Creditor – Loro Dinapoli http://lorodinapoli.org/ Thu, 29 Sep 2022 04:55:57 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 http://lorodinapoli.org/wp-content/uploads/2021/07/icon-2021-07-06T154208.998-150x150.png Creditor – Loro Dinapoli http://lorodinapoli.org/ 32 32 IMF Arrears Lending Policy: Just Use It http://lorodinapoli.org/imf-arrears-lending-policy-just-use-it/ Thu, 29 Sep 2022 03:00:49 +0000 http://lorodinapoli.org/imf-arrears-lending-policy-just-use-it/ Sean Hagan served as IMF General Counsel from 2005 to 2018; he is currently Professor of Practice at Georgetown Law Over the years, efforts to improve the sovereign debt restructuring process have focused primarily on collective action by private creditors. This has changed. There is now a consensus that one of the main obstacles to […]]]>

Sean Hagan served as IMF General Counsel from 2005 to 2018; he is currently Professor of Practice at Georgetown Law

Over the years, efforts to improve the sovereign debt restructuring process have focused primarily on collective action by private creditors. This has changed.

There is now a consensus that one of the main obstacles to this process – including the process launched by the so-called “common framework” – is ensuring cooperation between official creditors, with a large focus on the most important of them, China.

Opinions vary on what changes to the international architecture are needed to address this issue. But I think more attention should be given to a consistent application of the existing frame.

Specifically, the IMF’s major shareholders should simply support vigorous enforcement of its lending policy in arrears.

The relevance of the IMF in this debate is not surprising. The IMF has always played a central role (for better or for worse) in guiding the process of debt restructuring. A country will generally only initiate a debt restructuring if and when the IMF determines that it is no longer prepared to provide financing in the absence of a restructuring.

Moreover, when restructuring is necessary, the financial parameters of an IMF-supported program determine the overall amount of debt relief needed to restore debt sustainability. One of the main challenges has always been the next step: ensuring adequate co-operation from creditors.

On the one hand, the IMF is reluctant to delay approval of financial support until the ink is dry on the restructuring agreement. On the other hand, it cannot approve a program until it has adequate assurance that creditors will, in fact, provide relief consistent with the assumptions of the program.

The IMF’s approach to obtaining such assurances from creditors (generally referred to as the “financing assurances” policy) has evolved. During much of the debt crisis of the 1980s, the IMF only approved a program if a critical mass of private creditors showed willingness to provide the necessary debt relief. However, over time, creditors began to drag their feet and as a result, the IMF found that its financial support to countries was unduly delayed.

The IMF therefore introduced one of its most consequential policies—the “loans in arrears” policy: in the absence of creditor support, the IMF obtained financing assurances on the assumption that if—during the term of the program — the debtor fails to reach an agreement with its creditors, the necessary financing for the program would be obtained by the accumulation of arrears.

A key aspect of this policy is that it can be invoked even in the absence of arrears — in other words, in a pre-default setting. In these situations, the financial parameters of the program assume that payments will no longer be made in accordance with the original contractual terms. While the first best-case scenario is that these parameters will be observed through a consensual restructuring that avoids a default, the IMF can assume that even in the worst case these parameters would be observed through the accumulation of arrears. . Essentially, politics can be used as a safety net.

Unsurprisingly, the introduction of this policy was unpopular with private creditors: they no longer had the leverage to block an IMF program. Moreover, in order to avoid a default, they had no choice but to provide debt relief on terms consistent with the IMF program.

As originally conceived, this heavy-handed approach was limited to private creditors. Under the Paris Club process, bilateral government creditors continued to provide the IMF with early assurances of their willingness to provide the necessary debt relief on a consensual basis.

However, over time, the exclusive reliance on this consensual approach collapsed with the emergence of new official bilateral creditors who were unwilling to join the Paris Club, including China. Faced with this challenge, the IMF decided in 2015 to adopt a policy allowing it to lend in arrears to official bilateral creditors.

