- 1.What actions are available to creditors prior to a formal insolvency proceeding to recover on a defaulted loan or obligation of a debtor? Are there any expedited formal proceeding?
Secured creditors may exercise rights and remedies on a defaulted loan or obligation, with respect to the collateral, prior to commencement of insolvency or bankruptcy proceedings.The preferred security on real property is the mortgage. However,the ordinary procedure for the foreclosure of a mortgage is extremely complicated and often takes longer than 12 months. In certain instances, an abbreviated mortgage procedure set forth in Law No. 6186 of 1963, applicable to financial institutions, may be available.
The most common type of security for moveable property is the non-possessory pledge, also established pursuant to Law No. 6186. This security, similar to a chattel mortgage, and originally intended for crops and agricultural equipment, was expanded by judicial interpretation to cover most movable assets, including industrial machinery and motor vehicles.
Prior to the commencement of bankruptcy or insolvency proceedings, unsecured creditors may institute one of several actions to recover on a defaulted loan or other obligation.The claimant may apply for a provisional judicial lien that will enable the creditor to seize real property owned by the debtor in an ex parte pre-judgment proceeding.The provisional judicial lien will be registered at the Real Estate Registrar’s Office, and may be converted into a definitive judicial lien if the claimant is successful, and the claimant can then foreclose on the property in a separate proceeding. However, if the property is the debtor’s declared homestead, then this remedy is not available to unsecured creditors.
In addition, an unsecured creditor may seek a judicial order to attach personal property owned by the debtor in an ex parte proceeding. Judges are lenient in granting this authorisation, and frequently do not request proof of the urgency or question the prima facie validity of the claim,in spite of the fact that the Dominican Supreme Court has repeatedly insisted that judges must satisfy themselves on these questions. Once the assets are attached, the claimant has 30 days to present the merits of the case.
The claimant may also place a garnishment on a debt owed to his debtor by a third party (known as embargo retentivo). If the creditor is the holder of an instrument setting forth the amount of the debt (such as a promissory note),the creditor will only need to attach a copy of such a document to the notice of garnishment served by a bailiff to the third party (most often a financial institution where the debtor has deposited funds). If the claim is for an indeterminate amount (for example, damages arising out of a breach of contract), then the creditor will need judicial authorisation to proceed with the garnishment.
- 2.What duties do directors or officers of a company owe creditors or other third parties if the company is insolvent or in financial difficulties, or has negative net worth? is there a standard of care towards third parties? in what circumstances can officers and directors be found liable for continuing to operate a company in financial difficulties? Can they be found criminally liable?
Applicable law generally provides that officers and directors of a company have a duty of loyalty and the obligation to act as good businessmen (akin to the business judgment rule under Delaware law),but such officers and directors also owe general fiduciary duties to creditors and third parties in certain instances. For example, officers and directors may also be held liable for employee claims and tax claims, and liability may also be established upon their violation of criminal provisions relating to bankruptcies. Another instance is that directors of bankrupt entities that act carelessly in the operation of the business and the keeping of its accounts, or have concealed assets or are engaged in other inappropriate conduct, may be criminally liable.
- 3.Can a creditor that has secured debt foreclose on the collateral or sell collateral in a private sale? if so, what rules exist to ensure the sale or foreclosure generates the maximum amount of sales proceeds possible? Can lenders take possession or control of the underlying collateral? are there any accelerated procedures available for secured creditors, and if so, under what circumstances can they be used?
Mortgagees or secured creditors are not permitted to sell collateral in a private sale, but are able to foreclose on the collateral and sell the collateral in a public auction. If the property is sold by the creditor at a price that exceeds the value of the claim, then the surplus must be recovered by the bankruptcy administrator. If the price at which the collateral is sold is less than the value of the claim, the creditor may participate on a pro rata basis in the distributions made pursuant to the liquidation plan for the debtor. Lenders cannot take control of the underlying collateral outside of a judicial proceeding (except in cases of pledged assets or similar cases where the creditor already has control of the collateral). For accelerated procedures available for secured creditors, please refer to the response to question 1.
