the court
appointed administrator will either supervise the directors, assist them or directly manage the
company.
Liquidation - the powers of the directors cease and the liquidator takes control of the company.
company?
Two months, provided that:
• it is proven to the court that the company has ceased being able to pay its debts as they fall
due; and
• the company is not capable of being rescued by means of a restructuring plan

26
FRANCE
immovable property?
Security over immoveable property is taken by:
• mortgage (hypothèque)
• lender’s lien (privilège de prêteur de deniers)
Security over tangible moveable property is taken by various forms of pledges (gage), many of
which require registration at various registries.
Security over different kinds of intangible movable property is taken by various forms of a different
kind of pledge (nantissement).
Yes – insolvency proceedings commenced in the courts of other EU member states are
Achieving recognition of insolvency proceedings commenced in countries that are not EU
member states is possible in theory but impractical in reality.
Preferential status is given to debts owed to employees in respect of remuneration incurred after
or in the two months prior to the judgment commencing insolvency proceedings.
creditors?
Yes, provided that creditors who reside outside metropolitan France lodged their claim within four
months of publication of the insolvency judgment in the BODACCC (official publication).
Are contract terms
insolvency valid?
No, they are void by law as a matter of public policy.

27
FRANCE
effective?
Yes. Any demand for return of property under a retention of title clause must be made to the
administrator by registered mail within three months of publication of the insolvency judgment.
What are the main
Certain transactions entered into within the 18 months prior to the insolvency judgment are
automatically void including:
• deeds assigning movable or immovable property
• payment of debts prior to the due date
• payments of debts by means that are not common business practice, eg payments
other than in cash or cash equivalents
• grants of security
Any other transaction entered into in the 18 months prior to the insolvency judgment can be
avoided at the discretion of the court where the counterparty knew that the company was
insolvent at the time of the transaction. Where such a transaction was with a company in the same
group, the counterparty’s knowledge of the company’s insolvency is presumed.
company?
Directors can be held civilly liable for the company’s debts if they mismanaged the company and
that mismanagement caused the company to become balance sheet insolvent.
Directors can be held criminally liable if their mismanagement of the company is sufficiently
serious.
Directors found civilly or criminally liable for mismanagement may be disqualified from acting as
directors.

28
FRANCE
Antoine Martin
+33 1 55 73 40 21
antoinemartin@eversheds.com
Rémi Kleiman
+33 1 55 73 40 24
remikleiman@eversheds.com
France please contact

29
GERMANY
jurisdiction?
• Insolvency administration (“Insolvenzverwaltung“)
• Self-administration under supervision (“Eigenverwaltung mit Sachwalter“)
• Creditors protection scheme (“Schutzschirmverfahren“)
Insolvency administration – A court procedure in which an administrator takes control of the
company. The directors of a limited liability company (GmbH and AG) that is cashflow or balance
sheet insolvent must apply for insolvency administration. Where a limited liability company is likely
to become cashflow insolvent its directors can voluntarily apply for insolvency administration.
The proceeding is flexible and can be used to achieve a range of outcomes for a distressed
company from a restructuring to a liquidation of the company’s assets. It is frequently used in
order to achieve a sale of the business of the company as a going concern. In order to protect the
business and preserve its value, the company is protected by a statutory moratorium whilst in
insolvency administration.
Self-administration under supervision – A court procedure in which the company’s management
remains in control of the company subject to supervision by a procurator. This procedure can be
applied for as part of the application for insolvency administration. It is frequently used in order to
achieve a sale of the business of the company as a going concern or to ensure that key suppliers
continue to sell to the company.
Creditors’ protection scheme – Only available to companies that are likely to become cashflow
insolvent. This procedure allows the company to propose a restructuring plan to the creditors.
Schemes can bind secured creditors. Creditors and members are divided into classes with similar
interests. The scheme only becomes effective if approved by the relevant majority of each class
and by the insolvency court.
GERMANY
Can a company obtain a
moratorium whilst it prepares
a restructuring plan?
Yes, the restructuring plan is prepared after the commencement of one of the three formal
proceedings and the courts can (and regularly do) grant a moratorium in such circumstances.
procedures?
In a creditor protection scheme or self-administration directors legally remain entitled to act
for and on behalf of the company.
In an insolvency administration, however, the administrator takes over. During the first stage of
the insolvency proceedings the directors remain in control of the company (although subject to
supervision by a preliminary insolvency practitioner).

30
GERMANY
company?
Two weeks to three months depending upon the case at hand and the process followed.
immovable property?
• mortgage (Hypothek)
• non-accessory land charge (Grundschuld)
• retention of title (Sicherungsübereignung)
• assignment by way of security (Sicherungsabtretung)
• possessory security such as pledges
Yes – proceedings commenced in the courts of other EU member states will be automatically
Insolvency proceedings commenced in the courts of countries that are not EU member states
are capable of being recognised by application to the German court, however, recognition will
be denied where the foreign court does not have jurisdiction in accordance with German law or
where recognition would be contrary to public policy, for instance where creditors of different
nationalities are not treated equally under the foreign insolvency proceeding.
Debts owed to secured creditors are preferred as are debts incurred after the commencement of
insolvency proceedings. Generally, debts owed to the company’s shareholders are subordinated
to debts owed to unsecured creditors.
creditors?
Yes.

