Chair: Justice Barbara Romaine, Alberta Court of Queens Bench, Canada - - PowerPoint PPT Presentation

Chair: Justice Barbara Romaine, Alberta Court of Queen’s Bench, Canada Speakers:

• Dr. Janis Sarra, University of British Columbia

Patrick Ang, Rajah & Tann Singapore LLP, Singapore

• Dr. Ignacio Tirado, UNIDROIT/UAM, Italy/Spain

Hélène Bourbouloux, FHB, France Chief Justice Geoffrey Morawetz, Ontario Superior Court of Justice, Canada Judge Louise De Carl Adler, U.S. Bankruptcy Court, S. District of California Javier Armando Lorente, Estudio Lorente & Lopez, Argentina Debra Grassgreen, President III

INTRODUCTION JANIS SARRA

Photo licensed creative commons

ASIA PATRICK ANG

A. SINGA NGAPORE

• Circuit breaking measures in April and May 2020
• All stay at home except for essential businesses
• COVID19 Temporary Measures Act 2020
• Legislation to allow meetings and court hearings by video

conference.

• Financial aid and schemes by Government.

B. B. COVID19 Tem empor

• rary M

Mea easures A Act 1. Relief for inability to perform scheduled contracts due to COVID19 2. Increase debt thresholds and period for personal and corporate insolvency 3. Implementation of assessor system

ASIA

C. C. Sche hedul uled c d contracts

• Leases of non-residential property
• Construction contracts
• Tourism or events related contracts
• Hire purchase
• Secured facilities for SME

D. D. Gover ernmen ent s schem emes es

• Job support scheme
• Property tax rebates
• SME loans - backed by government
• Lower interest
• deferment of loan installments till end 2020

E. Malay aysia

• Central bank directive on loan deferment, and provision of

support for restructuring.

• Increased threshold in amount and period before insolvency

can be commenced

• Targeted financial help for tourism and hospitality

F. F. CHINA NA

• Reduced tax obligations and social insurance contributions
• Policy for banks to defer loan repayment for affected

industries

• Employment policies to reduce unemployment

H.

• H. Pos
• st C

COVI VID

• Which companies will survive?
• How to help viable companies who have a debt overhang

from the debt relief measures?

• Should insolvency and restructuring laws be simplified to deal

with large number of cases?

EU U AND ND S SELECTE TED COUNTRI TRIES

IGNACIO T TIRADO DO

European Un Union

• Not unified action in terms of legal reform
• DG Justice, focal point for info. Imp re temporary national measures concerning cross border

judicial action

• Informally: forbearance concerning state aid restrictions during crisis and immediate aftermath
• Economic measures: EIB, ESM, possible joint fund

Measures es at Member er S State L e Lev evel el

• Opening of Proceedings
• A) Duty to file:
• Germany, suspension until 30 sept, possible extension 31 March 2021, only if (i) not already cash flow

insolvency by 31 Dec 2019, (ii) insolvency caused by Covid (pressumption), (iii) situation can be

• bjectively overcome
• Spain, until 31 Dec 20, no duty to file, applicable also during out of court negotiation period
• B) Petition by creditors, Spain suspension until 31 Dec 2020; Italy, until 30 June, except filings by

Prosecutor if precautionary measures requested to protect assets or the company.

• C) The Italian case: no duty to file, but possible liability for late action. Suspended 30 June (extendable).

Debtors not allowed to file successfully. Court of Rimini modifying rule Prior: Italy has postponed entry into force of major reform until Sept 2021; Spain has accellerated its reform process

• Spe

pecial m measures t to f foster c r credi dit

• A) No Subordination of financing from specially related parties
• Germany, for loans granted/guarantees provided during suspension period, until 30 Sept 2023
• Spain, for loans granted during state of alarm and for 2 years, in insolvency proceedings opened

within those 2 years

• Italy, no subordination of intra-group/shareholder loans granted until 31 Dec 2020
• B) Protection of credit thru indirect actions
• Germany, limitations to liability of directors for payments in context of continuation of activity or

restructuring measures. Payments protected from avoidance. Similar rules in Italy