- 4.What types of insolvency proceedings are available in your jurisdiction? are different insolvency proceedings available for individuals and companies? is there any distinction made between ‘preventative’ insolvency proceedings and ‘actual’ insolvency proceedings?
The Code of Commerce and Law No. 4582 of 1956 are the laws currently applicable to bankruptcy proceedings in the Dominican Republic. These bankruptcy provisions deal mainly with liquidation and do not contemplate the reorganisation of the debtor (although a debt restructuring may be agreed upon at a preliminary stage of the proceedings in certain instances).
Prior to permitting a creditor to institute a bankruptcy proceedings against the debtor, applicable law provides for a compulsory preliminary conciliation proceeding before the Chamber of Commerce. Bankruptcy cases often end at this stage.
There is no organised insolvency for entities other than merchants or business organisations and there is no system of debtor relief or protection against overindebtedness. Special insolvency rules exist for financial institutions under the jurisdiction of the Superintendency of Banks.There are also special regimes for companies participating in the electric sector (primarily the business of power distribution),insurance companies,and pension funds.There are no rules governing the insolvency of state-owned enterprises.
There is no distinction between ‘preventive’ and ‘actual’ insolvency proceedings, but the compulsory preliminary conciliation proceeding could be considered as a ‘prior’ proceeding, since such conciliation is mandatory prior to the commencement of a bankruptcy proceeding.
- 5.On what grounds may a debtor company be placed into an insolvency proceeding? who may do this? what are the grounds for a voluntary proceeding? if an involuntary proceeding is filed, must a bond be posted or is there any risk of liability to the creditor or creditors who filed the action? what effect, if any, does a filing have on a subsidiary or affiliate of the debtor? are there any grounds for consolidating or coordinating insolvency proceedings involving related parties? are inter-company or affiliate claims treated differently in terms of recovery or voting?
A debtor company is compelled to file for bankruptcy within three days following a general cessation of payments. Failure to do so may give rise to criminal prosecution and subject the officers and directors of the bankruptcy company imprisonment (from 15 days to one year). Should the compulsory conciliation procedure be unsuccessful,unsecured creditors may bring the liquidation action through judicial proceedings.
If a debtor has sufficient assets to satisfy outstanding claims, it may attempt a voluntary out-of-court liquidation; if its assets are insufficient to satisfy all claims, then the debtor will need to initiate its voluntary liquidation through the existing bankruptcy proceedings.
Only the debtor and unsecured creditors of the debtor may initiate a bankruptcy or insolvency proceeding; secured creditors may commence said proceedings provided he or she surrenders the right to the collateral. The declaration of bankruptcy has no effect on secured creditors, except that interest payable under such secured claims may only be collected from the security interest granted for the benefit of such claim. Except for accruing interest, secured creditors may benefit from bankruptcy proceedings with respect to unsecured portions of their claims.
In regard to involuntary proceedings, there is no need for the creditor to post a bond and there are no provisions regarding additional liability of a creditor who files such an action. However, a creditor seeking a declaration of bankruptcy is expected to provide proof of the insolvency of the debtor or its general cessation of payments.
There are no provisions regarding the effects of insolvency proceedings on subsidiaries or affiliates of the debtor. Also, there are no provisions on intercompany or affiliate claims. Insolvency procedures of subsidiaries and affiliates would be treated as separate procedures (namely, there are no provisions regarding substantive consolidation or joint administration of related bankruptcy proceedings).
- 6.What notifications and meetings are required after the company has been placed in an insolvency proceeding? Do the insolvency laws recognise bondholders under an indenture? what must they show to prove their ownership interest in the underlying debt?