31
GERMANY
Are contract terms
insolvency valid?
Depends on nature of the contract. The terms will be invalid if they provide for automatic
termination of a contract as are terms that deprive the insolvent party of the right to be paid sums
that have fallen due prior to the commencement of insolvency. Inclusion of terms that provide for
termination on insolvency are prohibited in certain contracts including leases of real estate and
leases of chattels.
effective?
In principle yes, provided that the retention of title clause is validly agreed upon by the parties and
the goods in question can be properly identified. In general, the validity of the retention of title is
subject to the law of the jurisdiction where the goods in question are situated.
What are the main
The insolvency administrator can challenge:
• transactions at an undervalue (concluded in the four years prior to filing for insolvency)
• preferences (given in the ten years prior to filing for insolvency)
• transactions entered into in the three months prior to filing for insolvency
• repayment of a shareholder loan (in the year prior to filing for insolvency)
• provision of security for a shareholder loan (in the ten years prior to filing for insolvency)
company?
Directors of a company that is (or is likely to become) insolvent on a cashflow or balance sheet
(overindebtedness) basis have a duty to file for insolvency. Directors in breach of this duty can be
held personally liable to make good all funds disbursed by the company after the date on which
they should have filed for insolvency.
Directors can also be criminally liable for fraud and other offences in relation to the insolvency of
a company. On conviction, a director can be disqualified from acting as a director for five years.

32
GERMANY
Dr Sebastian Zeeck, LLM
+49 40 80 80 94 300
sebastian.zeeck@eversheds.de
Dr Christian Hilpert, MBA
+49 89 54 56 51 48
christian.hilpert@eversheds.de
Germany please contact

33
HONGKONG
jurisdiction?
• Liquidation
• Scheme of arrangement
Liquidation – There are three types of liquidation:
• members’ voluntary liquidation (MVL): solvent, commenced by a resolution of the
shareholders
• creditors’ voluntary liquidation (CVL): insolvent, commenced by a resolution of the
shareholders
• compulsory liquidation: insolvent, commenced by court order
The liquidator realises the assets of the company and distributes the proceeds to its creditors. In an
MVL the surplus is paid to the shareholders. At the end of the process, the company is dissolved
and ceases to exist.
Scheme of Arrangement – Where a company is in financial difficulties, it can propose a
compromise of its debts to its members and creditors.
Creditors’ schemes must be approved by a majority of creditors in number and 75% in value.
Members’ schemes must be approved by 75% of the members and all members must vote.
Special rules apply where the scheme is used to effect a takeover.
HONG KONG
plan?
There is generally no moratorium where a company is preparing a restructuring plan, although
appointment of a provisional liquidator would effectively provide one.
procedures?
On making of an order for compulsory liquidation by the court the directors’ powers of
management cease.
In a voluntary liquidation the directors’ powers cease on appointment of a liquidator, although
the shareholders or creditors can sanction the continuance of the directors’ powers.
In a scheme the directors remain in control of the company.

34
HONGKONG
company?
Around eight to ten weeks.
immovable property?
Security over immovable property is taken by a mortgage.
• fixed charge
• floating charge
• pledge
There is no legislation in relation to cross-border insolvency, however, the Hong Kong court
generally recognises overseas insolvency proceedings.
Preferential debts include:
• payments to employees in respect of severance, long service, notice, holiday and statutory
compensation, subject to certain limits
• all statutory debts owed to the State
creditors?
Yes.

35
HONGKONG
Are contract terms
insolvency valid?
Yes.
effective?
Yes, provided that such clauses are incorporated into contracts that are valid under Hong Kong
law.
What are the main
A liquidator can challenge:
• fraudulent preferences
• floating charges granted in the 12 months prior to the company going into liquidation. The
court will avoid the charge unless the chargeholder can prove that following the grant of the
charge the company remained solvent
company?
Directors can be found civilly liable for losses caused to the company by:
• breach of fiduciary duty
• fraudulent trading
Directors can be held criminally liable for fraudulent trading and punished by an unlimited fine
and upto five years imprisonment.

36
HONGKONG
Ivan Ng
+852 2186 3223
ivanng@eversheds.com
Emily Li
+852 2186 3219
emilyli@eversheds.com
company insolvency in Hong
Kong please contact

37
HUNGARY
jurisdiction?
• Bankruptcy
• Liquidation
Bankruptcy – A financially distressed company can petition to the court for bankruptcy
proceedings, which permit the company to enter an arrangement or a composition with its
creditors. If the company successfully executes the arrangement it is restored to financial health.
Liquidation – A creditor or the company can petition the court for the liquidation of an insolvent
company, or the court can commence proceedings on its own motion. The court appoints a
liquidator who realises the assets of the company and distribute the proceeds to the creditors.
HUNGARY
plan?
Yes, in bankruptcy the company can obtain a moratorium on payment, creditor enforcement
and insolvency proceedings for 120 days from the date of court order commencing proceedings,
extendable to 240 days with the consent of creditors.
procedures?
In bankruptcy the directors remain in control of the company subject to supervision by an
administrator appointed by the court.
In liquidation the powers of the directors cease and the liquidator takes control of the company.
company?
Between eight and ten weeks.