• Other measures
• A) Flexibility to restructure work force: eg, Spain temporary dismissals
• B) Softening corporate law duties and their timinig, flexibility in the form: Germany, Italy, Spain
• C) Protection of consumers (Germany) and of specialy vulnerable creditors re mortgage loans (Spain)
• D) Suspension/postponement of duty to pay tax/social security: Italy, Spain
• E) Postponement of terms of compliance with insolvency plans (Italy, Spain)
• The special case of the Netherlands: No suspension of the duty to file, “as this risks to keep

unviable enterprises alive”. They “focus on facilitating speedy restructuring”. No other measures apart from tax deferrals.

FRANCE HÉLÈNE BOURBOULOUX,

The French State’s support measures:

• preservation of cash in the immediate future : deferral of social security and tax debts, loan

deferrals, day-to-day expenses, reinforced short-time work scheme paid by the State…

• 1 exception => SMEs benefit from automatic cash payout => financial aid of up to €1,500 for the

1st tranche up to 5,000 for the 2nd => only for smaller SMEs, the self-employed and independent professions, “micro entrepreneurs”

• Very unequal access to the PGE (state guarantee of up to 90% of the face value of bank loans; capped at

25% revenues/twice payroll) => banks are the final decision makers and give priority to companies to which they have exposure; distressed companies’ applications are denied, most of the time

=> French aid system = debt creation => what solvency capacity can be expected? Legal tools for dealing with difficulties:

• No new proceedings created
• Strongest adjustment of the French law = freeze the economic situation of companies
• n 12 March => the decrease in activity after 12 March is not taken into account, the suspension of

payments is assessed based on the situation on 12 March

• Contractual and procedural extensions of time limits => not to penalise litigants + extend the time

taken to act in conciliation or collective proceedings (up to 6 ½ months)

FRANCE

Judicial activity in France during lockdown:

• Overall, commercial courts continued to function: online Registry, electronic hearings

with widespread use of videoconferencing, our offices are still working remotely => great adaptability

• Inside cases => all pending files have become more intense ; huge prevention cases or

collective proceedings already opened in the most exposed sectors (retail with La Halle, automotive with Novares, press distribution with Presstalis…)

• State-financed "life-support“ (postponement of social security charges, loans, short-time working) = the

peak of the crisis is ahead of us => consolidation of all sectors is expected (competitors, investment funds…) How to prepare for this (we strongly suggest the following)

• Measures to promote financing granted to buyers
• Creation of a State-guaranteed loan to finance takeovers and working capital

requirements

• Creation of a post-money privilege in order to finance continuity plans
• Drastically speed up the adoption of plans by removing unconstructive

formal deadlines

• Allow a viable company that is unable to repay its debts to be sold to its

manager or shareholder

CANADA CHIEF JUSTICE MORAWETZ

• Order granted to Superintendent of Bankruptcy (OSB) pursuant to the

Bankruptcy and Insolvency Act (BIA): Re Stephen Francis Podgurski 2020 ONSC 2552 (Ont. S.C.J.).

• “Period of the emergency” March 13, 2020, to June 30, 2020
• “Period of suspension” April 27, 2020 to June 30, 2020
• Order applies to all “active commercial proposals” (Division I, BIA) and all

“active consumer proposals” (Division II, BIA) and all “active bankruptcy files” filed up to end of period of the emergency, excluding bankruptcy discharges on or before the date of order.

• Order abridged time for service and filing of the motion and dispensed

with notice to every active insolvency file and creditors in Ontario affected.

CANADA

For activ ive c commercia ial l pr proposals ls The time for holding creditors’ meeting that is to take place during the period

• f the emergency, as provided by s.51 BIA, is to be extended by the time of

the suspension period, April 27 to June 30, 2020. For active c e consumer p proposals The time for holding creditors’ meeting that is to take place during the period

• f the emergency, s.66.15 BIA, is to be extended to June 30, 2020.