It is important to note that the policy on official arrears is less flexible than that applicable to private arrears. Although two of the criteria that must be met also apply to private arrears (namely the urgency of IMF support and the existence of good faith efforts on the part of the sovereign), the third criterion is specific to claims public: the policy cannot be applied if it would have an “undue negative effect on the ability of the Fund to mobilize public financing in future cases”.

Since the arrears of a particularly large creditor — or group of creditors — increase this risk, the policy provides that the Fund would “normally” be unwilling to lend against arrears when the total value of the claims held by the official creditor(s) in question accounted for “the majority of the total financial contributions required from official bilateral creditors during the program period”.

Despite these constraints, the 2015 policy remains an important policy tool, both in the pre-default and post-default context. In particular, the term “normally” provides flexibility and could, under policy, allow the IMF to lend against the arrears of a large creditor that has not proven itself in debt relief.

Unfortunately, the IMF has generally been reluctant to enforce this aspect of policy. This reluctance no doubt reflects the concerns of the IMF’s Board of Directors, where the interests of traditional Paris Club creditors are represented.

There is concern that even if a country accumulates arrears to a major official creditor during the program period, the creditor in question could use its leverage to restore the full value of the debt when the program expires, increasing both issues of viability and equity among creditors. While this is undoubtedly a risk, there may be ways to mitigate it, including through the type of “most favored creditor” arrangement recently suggested by Lee Buchheit and Mitu Gulati.

In any case, this risk of recovery must be weighed against another: giving a creditor a right of veto over the approval of an IMF program. This is precisely the risk for which the delinquent loan policy was designed.

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Israeli Supreme Court rules on reclassification of pledges as floating charges – Commentary http://lorodinapoli.org/israeli-supreme-court-rules-on-reclassification-of-pledges-as-floating-charges-commentary/ Tue, 27 Sep 2022 00:30:50 +0000 http://lorodinapoli.org/israeli-supreme-court-rules-on-reclassification-of-pledges-as-floating-charges-commentary/ IntroductionBackgroundFactsDecisionComment Introduction Companies often create security for the benefit of creditors over fluctuating pools of assets. This is the case in the event of a pledge of a bank account or a securities account and also in the event of a pledge of receivables or other future rights. Whereas in the case of an obligation […]]]>

Introduction
Background
Facts
Decision
Comment

Introduction

Companies often create security for the benefit of creditors over fluctuating pools of assets. This is the case in the event of a pledge of a bank account or a securities account and also in the event of a pledge of receivables or other future rights. Whereas in the case of an obligation creating the pledge, the parties generally qualify these pledges as fixed pledges or fixed charges (pledges and charges are synonymous in this context), the question has always been left unanswered whether such promises are at risk ofat one point, a court finding that their true nature is that of a floating charge.

While there have been district court rulings addressing this issue in various scenarios, as well as some obiter comments from Supreme Court justices, this is the first time the Supreme Court has directly addressed this issue in the context pledges of bank accounts and receivables.

Background

If the pledgor initiates insolvency proceedings, the question of whether a pledge is fixed or floating is important for two main reasons:

  • Floating charges are lower in the order of priority of creditors in the event of insolvency. They rank after fixed charges and certain statutory privileged debts (such as certain taxes and employee salaries), while fixed charges take priority over these privileged debts.
  • Floating charges only secure 75% of the insolvent company’s debt to the secured creditor, while the remaining 25% is considered unsecured debt.

There are additional implications to this characterization, as the facts of the court case show.

Facts

The main facts of the case in Civil Appeal 2966/17 Agreement against the State of Israelas of August 29, 2022, were as follows:

  • A company took out credit from a creditor named Accord and pledged two bank accounts and its claims (i.e. its rights to receive payments from certain customers) in its favor.
  • These pledges were characterized in the obligations creating them as fixed and were recorded as such.
  • The company was later charged with certain economic and money laundering criminal offences, and in such proceedings the State of Israel is entitled to confiscate the assets of the indicted company.
  • The State requested the confiscation of the funds which were then in the pledged bank accounts of the company and which came from the pledged receivables.
  • Accord, the creditor, opposed this confiscation and asserted that it was entitled to receive these funds on the basis of the pledges granted in its favour.