38
HUNGARY
immovable property?
• lien
• mortgage
Security over movable property is taken by:
• lien
• mortgage
Security over tangible property is taken by:
• Pledge
• lien
automatically recognised under the EC insolvency regulation. Insolvency proceedings commenced
in the courts of countries that are not EU member states are not recognised.
The expenses of liquidation including the liquidator’s fees and sums owed to employees have
preferential status.
Other debts will be satisfied in the order specified by statute:
• claims secured by pledged property
• life-annuity payments
• compensation, restitution and similar claims
• claims of private individuals not originating from economic activities
• debts owed to social security funds, taxes, default interest and late charges, surcharges and
penalties and similar debts
• general creditors
The following debts are subordinated:
• debts owed to majority shareholders and executive officers of the company and their close
relatives (except for wages)
• debts owed to companies of which the company has majority control
creditors?
Yes.

39
HUNGARY
Are contract terms
insolvency valid?
Yes, provided that the contract terms expressly permit termination on grounds of
commencement of insolvency proceedings.
effective? Yes.
What are the main
In liquidation proceedings a creditor or liquidator can challenge:
• transactions defrauding creditors if the counterparty knows or should know of that
intention to defraud creditors, and the transaction is entered into after or in the five years
prior to the date of the liquidation petition
• transactions at an undervalue entered into after or in the two years prior to the date of the
liquidation petition
• preferences entered into after or in the 90 days prior to the date of the liquidation petition
company?
Directors can be held civilly liable for damages if:
• they fail to act in the best interests of the company
• once they foresee or ought reasonably to foresee that the company will not be able to pay its
debts as they fall due, failing to perform their duties primarily in the interests of the creditors
• they failure to assist the liquidator
If a director is held personally liable for the company’s debts the court can also disqualify that
person from acting as a director.
Any person who intentionally disposes of all or part of the company’s assets can be held criminally
liable for imprisonment for up to eight years if the creditors incur losses by that person:
• concealing, damaging or destroying any asset
• causing the company to enter into a sham transaction or acknowledge a doubtful liability
• acting in any other way contrary to the requirements of reasonable management

40
HUNGARY
Dr. Ildikó Szegedi
+36 13 94 31 21
szegedi@eversheds.hu
Dr. Péter Sándor
+36 13 94 31 21
peter.sandor@eversheds.hu
Hungary please contact

41
IRELAND
jurisdiction?
• Examinership
• Liquidation
• Scheme of arrangement
Examinership – A financially distressed company can apply to the court for an examinership. If
granted a moratorium arises and the court appoints an examiner who formulates proposals for
a scheme of arrangement between the company, its members and its creditors. If the scheme is
approved by the court and successfully implemented, the company returns to solvency. If the
court rejects the scheme or, following approval by the court the scheme cannot be successfully
implemented, the moratorium is withdrawn and the company usually goes into liquidation.
Liquidation – A liquidation can be commenced by an order of the court (compulsory liquidation),
usually on the petition of a creditor or by a resolution of the company’s shareholders (voluntary
liquidation). The liquidator realises the assets of the company and distributes the proceeds among
the creditors in accordance with the priority set by law.
Scheme of arrangement – An application can be made to court to call meetings of creditor
and members to agree a scheme by which claims against a company can be compromised or
arrangements made by the company with its members or creditors. A scheme must be approved
by a company’s creditors or shareholders by a majority in number and 75% by value of the relevant
creditors or shareholders. On approval at a second court hearing the scheme is put into effect.
IRELAND
plan?
No – Irish law does not provide for any freestanding restructuring moratorium. As a result where
a company requires protection whilst a restructuring is effected, it will generally avail itself of the
examinership process which will provide for a restructuring moratorium of 70 to 100 days (as
directed by the court).
procedures?
Examinership - the directors remain in control of the company.
Liquidation - the powers of the directors cease and the liquidator takes control of the company.
Scheme of arrangement - the directors remain in control of the company.

42
IRELAND
immovable property?
Security over immoveable property is taken by:
• fixed charges
• fixed charges
Security over tangible property is taken by:
• pledges
• liens
Yes – insolvency proceedings commenced in other EU member states will automatically be
In respect of non EU member states, insolvency proceedings will not be automatically recognised
but the courts have inherent jurisdiction to grant recognition.
The costs and expenses of examiners and liquidators have priority to all debts including secured
debts.
Debts owed to employees are preferred to ordinary unsecured creditors.
Sums due to the shareholders of a company are subordinated below the claims of unsecured
creditors.
company?
Six to ten weeks to appoint an official liquidator, depending on the caseload of the High Court.
If there are serious concerns about preserving the company’s assets, a provisional liquidator can
be appointed in 24 to 48 hours.

43
IRELAND
creditors?
Yes.
Are contract terms
insolvency valid?
Yes.
effective?
Yes, provided that the clause is properly incorporated into the contract and that the goods in
question can be identified.
What are the main
The insolvency officer can challenge:
• fraudulent preferences entered into in the six months prior to the commencement of
insolvency (two years if the creditor is a connected party)
company?
Directors can be civilly liable for breach of their duty (arising when they know or ought to know
that the company cannot avoid insolvent liquidation) to minimise the losses suffered by its
creditors.
Directors whose conduct indicates that they are unfit to be company directors can be disqualified
from acting as directors.