If the company is insolvent or faces financial difficulties, notices must be given to all creditors.The said notices are given in order to ascertain existing claims against the debtor for their subsequent evaluation, with such evaluation to take place during meetings held within a period of 15 days following the appointment of the bankruptcy administrator.Creditors with duly authenticated credits may be present at the hearing for the verification of the credits.
Bondholders will be considered as secured or unsecured creditors and will either be entitled to participate directly in the proceeding or through the indenture trustee, depending on the terms and conditions of the relevant bondholder instruments.
- 7.How are contingent creditors dealt with? How are inter-company claims handled? if so, has this been challenged and with what result? are there special rules for certain contracts?
There are no special provisions regarding treatment of contingent creditors. The most likely outcome would be that they are treated as unsecured creditors, provided their contingent claim is quantified.
There are no provisions regarding inter-company claims nor special provisions for certain contracts (namely, there is no safe harbour for derivatives contracts and the like).Companies in certain sectors may be entitled to different treatment and resolution of relevant claims (please see question 4).It should also be noted that tax claims and employee claims are entitled to super-priority status in any bankruptcy proceeding.
- 8.What effect does the commencement of an insolvency proceeding have on the debtor and its operations? is there an automatic stay that prevents third parties from acting against the debtor? Can a debtor terminate or reject contracts to which it is a party?
The declaration of bankruptcy by the judge leads to the removal of the officers and directors of the debtor from the administration of the assets of the debtor. All legal proceedings towards the enforcement of unsecured claims are stayed upon declaration of bankruptcy by a judge; interest on unsecured claims stops accruing and all indebtedness of the debtor is accelerated and becomes due and payable.
There are no provisions regarding the rejection of contracts.However,nothing precludes a debtor from attempting to reorganise with the agreement of all its creditors (prior to a filing) or during the mandatory conciliation procedure.
- 9.How are secured creditors treated in an insolvency proceeding? How do they protect their collateral, particularly liquid assets? Can they seek remedies? Must their approval be obtained to use or dispose of their collateral? How are unsecured creditors treated? How are equity holders treated? Could an equity holder recover prior to creditors being paid in full?
The bankruptcy declaration has no effect on secured creditors, except that interests payable on their claims may only be collected from sums generated through the use of the collateral. Secured creditors may also benefit from bankruptcy proceedings with respect to unsecured portions of their claims (except accruing interest).
A secured creditor may voluntarily release its collateral during the drafting phase of the liquidation plan,in which case the creditor would be entitled to pro rata distributions as an unsecured creditor upon the debtor’s liquidation.
Unsecured creditors cannot foreclose on the collateral outside of the bankruptcy proceeding.Distributions are made in accordance with the payment plan approved pursuant to provisions of Law No.4582,or under the liquidation plan approved by the majority of creditors. Such distributions are made on a pro rata basis to all unsecured creditors. Subordinated claims (such as claims from equity holders) and subordinated loans subject to the applicable subordination provisions are last in the distribution waterfall.
- 10.What is the effect of an insolvency proceeding on current and retired employees?
Current employees have a super-priority claim to their unpaid salaries and benefits (including over secured creditors, please see question 7).There are no specific provisions set forth for retired employees; such employees would most likely be treated as unsecured creditors.
- 11.Do directors or officers of companies in insolvency proceedings suffer any consequences?
Once a company enters into a liquidation proceeding, officers and directors cease to act as such and the court will appoint administrators or liquidators.
Former directors or officers are not disqualified from serving as officers or directors of other companies or as liquidators of the company involved in the insolvency proceeding. Please see question 2 for further information regarding the liability of directors or officers of companies involved in insolvency proceedings.
- 12.How do the various types of claims rank in an insolvency proceeding? Do some claims automatically have higher priority?
The rights of employees to their salaries, severance payment and, in the case of natural persons,their obligations to support their wives and children,tax claims, and the claims of retailers for food and lodging for the past six months receive super-priority status above all other claims,whether secured or unsecured.In the case of an ongoing business, labour claims can be very high, and thus the claims of unsecured and possibly even secured creditors are not always repaid in full.