Decision

The Supreme Court first ruled, based on previous judgments, that in this competition between the creditor and the State, the creditor will prevail if the goods are pledged in fixed pledge, while the State will prevail if the property is encumbered with a floating charge. Consequently, the Court had to determine the nature of these pledges and whether, notwithstanding their characterization by the parties as fixed charges, they should be reclassified as floating charges.

Re-characterization – relevant factors
The Court first clarified that the qualification of a pledge as fixed or floating will derive mainly from the substance of the pledge and its terms, while the name given to it by the parties is not an important factor in this to analyse. The Court mentioned the following three main factors that should be considered, overall:

  • the specificity of the pledged assets – where the debenture creating the pledge accurately and precisely determines the assets subject to the pledge, this is an index of a fixed pledge, whereas a more open or vague definition is an index of a floating charge;
  • the nature of the pledged assets – the Court indicated that the law recognizes the possibility of creating a firm pledge on future assets. However, where the pledge is taxed on a fluctuating pool of assets which may include assets which were not yet held by the pledgor at the time the pledge was created, this may justify classification as a floating charge, then that a fixed pledge would more generally be taxed on fixed assets already held by the pledger; and
  • the level of control of pledgees over the pledged assets – the main characteristic of a floating charge is the freedom granted to the pledgor with respect to the pledged assets in the context of their use and transfer. Under a fixed pledge, the pledger is generally very limited in using or dealing with the pledged property without the prior consent of the secured creditor. The Court noted in this regard that not all restrictions are necessarily indicators of a fixed charge, since it is common for certain restrictions to also apply in the context of floating charges (for example, the conditions of most floating charges prohibit the pledging of assets in favor of another creditor).

After analyzing the judges’ opinions, the third factor seems to be the most important of the three.

Requalification by the Court of the pledge on the bank accounts
The debenture creating the pledge in this case classified the pledge on the bank accounts as fixed. Under its terms, the creditor had a right to inspect the accounts and the pledgor undertook not to proceed with any alienation of the pledged property. Nevertheless, the pledgor had the right to freely withdraw funds from the accounts and use them for any purpose not prohibited by the debenture.

The main reasons for the reclassification by the Court of these assets pledged as floating charges were as follows:

  • changes in the composition of assets in the accounts were permitted. Therefore, the creditor could have no certainty as to the extent and value of the assets if and when the pledge was realised. Thus, the creditor has taken the risk that upon completion, the bank accounts will be empty and that there will be no more funds; and
  • the pledgor had complete freedom to act on the account as it saw fit until an event of default occurred and the secured creditor had virtually no control over the assets.

Reclassification by the Court of the pledge on receivables
The debenture creating the pledge in this case classified the pledge over the receivables as firm. Pledged assets have been defined as all rights, funds and payments to which the pledgor will be entitled from time to time from certain customers. Although the names of the clients were specified in the debenture, there were no details as to the specific agreements with them or the specific claims. The pledgor has undertaken not to proceed with any alienation of the pledged goods and not to waive any rights with regard to the clients without the agreement of the pledged creditor.

The judgment of the Court regarding the claims was adopted by a majority against the dissenting opinion of a minority judge, who approved the qualification of the pledge as a pledge.

The majority judges decided to reclassify the pledge on floating charge claims, on the basis of the following main reasons:

  • The pledged assets were not specific enough, but rather a pledge on a general pool of changing assets.
  • The secured creditor had no effective control over the funds paid to the pledge by the customers in respect of the claims. The Court gave weight to the fact that under the terms of the debenture, the obligee could have demanded the deposit to block the funds received, but chose not to do so, thus allowing the pledgor to freely use funds without exercising any control over them.