44
IRELAND
Norman Fitzgerald
+35 31 66 44 23 9
normanfitzgerald@eversheds.ie
Neil O’Mahony
+35 31 66 44 29 2
neilomahony@eversheds.ie
Ireland please contact

45
ITALY
jurisdiction?
• Pre-insolvency schemes of arrangement:
1. Out-of-courtdebtrestructuringplan(“pianoattestatodirisanamento”)and
2. Debt restructuring agreement (“accordo di ristrutturazione dei debiti”)
• Pre-insolvency composition with creditors (“concordato preventivo”)
• Extraordinary administration (“amministrazione straordinaria delle grandi imprese”)
• Bankruptcy (“fallimento”)
Out-of-court debt restructuring plan – A means for a distressed company to obtain new
financing without the intervention of the bankruptcy court and the risk of claw back actions.
A restructuring plan is prepared by the company and agreed with its creditors. The plan is
approved by an expert who considers the reasonableness of the assumptions and the company’s
ability to fulfil its payment obligations. Plans generally include an industrial and financial plan, a
moratorium, a debt refinancing or rescheduling plan and an analysis of all payments to be made
and security granted under the plan.
Debt restructuring agreement – Enables a company to deal with excessive indebtedness while
continuing to trade. Provides a moratorium without the need for the court to make a declaration
of insolvency.
A debt restructuring agreement is confirmed by the court and binds only those creditors who are
party to the agreement. For an agreement to be effective, creditors who are owed 60% in value of
the company’s debts must be party to the agreement.
Composition with creditors – Enables a company to deal with excessive indebtedness while
continuing to trade. Provides a moratorium without the need for the court to make a declaration
of insolvency.
A composition with creditors is scrutinised and approved by the bankruptcy court and is binding
on all creditors (including dissenting creditors).
Extraordinary administration – The extraordinary administration proceeding is for the
restructuring of companies and groups of companies that have a strategic position in the Italian
economy. The procedure is commenced by the Ministry of Industry who appoints extraordinary
commissioners who in turn are supervised by the bankruptcy court.
ITALY

46
There are two types of extraordinary administration (under legislative decree and under the
Marzano law). In both procedures the company is declared insolvent by the bankruptcy court.
A liquidation or restructuring plan is prepared by the commissioner and approved by the Ministry.
Only under the Marzano procedure might creditors be requested to approve the plan.
Bankruptcy - Following a declaration of insolvency, the court appoints a supervising judge and
a trustee who is entrusted with the management of the business (if any) and realisation of the
company’s assets.
On declaration of insolvency an automatic moratorium arises. Creditors present their claims and
the trustee draws up a list of creditors. Creditors are paid pro rata to their claims. Secured creditors
whose debts are not repaid from the assets on which they are secured are entitled to prove for the
shortfall along with unsecured creditors.
ITALY
plan?
Yes, a company can obtain the protection of a moratorium while preparing a plan in the context
of a pre-insolvency composition with creditors. The moratorium will take effect from the date that
the composition application is made to the court. The plan must be filed at the court within 120
days of obtaining the moratorium, although this period can be extended for a further 60 days.
procedures?
In a bankruptcy or extraordinary administration the powers of the directors cease and a trustee or
extraordinary commissioner takes control of the company.
In pre-insolvency proceedings the directors remain in control of the company, subject to
supervision by the court (and in a composition, supervision by an insolvency practitioner).
company?
A minimum of eight weeks.

47
immovable property?
Security over immovable property is taken by a mortgage (“ipoteca”)
Security over movable property is taken by a pledge (“pegno”).
Yes - insolvency proceedings commenced in the courts of EU member states are recognised under
the EC insolvency regulation.
The Italian Court of Appeal will recognise insolvency proceedings commenced in the courts of
countries that are not EU member states if:
• the proceedings are not contrary to a decision of the Italian court
• there are no proceedings pending before the Italian courts
• the proceedings are not contrary to Italian public policy
The following debts have preferential status:
• the expenses of the insolvency procedure
• debts incurred during trading after the commencement of insolvency (if authorised)
• debts having a general right of preference including salaries and professional fees
• social security contributions and taxes
Sums due to shareholders of the company are generally subordinated to the claims of unsecured
creditors.
creditors?
Yes.
Are contract terms
insolvency valid?
In general the Italian law does not recognise a declaration of insolvency as a culpable default by
the company.
effective?
Yes, although if the value of the property subject to the retention (as determined by an independent
expert) exceeds the debt owed to the supplier, the surplus must be paid to the company.
ITALY