An active consumer proposal shall not be deemed annulled pursuant to section 66.31 BIA unless the consumer debtor is in default:

• where payments made monthly or more frequently, default of 3

payments, plus additional of 3 payments for defaults occurring period March 13, 2020 to December 31, 2020;

• where payments made less frequently than monthly, default is 3

months after consumer debtor in default, except for payments due between March 13, 2020 to December 31, 2020, now six months after the day on which the consumer debtor is in default.

CANADA

Matters appl pplic icable t to activ ive ba bank nkrup uptcy files:

• Trustee’s obligation to apply to court for a hearing during the period
• f the emergency, s.170.1(3) BIA, is to be extended by the time of

the suspension period.

• The time for the holding the creditors’ meeting that is to take place

during the period of the emergency, s.102 BIA, is to be extended by the time of the suspension period.

• The time for scheduling a mediation that is to be extended by the

time of the suspension period.

• Any interested person may apply to the court to terminate the

emergency relief, on 5 days notice to the trustee, the OSB, and any

• ther person likely to be affected by the order sought.
• As of May 1, 2020, other jurisdictions in Canada have now granted
• rders modelled on the Ontario order.

UNI NITED S STATES JUDG DGE L LOUISE DE DE CARL RL A ADL DLER

1. 1. Corona navir irus A Aid, d, Relief and nd Economic Security A Act ( (CARES A Act): Enacted on March 27, 2020. Intended to provide relief to individuals and businesses facing economic hardship due to Covid-19 virus. 2. 2. $2 Trill llion A n Aid d Package: Temporarily amends the Bankruptcy Code to expand access to small businesses and individuals by raising the debt limit for cases filed under the Small Business Reorganization Act (SBRA or Subchapter V of Ch. 11) 3. 3. Payroll ll P Protectio ion Enha nhancement A Act ( (PPP PPPHCE): Enacted Apr. 23, 2020. Supplements the CARES Act. Ke Key econo nomic s stimul ulus us pr provis isions of C CARE RES A Act and nd PPPH PPPHCE! 1. Permits the Small Business Administration (SBA) to provide 100% federally-backed loans of up to $10M to help payment of operating costs including payroll, rent, employee health benefits, insurance, utilities. $350B of those loans may be eligible for forgiveness if the borrower uses the money for allowable expenses. New rules: NO NO lending to businesses in bankruptcy. 2. $10B in direct grants to businesses that do not qualify for the Economic Injury Disaster Loan Program (EIDLP) 3. $17B to the SBA itself to cover principal and interest payments on existing SBA loans.

UNITED STATES

Ke Key bankrupt uptcy-rela lated d features

• Maximum debt threshold for SBRA cases increased (for one year only) from $2.725M to $7.5M
• Adding s. 1329(d) to Bankruptcy Code to permit Ch. 13 debtors to modify a confirmed plan based on a

showing of a material financial hardship caused by the COVID-19 pandemic. Permits debtors to extend those plans to a period of 7 years after initial plan payment.

• COVID-19 related payments to individuals and small businesses are excluded in a Ch. 7 case from

determining means test eligibility and excluded in a Ch. 13 case from the determination of disposal income.

• Up to one year forbearance on federally-backed mortgage loans

Stude udent L Loan M Modific icatio ions unde under t the he CARES Act

• Although not strictly bankruptcy-related, ~9 million student loan borrowers will likely be assisted by a 6-

month suspension of payments & interest on federally-insured student loans (to 30 Sept 2020). During the suspension period:

• Credit reporting agencies may not report the missed payments as delinquent.
• No collection or garnishment for the skipped payments against Social Security or tax refunds will occur
• 6-month period will still count toward the 120 required payments under the Public Service Loan

Forgiveness Program.