The Court explained that if the pledgor were required to pay all funds received in respect of the claims into a special account controlled by the creditor, this would constitute control by the creditor over the claims and would probably lead to the pledge being qualified as a pledge. .

Comment

This case is likely to have a significant effect on the determination and drafting of the terms of pledges and will impact and change market practice on these issues. With specific regard to pledges of receivables, creditors who, in accordance with current market practice, continue to allow pledgers to freely use the pledged receivables until the occurrence of an event of default without effective control of the creditor on the flow of funds, will now be exposed to an increased risk that this pledge will be reclassified as a floating charge. Similarly, with respect to pledged bank accounts, creditors will need to find effective measures to control the flow of funds out of these accounts. All of these control measures will naturally have to be weighed against the pledgers’ needs for commercial flexibility, in order to enable them to manage their business.

For more information on this, please contact Shiri Shaham or Shai Margalit at Yigal Arnon & Co by phone (+972 3 608 7777) or email ([email protected] Where [email protected]). Yigal Arnon & Co’s website can be accessed at www.arnon.co.il.

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No Obstacle to Withdrawing CIRP Claim Admitted Before Creditors’ Committee Established: Supreme Court http://lorodinapoli.org/no-obstacle-to-withdrawing-cirp-claim-admitted-before-creditors-committee-established-supreme-court/ Sat, 24 Sep 2022 12:00:03 +0000 http://lorodinapoli.org/no-obstacle-to-withdrawing-cirp-claim-admitted-before-creditors-committee-established-supreme-court/ The Supreme Court observed that there is nothing to prevent the withdrawal of a request for CIRP admitted before the constitution of the creditors’ committee. The settlement cannot be suppressed before the constitution of the creditors’ commission in anticipation of claims against the debtor company from third parties, the bench Judges Indira Banerjee and JK […]]]>

The Supreme Court observed that there is nothing to prevent the withdrawal of a request for CIRP admitted before the constitution of the creditors’ committee.

The settlement cannot be suppressed before the constitution of the creditors’ commission in anticipation of claims against the debtor company from third parties, the bench Judges Indira Banerjee and JK Maheshwari said.

The court did so while dismissing the appeal against the NCLAT’s order which provided the parties with an opportunity to settle their disputes before the contracting authority (NCLT) under IBC Section 12A read with the Rule 11 of the National Company Law Tribunal Rules, 2016 (NCLT Rules).

The bench noted that Section 12A of the IBC allows the contracting authority to authorize the withdrawal of an application admitted under Section 7 or Section 9 or Section 10, on an application made by the applicant with the approval of 90% of the voting shares of the Creditors’ Committee in such manner as may be specified. It said;

“IBC Section 12A clearly permits the withdrawal of an application under IBC Section 7 which has been admitted on an application made by the applicant. The issue of creditors’ committee approval by the required percentage of votes can only arise after the Creditors’ Committee is constituted. Prior to the constitution of the Creditors’ Committee, there is, in our opinion, no obstacle to the plaintiff’s withdrawal of a request admitted under section 7 of the IBC.”

The court further noted that Rule 11 of the NCLT Rules permits the NCLT to make orders for the purposes of justice, including an order permitting a CIRP claimant to withdraw its claim and permitting a corporation to conduct its activities with ease, without any obstacles. . While denying the appeal, he said:

“Given the investments made by the Debtor Company and the number of people dependent on the Debtor Company for their survival and subsistence, there is no reason why the applicant for the CIRP should not be authorized to withdraw his application once settlement may not be stifled until the creditors’ commission is constituted in anticipation of claims against the debtor company from third parties The withdrawal of a CIRP application by the plaintiff would not prevent any further financial creditor to initiate proceedings under the IBC The urgency of meeting deadlines for the completion of the resolution process is not a reason to stifle settlement.