48
What are the main
The bankruptcy trustee can apply to court for the annulment of certain transactions entered into
prior to the commencement of the bankruptcy:
• transactions involving unusual means of payment
• security granted to secure pre-existing debts
• security granted to secure due and payable debts
The transaction must have taken place in a relevant period (six months to two years before the
declaration of insolvency) and the trustee must prove that the counterparty was aware that the
company was insolvent at the time of the transaction. There are various defences to avoidance
actions.
company?
Directors can be held civilly liable to pay damages for breach of their duties to:
• supervise the general conduct of the company’s affairs
• minimise losses
• prevent the company from entering in to prejudicial transactions
• preserving the company’s assets
Directors can be held criminally liable if prior to the commencement of bankruptcy they:
• dissipate the company’s assets to the detriment of its creditors
• prefer certain creditors (“bancarotta fraudolenta”)
• increase the company’s losses by imprudent and incautious actions (“bancarotta semplice”)
• conceal the company’s true financial position of distress or insolvency in order to obtain
funding (“ricorso abusive al credito”)
On conviction directors can be imprisoned for up to ten years and are automatically disqualified
from acting as a director.
ITALY

49
ITALY
Mariafrancesca De Leo
+39 02 89 28 71
mariafrancescadeleo@eversheds.it
company insolvency in Italy
please contact

50
jurisdiction?
• Legal protection proceedings (restructuring)
• Corporate insolvency proceedings (liquidation)
Legal protection proceedings (restructuring) – Commenced by the company and intended
to restore the company in financial distress to solvency. The company prepares a restructuring
plan that must be approved by its creditors (two thirds of secured creditors and a simple majority
of unsecured creditors) and the court. On approval by the court the plan is implemented by an
administrator chosen by the creditors or, failing that, appointed by the court. The plan can be
prepared and approved by the creditors prior to application to the court, but if the application
is made first then the company benefits from a moratorium while preparing the plan as well
as while implementing it. The proceedings last for two years initially and can be extended by a
further two years.
Corporate insolvency proceedings (liquidation) – Commenced by court order on the
application of an unsecured creditor or the company. An administrator is appointed by the court
unless the insolvency proceedings are commenced as a result of unsuccessful legal protection
proceedings, where the existing administrator continues in office. The administrator realises the
assets of the company and distributes the proceeds to its creditors.
LATVIA
plan?
Yes. On the court ordering commencement of legal protection proceedings a moratorium arises.
procedures?
Restructuring - the directors, council and shareholders remain in control of the company, subject
to supervision by the administrator.
Liquidation - powers of the directors, council1
and shareholders of the company cease and the
administrator takes full control.
LATVIA
1
A council is the supervisory institution of a company, which represents the interests of shareholders during the time periods
between the meetings of shareholders and supervises the activities of the board of directors within the scope specified in
Latvian law and the articles of association.

51
immovable property?
Security is taken over:
• immoveable property by mortgage
• moveable tangible property by commercial pledge
• specific intangible property by commercial pledge
• Latvian registered ship by ship mortgage.
Yes - insolvency proceedings commenced in the courts of other EU Member States will be
The liquidator of an insolvent non-EU company will treated as the legal representative of the
company but no further recognition is possible.
The order of priority in corporate insolvency proceedings is as follows:
• Claims of secured creditors (less costs of realisation)
• Expenses of the proceedings including tax, professional fees, maintaining the company’s
property
• Debts incurred after commencement of the proceedings
• Employees’ claims
• Pre-insolvency tax
• Unsecured debts
• Interest on unsecured debts
company?
Five weeks.
LATVIA

52
creditors?
Yes.
Are contract terms
insolvency valid?
Yes.
effective?
In general – yes. The supplier who has the benefit of a retention of title clause will be able to
retrieve the goods provided he submits documents to the administrator proving his ownership
of the goods. If a dispute arises, the supplier can submit a claim to the court to prohibit the
administrator from selling the goods until the dispute is settled.
What are the main
The administrator or, if the administrator fails to act, a creditor can bring actions to avoid the
following:
• Transactions at an undervalue entered into after or within three months prior to the
company being declared insolvent, regardless of whether the counterparty was aware of the
company’s insolvency
• Transactions at a loss entered into after or within three years prior to the company being
declared insolvent provided the counterparty knew or should have known the company was
insolvent
• Gifts
• Repayment of a debt before its due date or to a connected party in the period after or
within six months prior to the company being declared insolvent
company?
Directors can be held civilly liable for losses suffered by the company as a result of them failing to
perform their duties to the standard of an honest and careful manager.
Directors can be held criminally liable for causing the company to:
• to enter into transactions at a loss
• perform activities which cause the company to become insolvent (eg transfer money to a
new entity, leaving company only with debts)
On conviction they can be imprisoned for up to three years, given community service or fined up
to EUR 48,000 and disqualified from all or some business activities for up to five years.
LATVIA

53
LATVIA
Raimonds Groza
+371 6 728 0102
raimonds.groza@eversheds.lv
company insolvency in Latvia
please contact
Māris Vainovskis
+371 6 728 0102
maris.vainovskis@eversheds.lv