UNITED STATES

COVID-19 and nd the he B Bank nkrup uptcy C Courts – access continued Best guide to the adjustments made by each bankruptcy court in each district throughout the U.S. is found in Practical Law Bankruptcy & Restructuring’s May 5, 2020 update called “Bankruptcy Courts Update: Impact of COVID-19” (Westlaw) Most common measures taken are

• Telephonic hearings
• Video trials and evidentiary hearings
• Automatic continuance of s. 341(a) hearings with concomitant extension of deadlines running from

the 1st s. 341(a) hearing

• Waiver of requirement to obtain “wet” signatures from clients in bankruptcy
• Requirement of wearing facemasks or coverings in courthouse public areas

State ba bank nkrup uptcy? While Chapter 9 provides for municipalities to file for bankruptcy and restructure their debt, no correlative bankruptcy protection for states; even if amended, there are some predictions that any amendment would fact a constitutional challenge as the originally-proposed Chapter 9 provisions did when enacted in 1934.

LATIN AMERICA Javier Armando Lorente

Commo mmon co conce cerns

• Massive disappearance of enterprises (mostly micro, small and

medium ones) despite of Governmental aids

• Huge increase of insolvency filings
• Courts collapse

Common t trends nds o

• f n

nationa nal r respo pons nses

• Mandatory (or de facto) courts recess -except for urgent matters
• Improvements in digitalization of judicial filings and court

communications

• Emergency amendments to the insolvency regime

LATIN AMERICA

Common c cha haracteri ristics o

• f a

already dy i introduc duced a d and/ d/or pendi nding insolv lven ency r reforms

• Temporary suspension of individual aggression against the debtor

(lawsuits, precautionary measures, creditors involuntary petitions, etc.)

• Postponement of deadlines in pending insolvency-restructuring

cases

• Rescheduling of obligations born from already confirmed

restructuring plans

• Reinforcement of (or strong recommendation to use) out-of-court

proceedings, informal negotiations, mediation, etc

• Introduction of new insolvency features specially designed for

micro, small and medium businesses

• Improvement of liquidation proceedings to easily and effectively

return distressed assets to the market

COLOMBIA

• Expedited admission (3 days) of insolvency filings
• Flexible payments to small creditors (up to 5% of the total of

liabilities)

• Improvement to obtain post-petition financing
• Decentralization of insolvency proceedings (Chambers of

Commerce)

• Two new insolvency proceedings – fast track (shorter, less costly

and more effective)

ARGENTINA

• Several proposed bills to amend insolvency regime
• New insolvency proceeding for Individuals and Micro/Small

businesses, not akin de US Subchapter V, Chapter 11 (SBRA) but similar to Chapter 13 USBC

• Shorter, less costly, with wider Court powers (cramdown)

BRAZIL

April 2nd 2020, Project of Law No 1.397/20

• Transitory amendments to Brazilian Insolvency Law (Law No 11.101/05) that will be valid

until 31 December 2020 or for the duration of ‘state of public disaster’ period.

• Insolvency Prevention System (all in-court and out-of-court foreclosure measures)

suspended for 60 days to allow debtor renegotiate obligations

• If parties are unable to settle during 60-day period, debtor will be entitled to initiate an in-

court ‘preventive negotiation’ proceeding, provided there is evidence of a 30% revenue reduction in comparison with the prior trimester. If such, the Court will suspend foreclosure measures for another 60 days and assign a professional negotiator facilitate discussions between the parties.

BRAZIL

• Improvements of the extrajudicial reorganization:

i) increase of nature of credits subject to the proceeding at the date of the filing (eliminating the restrictions on certain nature of credits to be reached, such as labor claims); ii) reduction of majorities to approve an extrajudicial reorganization plan (simple majority by classes reached and allowance to be obtained after filing, up to 90 days, during the ratification proceeding (minimum 1/3 approval for the filing); iii) automatic stay.

• Increase of the minimum credit amount entitled by a creditor to file involuntary petitions
• f bankruptcy (R$ 100.000 – one hundred thousand reais).

MEMBER DISCUSSION CLOSING REMARKS DEBRA GRASSGREEN, PRESIDENT