Meet the Co-chairs - TAGLAW
Conner & Winters, LLP
Dykema Cox Smith
Blaney McMurtry LLP
Insolvency and Secured Transactions
Author: Fatih Isik
A significant part of the recent legislative amendments to improve the investment environment are made to Enforcement and Bankruptcy Law ("EBL") numbered 2004. The amendments made within the scope of Law numbered 7101 on the Amendments in Enforcement and Bankruptcy Law and Certain Laws1 ("Law numbered 7101") and the Law numbered 7078 on the Ratification of the Statutory Decree on Certain Regulations within the Scope of State of Emergency with Alterations2 ("Law numbered 7078") shall be addressed.
On the heels of last year’s Hurricane Irma, everyone is mindful about the upcoming 2018 hurricane season. Last year, Hurricane Irma hit Florida and left about 65% of the state without power. In the months following the storm, businesses in the affected areas often struggled to recover, and it was a more difficult process for some more than for others. Those companies that have relied too much on leverage and stretched their borrowing to the limit may find it difficult to get back on their feet.
With the latest changes in the Bulgarian Commerce Act, promulgated on December 2016, a complete new set of business stabilization proceedings were created, which are regulated in the amended Fifth part of the Act.The aforementioned amendment, together with the other changes in the Act, are a result of the tendencies at transnational level within the European Union, which have been prevailing in the last years,for creating minimum standards for security and guaranteeing the citizens’ rights and the opportunities for investments. One of the main aims of the European Commission Recommendation from 12 March 2014 is to ensure the possibility for restructuring of businesses with financial difficulties, in order to prevent the risk of becoming insolvent, and to lead to maximum benefit for the businesses and their creditors and employees. The same point is set out in the European Council Recommendation from 14 July 2015, which recognizes the importance of national legislation for facilitating the process of reduction of the debt ratio of businesses. The Recommendation also provides advice for improving the businesses’ restricting mechanisms before the bankruptcy proceeding are instituted.The changes in the Commerce Act are also in compliance with the recommendations of the World Bank, in accordance with the regulations of the bankruptcy proceedings and the rights of the creditors. The new amendment in the field of the stabilization proceedings will enter into force on 01 July 2017.
On 22 December 2016 the last changes in the Commerce act were adopted. Among them are also the amendments of the bankruptcy proceedings legislation and the creation of completely new proceedings –business stabilization proceedings. One of the purposes of these changes is to catch up with the prevailing in the last years tendencies at a transnational level within the European Union, for guaranteeing the existence of procedures, which can ensure the possibility for undertakings to stabilize, and also for conducting efficient bankruptcy proceedings, which can result in providing fair satisfaction of creditors‘ .
The Resolution, adopted by the European Parliament on 15 November 2011, refers clearly to the need of harmonization of the legislation of the Member States in the field of the bankruptcy and it also indicates the guidelines of the necessary changes, which have to affect the initiation of the bankruptcy proceedings, the presentment of claims, the rules for the revocatory actions, etc. Different guidelines for creating plans for restructuring of the undertakings, the effect and the content of these plans are also adduced in the Resolution.
Due to present political and economic circumstances in Brazil, the number of judicial reorganisation requests has considerably increased in the past few years. As a result, courts have been tested on a number of issues and new legal interpretations have been adopted. Specifically, recent court rulings have determined that provisions under financing agreements setting forth the acceleration of outstanding debt as a consequence of judicial reorganisation filings by debtors would contradict a legal purpose of protecting the debtor’s going concern, and would thus be null and void. In this scenario, the article contains an analysis of the legal validity and effectiveness of debt acceleration contractual provisions in Brazil, particularly vis-à-vis the referred recent court rulings and their potential adverse impact on credit supply and risk management.