Claimants with a lower priority don’t receive considerations during distributions made within the payment plan.
- 13.Are local creditors treated differently from foreign creditors in practice? What laws exist to prevent such disparate treatment? What factors contribute to how effectively those laws are applied?
The same remedies are available to local and foreign creditors. However, foreigners may be at a disadvantage when it comes to asserting their rights in Dominican courts since they might be asked to post security to cover the attorneys’ fees and court costs incurred by the defendant, as well as any damages for wrongful prosecution in case the latter is successful. Waivers to the aforementioned litigation bond are valid and certain local courts have declared the said provisions as unconstitutional for implying a discriminatory treatment and, therefore, null and void in the benefit of the claimant as well as recent laws. Additionally, recent laws have included an exception to the need to post security for costs, including the new Business Law, No. 479-08, according to which foreign companies are exempted from the obligations to place the litigation bond.
- 14.What level of creditor support is needed to approve a reorganisation plan? Can secured creditors and other priority claim holders that do not approve a reorganisation proposal be ‘crammed down’? Are there any
substantive criteria that a plan must satisfy? Must hearings take place or documents be distributed?
Dominican legislation essentially provides for a liquidation procedure. However, a debt restructuring or a plan to honour unsecured claims may be sought through an out-of-court restructuring or during the compulsory preliminary conciliation.Any plan agreed to at the compulsory conciliation stage must provide for the repayment of at least 50 per cent of all unsecured debt of the debtor payable within a term no longer than two years, and two-thirds of the admitted credits must approve the proposal. Under this scenario, a hearing must be held before the Conciliatory Commission established by the law to verify and admit all credits prior to the presentation by the debtor of his or her proposal for payment. Notices have to be given to creditors in the liquidation proceedings and meetings have to be held towards the adoption of a payment or liquidation plan.
- 15.May creditors trade their claims during the course of a reorganisation? what impact, if any, will it have on voting for a plan?
There are no provisions that impede the purchase, sale or transfer of claims against the debtor during the course of a private reorganisation or during the compulsory conciliation stage with the agreement of his creditors.
- 16.Does the government tend to play an active role in insolvency proceedings? What factors determine this?
The Dominican government plays an active role only in certain insolvency proceedings. Special insolvency rules govern insolvency procedures involving financial institutions,insurance companies,pension fund administrators and electric sector companies. Such proceedings include the participation of specific autonomous institutions designated for the purpose of regulating and supervising the specific markets (banking, insurance, electricity and pension funds), given the nature of the services provided and the high amount of assets held by such entities.
- 17.What kind of court supervision is there in each type of insolvency proceeding? Is a trustee or receiver (or other court-appointed officer) appointed to supervise the debtor or can the debtor continue to
control operations during the insolvency proceeding? Can creditors form creditors’ committees? what formal role do creditors (or creditors’ committees) play in the process? Do insolvency proceedings permit competing reorganisation plans? Are the judges that supervise and administer the process specialised? Does a debtor company or its creditors have any power to select or influence the selection of the
trustee, receiver or other court-appointed officer?
As previously discussed, prior to the intervention of the courts in a bankruptcy, a mandatory conciliation proceeding before the Chamber of Commerce must take place. Most attempted bankruptcy proceedings are settled at this stage and rarely do the proceedings escalate to the judicial stage (please see question 9 in regard to the role played by creditors in the process).
There are no legal provisions for the formation of creditors’ committees. A provisional administrator gives notice to creditors towards the assertion of claims against the debtor,the evaluation of such claims and the meetings towards the adoption of a repayment or liquidation plan. Creditors with duly authenticated credits may be present at the hearing for the verification of the credits,and will be designated as the board of creditors.The said board will hold a meeting presided by the appointed judge,in order to agree on a repayment plan for unsecured credits.There are no rules governing competing reorganisation plans.