54
jurisdiction?
• Judicial bankruptcy
• Out of court bankruptcy
• Restructuring
Judicial bankruptcy – An application for a judicial bankruptcy of a company can be made by
a company’s creditor, its shareholders (holding more than 10% of the company’s shares), its
managing director or, where it is subject to a solvent liquidation and it transpires that there is
an insufficiency of funds to meet the company’s debts in full, its liquidator. If the court judges
the company to be insolvent it will initiate bankruptcy proceedings and appoint a bankruptcy
administrator.
Out of court bankruptcy – A company’s managing director or shareholders can call a creditor’s
meeting to consider a written proposal for an out of court bankruptcy (specifying the duration
of the bankruptcy, the date on which debts will be settled and the identity of the bankruptcy
administrator). The proposal requires the approval of 80% in value of the creditors. If approved
the out of court bankruptcy commences. If not approved a judicial bankruptcy will usually be
commenced instead.
An out of court bankruptcy cannot be commenced where the company is subject to debt recovery
proceedings.
Restructuring – If a company is or is likely to become financially distressed, its managing director
can prepare a draft restructuring plan and put it to a vote of shareholders. The plan must be
approved by a two thirds majority of shareholders and two thirds majority in value of creditors.
Court approval is required but the court will not look at the economic substance of the plan and
its approval is usually a formality. A restructuring plan is intended to settle the company’s debts
and restore it to financial health.
A restructuring cannot be commenced if the company is subject to either type of bankruptcy
proceedings or has ceased trading.
LITHUANIA
plan?
No, a moratorium only arises on the making on an application to the court for the opening of
restructuring proceedings and recognition of the already agreed restructuring plan.
LITHUANIA

55
procedures?
Judicial bankruptcy or out of court bankruptcy - the powers of the directors cease and the
bankruptcy administrator assumes control of the company.
Restructuring - the powers of the directors continue, subject to the supervision of the restructuring
administrator and the provisions of the restructuring plan. Certain significant decisions may
require court approval.
immovable property?
Security over immoveable property is taken by a mortgage.
Security over moveable property is taken by a pledge.
Yes. Insolvency proceedings commenced in the courts of other EU members states will be
Insolvency proceedings commenced in non-EU jurisdictions may be recognised by the Lithuanian
Court of Appeal under the recognition of foreign courts’ judgements procedure.
The following categories of debt are preferred to unsecured debts and rank in the following order:
• debts owed to employees
- remuneration
- compensation for work related injury, disease or death
• debts owed to the state
- taxes
- social insurance contributions and compulsory health insurance
contributions
- loans provided by the state out of its own borrowing
- loans guaranteed by the state or by guarantee institutions which are in
turn guaranteed by the state
company?
Two months.
LITHUANIA

56
creditors?
Yes. Foreign creditors have the same rights as domestic creditors.
Are contract terms
insolvency valid?
Yes.
effective?
Yes, provided that the clause is incorporated into the contract and the goods in question can be
identified.
What are the main
In bankruptcy proceedings, the bankruptcy administrator examines all contracts entered into in
the three years prior to the commencement of bankruptcy. The bankruptcy administrator can
bring an avoidance action in respect of any transaction that:
• was contrary to the objectives of the company’s business
• contributed to the company becoming insolvent
company?
A managing director can be held civilly liable for:
• failure to file for bankruptcy proceedings
• taking unreasonable commercial risks that prejudice the company or its creditors
A managing director can be held criminally liable for:
• taking unreasonable commercial risks that prejudice the company or its creditors where such
behaviour is sufficiently serious
• intentional bad management, including:
• taking actions that will clearly cause the company to become insolvent
• causing the company to enter into obviously unprofitable contracts
• providing fraudulent financial information about the company that cause a creditor or
shareholder to making a loss
A managing director can be disqualified from acting as a managing director of a company for
LITHUANIA

57
LITHUANIA
Jonas Saladžius
+370 5 239 2362
jonas.saladzius@eversheds.lt
Lithuania please contact
Rimtis Puišys
+370 5 239 2373
rimtis.puisys@eversheds.lt
three to five years for:
• failure to file for bankruptcy proceedings when required to do so by law
• failure to hand the company’s assets and documents to the bankruptcy administrator
• not providing relevant information to the bankruptcy administrator and the court
• interfering with the bankruptcy proceedings in any other way

58
jurisdiction?
• Suspension of payments
• Bankruptcy
• Pre-pack bankruptcy
Suspension of payments – A company that foresees it will not be able to pay its creditors can
petition the court to grant a suspension of payments. The purpose of a suspension of payments
is to enable the company to continue to trade and avoid bankruptcy. If the application is granted,
the court will appoint an administrator (“bewindvoerder”) and a supervisory judge (“rechter-
commissaris”). Generally the company will continue its business, however, if it cannot agree a
composition with its creditors, secure refinancing or agree a restructuring plan within a few days
then suspension of payments will usually end in bankruptcy.
Bankruptcy – The company or a creditor can file for bankruptcy. If the company is declared
bankrupt the court appoints a bankruptcy trustee (“curator”) and a supervisory judge (“rechter-
commissaris”). The bankruptcy trustee will interview the management board of the company,
terminate all contracts of employment, realise the company’s assets and investigate whether the
directors are liable to the company for misfeasance. The bankruptcy trustee must file regular
bankruptcy reports with the court.
Pre-pack – A bankruptcy can be used to effect a pre-packaged sale of the business of a company
in financial distress. Although not yet a formally recognised insolvency procedure, prior to a
formal bankruptcy the court will appoint a ‘silent trustee’, who participates in negotiations with
stakeholders in order to agree the sale of the company’s business. Once agreed, the company is
put into bankruptcy and the bankruptcy trustee (usually the former silent trustee) makes the sale
on the agreed terms.
NETHERLANDS
plan?
No, Dutch law does not provide for a moratorium (“afkoelingsperiode”) outside insolvency
procedures.
NETHERLANDS