Bankruptcy procedures are brought before the Civil and Commercial Chamber of the Court of First Instance.The judges that supervise and administer the process are not specialised (there is no specialised jurisdiction for insolvency or bankruptcy proceedings).
A provisional administrator is appointed by the judge and within a period of 15 days after the appointment of the provisional administrator, all known creditors must be gathered in order to discuss the appointment of up to three new administrators and are entitled to submit observations regarding the appointed administrators (with the possibility of increasing or reducing their number). When required by representing one-quarter of the registered debts, the new administrators must post a bond set by the court.The bond cannot be greater than 30 per cent of the total assets of the debtor as of the bankruptcy date or less than 15 per cent thereof.
- 18.May a debtor obtain financing while in insolvency will the lender enjoy special rights or preferences for providing debtor-in-possession financing?
The debtor undergoing a liquidation proceeding may not contract additional obligations; however, the designated administrator or administrators may incur a further debt towards the continuation of the business in the interest of unsecured creditors.No special rights or preferences are granted by law to such new debts; however French doctrine, which is consulted by local judges because the bankruptcy provisions are based on the same French texts,takes the position that these new debts have a higher priority interest in relation to other unsecured claims of the debtor (akin to the DIP super-priority).
- 19.What happens at the end of an insolvency proceeding? If there is a discharge of prior claims, is it permanent or subject to any conditions subsequent?
Liquidation cases are formally concluded with the approval of the liquidation plan and distributions made to unsecured creditors on a pro rata basis. Only secured or privileged claims survive the conclusion of an insolvency procedure.
- 20.How long do restructurings last? is there a formal deadline?
Neither the pre-filing compulsory settlement process or the judicial insolvency process is subject to a completion deadline.
- 21.Is there an expedited or summary proceeding available to obtain court approval of an out-of-court restructuring plan? If so, what types of claims and creditors may participate and how does the process work?
There are no provisions for expedited or summary proceedings to obtain court approval or out-of-court restructuring plans.
- 22.May creditors offset debts owed to them by the debtor in an insolvency proceeding? Does it require court approval? Can creditors recover the expense of participating in the process? if so, how is that dealt with?
There are no specific provisions regarding the offsetting of debts owed to creditors by the debtor in a court insolvency proceeding or for the recovery of expenses for participating in the process. However, recovery of expenses for participating in an insolvency proceeding could be included in the debts owed to creditors and would probably be treated as an unsecured credit.
- 23.If a debtor company has tax losses prior to a reorganisation, will it retain and be able to use such losses after it emerges from the reorganisation?
No regulations refer to the retention and use of tax losses prior to insolvency procedures.
- 24.How are extraterritorial bankruptcy or insolvency proceedings recognised? Could a bankruptcy or insolvency judgment abroad substantially delay an insolvency proceeding in your jurisdiction? Does your jurisdiction contemplate ancillary or parallel insolvency proceedings with respect to a foreign proceeding? if a company organised under the laws of your jurisdiction entered into extraterritorial bankruptcy or insolvency proceedings, would those proceedings be recognised in your jurisdiction?
In general, Dominican Republic law does not have any provisions regarding extraterritorial insolvency proceedings or ancillary or parallel insolvency proceedings. However, an exception exists for proceedings conducted in a nation that is a party to the 1928 Havana International Private Law Convention (the Bustamante Code).The Bustamante Code provides rules related to the appointment of liquidation administrators, and with reference to the enforcement of judgments within the signatory states. However, the United States, Japan and most countries of Western Europe are not a party to the Bustamante Code. For the enforcement in the Dominican Republic of decisions other than those issued by judicial authorities of nations party to the Bustamante Code, an exequatur (ratification decision) must be issued by a local judge, such as in a case where the company is organised under the laws of the Dominican Republic but is subject to an extraterritorial bankruptcy or insolvency proceeding.In order to validate foreign judgements, a court of first instance must verify that the decision was issued by a competent court, that it can’t be subject to further appeals or remedies, that the defendant exercised his or her right of defence, and that it doesn’t violate Dominican law or public policy.