59
procedures?
During a suspension of payments, the directors remain in office but require the approval of the
administrator to enter into transactions.
On the court declaring a company bankrupt, the powers of the directors cease and the bankruptcy
trustee takes control of the company.
immovable property?
Security over real estate, aircraft and large ships is taken by a mortgage (“hypotheekrecht”),
registered in the public land register (“Kadaster”).
Security over movable property, receivables, bank accounts and shares is taken by a pledge
(“pandrecht”).
Insolvency proceedings commenced in a court of a non-EU member state may be recognised if
provided for in a relevant treaty.
The following debts are preferred:
• the fees and expenses of the bankruptcy trustee
• tax
• debts owed to employees
• the Employee Insurance Agency (which will pay certain debts owed to employees)
Debts can be contractually subordinated.
company?
Between four and six weeks from filing the petition with the court.
NETHERLANDS

60
creditors?
Yes.
Are contract terms
insolvency valid?
Yes.
effective?
Yes, provided that (i) the clause is incorporated in the contract between the parties (the supplier
and the debtor) and (ii) the goods in question can be identified. The party claiming a retention of
title must prove its claim to the administrator or bankruptcy trustee.
What are the main
The bankruptcy trustee can nullify pre-bankruptcy legal acts which had a prejudicial effect on
other creditors as voidable preferences (“actio pauliana”).
Dutch law distinguishes between legal acts where there is a due and payable obligation
(obligatory acts), eg payment of a debt on a due date, and where there is not a due and payable
obligation (voluntary acts), eg a transaction at an undervalue.
The bankruptcy trustee can nullify voluntary acts where both the company and the counterparty
knew or should have known that the act would prejudice other creditors of the company. Where
the act took place within the year prior to the commencement of bankruptcy and the counterparty
was a connected party (a majority shareholder, director or company in the same group) such
knowledge is rebuttably presumed.
A bankruptcy trustee can only nullify obligatory acts where either:
(a) the counterparty knew that a bankruptcy petition was pending against the company at the
time the legal act was performed; or
(b) the company and the counterparty conspired to prejudice other creditors by entering in to
the transaction.
NETHERLANDS

61
company?
Directors can be held civilly liable to make good the losses caused to creditors by:
• mismanagement of the company - rebuttably presumed if the directors fail to ensure the
company’s accounts are published in accordance with the law
• mismanagement of the company causing taxes or contributions to pension funds to be
unpaid - rebuttably presumed if the directors did not inform the tax authorities or pension
trustees in time that the company would be unable to pay its debts
• causing the company to enter into contracts - at a time when the director knew or should
have known that the company would be unable to fulfill its obligations under the contract
Directors can be held criminally liable for fraudulently removing assets from the company before
or during bankruptcy.
Miriam van Ee
+31 10 24 88 026
miriamvanee@eversheds.nl
company insolvency in the
Netherlands please contact
Mark van Wouwe
+31 10 24 88 034
markvanwouwe@eversheds.nl
NETHERLANDS

62
jurisdiction?
• Bankruptcy - Liquidation
• Bankruptcy - Arrangement with creditors
Bankruptcy – Poland has a gateway insolvency proceeding that can be commenced by company
or a creditor where a company is unable to pay its debts as they fall due or is balance sheet
insolvent. The court will determine whether a liquidation or an arrangement with creditors
(a form of restructuring) will provide the best return for creditors. If circumstances change a
liquidation can be changed to an arrangement with creditors and vice versa.
Liquidation – The court appoints an insolvency receiver to realise the company’s assets and
distribute the proceeds to the creditors in the statutory order of priority.
Arrangement with creditors – A flexible restructuring procedure in which the company has one
month (which can be extended by a further three months by the court) to devise proposals for
the restructuring of the company. The proposals must be approved by the court and two thirds
in value of the creditors, voting in classes as appropriate. The proposals can include rescheduling
of debt, compromise of debt or a debt for equity swap.
If the company carries out the arrangement successfully the insolvency proceedings are closed
and the company is restored to financial health.
POLAND
plan?
Yes, if the restructuring plan is prepared during a formal bankruptcy of the arrangement with
creditors type, but not if the restructuring plan is prepared outside of formal proceedings.
procedures?
Liquidation - the insolvency receiver takes control of the company.
Arrangement with creditors - the directors generally remain in control of the company subject
to supervision by a court supervisor, the insolvency court and a creditors’ committee. In some
cases the management can be replaced by an administrator appointed by the insolvency court.
POLAND

63
immovable property?
Security over immoveable property is taken by a mortgage.
Security over moveable property and rights is typically taken by a pledge (either ordinary or
registered).
Poland has enacted the UNCITRAL model law on cross-border insolvency proceedings and
insolvency proceedings commenced in jurisdictions other than EU member states can be
recognised by the Polish courts on the application of the foreign liquidator.
There are three categories of preferential debts that rank ahead of unsecured creditors. In order
of priority these are:
1. expenses of the bankruptcy proceedings; pensions due post insolvency; sums due under pre
insolvency contracts that the receiver requires the counterparties to perform; and sums due
as a result of actions taken by the receiver;
2. wages and other employment related claims; pensions and social security payments due for
the two years prior to insolvency; and
3. taxes, other public levies and social security payments not within (2).
Subordinated debts include interest arising after insolvency or more than one year prior to
insolvency and court and administrative fines.
company?
Six months to one year.
POLAND

64
creditors?
Yes.
Are contract terms
insolvency valid?
No.
effective?
Yes, as long as the clause is in writing and the date on the contact is officially certified by a notary
public.
What are the main
POLAND
Any creditor can challenge a transaction within five years of it being entered into if it is a:
• Fraudulent preference (actio pauliana) - a transaction entered into by a company that
causes it to become insolvent or, if it is already insolvent, to incur further indebtedness at a
time when the counterparty knows or ought to know that the company is insolvent.
A receiver, court supervisor or administrator can challenge the following transactions:
• Transactions at an undervalue entered into in the year prior to the commencement of
insolvency
• Security granted for debts not yet due granted in the two months prior to insolvency
unless a secured creditor can prove that it was not aware of the company’s insolvency at the
time the security was taken
• Transactions with connected parties transactions between the company and its directors,
directors’ family members, or shareholders or related companies entered into in the six
months prior to the insolvency
• Excessive remuneration of the company’s representatives grossly overstated claims for
remuneration of the company’s representatives that do not reflect the time and effort taken
• Security granted in favour of connected parties security in favour of a company’s directors,
directors’ family members, shareholders or related companies granted in the year prior to
insolvency, regardless of the amount of consideration provided by the counterparty

65
company?
Directors can be held civilly liability for the company’s debts if they fail to apply for insolvency
proceedings within the proper time limit.
Directors can be held criminally liable for:
• failing to apply for insolvency proceedings within the time limit
• failing to state the truth in a relevant application
• failing to cooperate with the receiver
The insolvency court has the power to disqualify delinquent directors from conducting business
activity for three to ten years.
Dr Krzysztof Haładyj
krzysztof.haladyj@eversheds.pl
+48 22 50 50 73 1
Poland please contact
Stanisław Żemojtel
stanislaw.zemojtel@eversheds.pl
+48 22 50 50 72 7
POLAND
Elżbieta Solska
elzbieta.solska@eversheds.pl
+48 22 50 50 721

66
jurisdiction?
• Liquidation
• Bankruptcy
Liquidation – A solvent process typically commenced by shareholder consent and conducted
in accordance with the company’s articles of association. A liquidator is appointed to realise the
company’s assets, pay its creditors and distribute any surplus to its shareholders. The consent of
the court and the shareholders is required to finally liquidate the company.
Bankruptcy – Where a company has stopped paying its commercial debts, a petition for
bankruptcy can be brought by the company, a creditor, the public prosecutor’s department, the
court or a majority of the shareholders.
The court determines the date on which the relevant entity became unable to pay its debts which
cannot be more than two years prior to the date of the bankruptcy order.
Up to three bankruptcy administrators are appointed to preserve, manage and realise the assets
of the insolvent entity.
NB: Qatari insolvency law is not yet fully developed and is largely untested.
QATAR
plan?
No.
procedures?
They don’t. The powers of management is transferred to the liquidator or the bankruptcy
administrator (as applicable).
QATAR
Please note that this does not cover the insolvency
regime in the Qatar Financial Centre

67
immovable property?
Security over immoveable property is taken by mortgages over land and affixed structures
• pledges over moveables
• assignments of receivables
• pledges over shares and bank accounts
No.
The statutory order of priority of creditors is as follows:
1. employees
2. Qatari government
3. landlords
4. judicial costs, taxes
5. secured creditors
6. unsecured creditors
7. shareholders
company?
As a general guideline 12 to 24 months, however, bankruptcy proceedings are extremely rare in
Qatar.
QATAR

68
creditors?
Yes.
Are contract terms
insolvency valid?
Yes theoretically (and they are commonly used). We are not aware of this being tested before the
courts.
effective?
Retention of title clauses are routinely included in contracts involving Qatari entities. There is
no reason to doubt their efficacy but we are not aware of the position having been tested in the
courts.
What are the main
The following pre bankruptcy transactions can be set aside where they are entered into after the
company has suspended payment of its debts:
• gifts
• settlement of debts before they fall due
• settlement of a debt in a manner otherwise than that agreed upon
• grants of security
• transactions where the counterparty knew the bankrupt company had suspended
payment of its debts
company?
The directors can be held civilly liable for the company’s debts if the value of its realised assets
is less than 20% of those debts. The directors can escape liability if they can prove that they
prudently administered the company’s affairs.
Directors can be held criminally liable for fraud or wilful misconduct.
QATAR

69
Ben Moylan
+97 44 49 67 39 5
benmoylan@eversheds.com
company insolvency in Qatar
please contact
Dani Kabbani
+97 44 49 67 38 6
danikabbani@eversheds.com
QATAR

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