- 25.How frequently do debtor companies reorganise and emerge from bankruptcy as opposed to liquidation? what factors determine this?
Private out-of-court reorganisations are fairly common and in many cases they are successful. However, as explained above, Dominican law does not provide for in-court reorganisation of an insolvent company.
- 26.In what circumstances could transactions that were entered into prior to an insolvency proceeding be vulnerable to challenge? By whom?
Secured claims that benefited from the pledge of collateral during the ‘suspect period’ or ‘cessation of payment period’ may be subject to invalidation.The period during which the effect of bankruptcy is retroactive is known as the ‘suspect period’ and is determined by the judge in a judicial proceeding.
Transactions by the debtor which might be declared null by the court are:
- payments made within 10 days of the date declared by the court as the beginning of the suspension of payments for obligations not due, or for overdue obligations in ways other than in cash; and
- the transfer of property for no consideration.
Creditors whose claims are annulled still have an action against the debtor and may participate in the bankruptcy proceedings in order to receive payment, provided that at the time of the receipt of the invalidated payment such a creditor was not aware of the debtor’s suspension of payments.
- 27.If a debtor company has debt securities, does your jurisdiction’s insolvency or securities law provide for any special treatment for an exchange of those securities?
- 28.Are there any common techniques that debtors use to manipulate or control insolvency proceedings? Have any of these techniques been challenged, and if so, what was the result?
The amicable settlement procedures prohibits the recording of secured credits after the date of the suspension of payments.In the past,this has allowed debtors to defraud creditors by fraudulently abusing this process.
- 29.Are any amendments to your jurisdiction’s insolvency laws envisaged?
The Dominican Republic is looking to modernise and update its insolvency and bankruptcy legislation.A bill,which includes provisions to permit corporate reorganisations, has been recently submitted to Congress for approval.
The proposed legislation contemplates two procedures: an out-of-court reorganisation undertaken under the supervision of the chamber of commerce, so as to maintain the existing structure contemplated under current law with respect to the compulsory conciliation preliminary; and a judicial liquidation, brought before the Civil and Commercial Chamber of the Court of First Instance (lower court). Cross-border insolvency procedures are expected to follow the UNCITRAL Model Law of 1997.
Contributing Author
Contributing Editors
Richard Cooper Adam Brenneman
Cleary Gottlieb Steen & Hamilton LLP
Questions
- 1.What actions are available to creditors prior to a formal insolvency proceeding to recover on a defaulted loan or obligation of a debtor? Are there any expedited formal proceeding?
- 2.What duties do directors or officers of a company owe creditors or other third parties if the company is insolvent or in financial difficulties, or has negative net worth? is there a standard of care towards third parties? in what circumstances can officers and directors be found liable for continuing to operate a company in financial difficulties? Can they be found criminally liable?
- 3.Can a creditor that has secured debt foreclose on the collateral or sell collateral in a private sale? if so, what rules exist to ensure the sale or foreclosure generates the maximum amount of sales proceeds possible? Can lenders take possession or control of the underlying collateral? are there any accelerated procedures available for secured creditors, and if so, under what circumstances can they be used?
- 4.What types of insolvency proceedings are available in your jurisdiction? are different insolvency proceedings available for individuals and companies? is there any distinction made between ‘preventative’ insolvency proceedings and ‘actual’ insolvency proceedings?
- 5.On what grounds may a debtor company be placed into an insolvency proceeding? who may do this? what are the grounds for a voluntary proceeding? if an involuntary proceeding is filed, must a bond be posted or is there any risk of liability to the creditor or creditors who filed the action? what effect, if any, does a filing have on a subsidiary or affiliate of the debtor? are there any grounds for consolidating or coordinating insolvency proceedings involving related parties? are inter-company or affiliate claims treated differently in terms of recovery or voting?
- 6.What notifications and meetings are required after the company has been placed in an insolvency proceeding? Do the insolvency laws recognise bondholders under an indenture? what must they show to prove their ownership interest in the underlying debt?
- 7.How are contingent creditors dealt with? How are inter-company claims handled? if so, has this been challenged and with what result? are there special rules for certain contracts?
- 8.What effect does the commencement of an insolvency proceeding have on the debtor and its operations? is there an automatic stay that prevents third parties from acting against the debtor? Can a debtor terminate or reject contracts to which it is a party?
- 9.How are secured creditors treated in an insolvency proceeding? How do they protect their collateral, particularly liquid assets? Can they seek remedies? Must their approval be obtained to use or dispose of their collateral? How are unsecured creditors treated? How are equity holders treated? Could an equity holder recover prior to creditors being paid in full?
- 10.What is the effect of an insolvency proceeding on current and retired employees?
- 11.Do directors or officers of companies in insolvency proceedings suffer any consequences?
- 12.How do the various types of claims rank in an insolvency proceeding? Do some claims automatically have higher priority?
- 13.Are local creditors treated differently from foreign creditors in practice? What laws exist to prevent such disparate treatment? What factors contribute to how effectively those laws are applied?
- 14.What level of creditor support is needed to approve a reorganisation plan? Can secured creditors and other priority claim holders that do not approve a reorganisation proposal be ‘crammed down’? Are there any substantive criteria that a plan must satisfy? Must hearings take place or documents be distributed?
- 15.May creditors trade their claims during the course of a reorganisation? what impact, if any, will it have on voting for a plan?
- 16.Does the government tend to play an active role in insolvency proceedings? What factors determine this?
- 17.What kind of court supervision is there in each type of insolvency proceeding? Is a trustee or receiver (or other court-appointed officer) appointed to supervise the debtor or can the debtor continue to control operations during the insolvency proceeding? Can creditors form creditors’ committees? what formal role do creditors (or creditors’ committees) play in the process? Do insolvency proceedings permit competing reorganisation plans? Are the judges that supervise and administer the process specialised? Does a debtor company or its creditors have any power to select or influence the selection of the trustee, receiver or other court-appointed officer?
- 18.May a debtor obtain financing while in insolvency will the lender enjoy special rights or preferences for providing debtor-in-possession financing?
- 19.What happens at the end of an insolvency proceeding? If there is a discharge of prior claims, is it permanent or subject to any conditions subsequent?
- 20.How long do restructurings last? is there a formal deadline?
- 21.Is there an expedited or summary proceeding available to obtain court approval of an out-of-court restructuring plan? If so, what types of claims and creditors may participate and how does the process work?
- 22.May creditors offset debts owed to them by the debtor in an insolvency proceeding? Does it require court approval? Can creditors recover the expense of participating in the process? if so, how is that dealt with?
- 23.If a debtor company has tax losses prior to a reorganisation, will it retain and be able to use such losses after it emerges from the reorganisation?
- 24.How are extraterritorial bankruptcy or insolvency proceedings recognised? Could a bankruptcy or insolvency judgment abroad substantially delay an insolvency proceeding in your jurisdiction? Does your jurisdiction contemplate ancillary or parallel insolvency proceedings with respect to a foreign proceeding? if a company organised under the laws of your jurisdiction entered into extraterritorial bankruptcy or insolvency proceedings, would those proceedings be recognised in your jurisdiction?
- 25.How frequently do debtor companies reorganise and emerge from bankruptcy as opposed to liquidation? what factors determine this?
- 26.In what circumstances could transactions that were entered into prior to an insolvency proceeding be vulnerable to challenge? By whom?
- 27.If a debtor company has debt securities, does your jurisdiction’s insolvency or securities law provide for any special treatment for an exchange of those securities?
- 28.Are there any common techniques that debtors use to manipulate or control insolvency proceedings? Have any of these techniques been challenged, and if so, what was the result?
- 29.Are any amendments to your jurisdiction’s insolvency laws envisaged?
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