Case details

Ashok G. Rajani v Beacon Trusteeship Ltd. | 2022 LiveLaw (SC) 790 | CA 4911 FROM 2021 | September 22, 2022 | Judges Indira Banerjee and JK Maheshwari

Summaries

Insolvency and Bankruptcy Code, 2016; Section 12A – National Company Law Tribunal Rules, 2016; Rule 11 – Section 12A clearly permits the withdrawal of a Section 7 IBC claim that has been admitted – The question of approval of the Creditors’ Committee by the required percentage of votes can only arise after the constitution of the creditors’ committee – Before the creditors’ committee is constituted, nothing prevents the plaintiff from withdrawing an application admitted under article 7 CIB – The transaction cannot be suppressed before the constitution of the creditors’ committee in anticipation of claims against the debtor company from third parties. The withdrawal of a CIRP claim by the claimant would not preclude any other financial creditor from pursuing IBC proceedings. The urgency of meeting deadlines for the completion of the resolution process is no reason to stifle settlement – ​​Rule 11 of the NCLT Rules allows the NCLT to make orders for the purposes of justice, including an order allowing a CIRP applicant to withdraw their application and allow a legal person to carry on its activities with ease, without hindrance. (Paragraphs 23-30)

Click here to read/download the judgment

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In Brief Series: The Polyvocal Tribunal http://lorodinapoli.org/in-brief-series-the-polyvocal-tribunal/ Wed, 21 Sep 2022 06:23:25 +0000 http://lorodinapoli.org/in-brief-series-the-polyvocal-tribunal/ The polyvocal court The extent of the powers of the adjudicating authority, the National Company Law Tribunal (the Tribunal) dealing with a claim by a financial creditor under Article 7 of the Insolvency and Bankruptcy Code (the Code) is again under discussion. One would have thought that the matter had been settled by the Supreme […]]]>

The polyvocal court

The extent of the powers of the adjudicating authority, the National Company Law Tribunal (the Tribunal) dealing with a claim by a financial creditor under Article 7 of the Insolvency and Bankruptcy Code (the Code) is again under discussion. One would have thought that the matter had been settled by the Supreme Court’s decision in Innovative Industries Ltd. against ICICI Bankfollowed by its decision in ES Krishnamurthy v Bharath Hi-Techch Builders (P) Ltd. But the “polyvocal” court that is our Supreme Court, there is always a possibility of a different judicial look from another bench.

In Innovative, the Supreme Court held that when an application for the opening of insolvency resolution proceedings is brought before the Court, the latter must decide the question of the existence of a default in payment of the financial debt based on Information Utility records or evidence provided by the financial creditor within 15 days. The Court then ruled that “once the contracting authority is satisfied that a breach has occurred, the claim must be granted” unless it is incomplete, in which case the applicant must be given an opportunity to rectify the deficiency. In the event of a defect noted, the judgment rendered in Innovative does not leave any discretion to the Tribunal to pursue any course other than to allow the application. If there still remained a doubt as to the power of the Tribunal, the Court specified that “it does not matter that the debt is disputed as long as it is “due”, i.e. payable unless it is prohibited by law or is not yet due in the sense that it is payable at a later date. It is only when this is proven to the satisfaction of the contracting authority that the latter may reject a request and not otherwise”.

In Bharat Hi-Tech, the Supreme Court again considered the scope of the s. 7 inquiry at the request of a financial creditor and concluded: “so, two Classes of action are available to the contracting authority in a request under Article 7. The the contracting authority must either allow the request under clause (a) of subsection (5) or he must reject the claim under clause (b) of subsection (5). The law does not plan ee contracting authority to undertake any other action, but for ee two choices available.” The Court upheld the decision of Innovative and advised the Tribunal and the National Company Law Appellate Tribunal on the limits of their powers as “status creatures”.

These decisions held ground until the recent Supreme Court decision in Vidarbha Industries Power Ltd. vs. Axis Bank Ltd.

In Vidarbha Industries, the Court completely reversed the previous position. He held that when considering a financial creditor’s claim under Article 7(5) of the Code, the Tribunal may “consider whether to initiate the CIRP, taking into account all relevant facts and circumstances, including the overall financial health and viability of the Debtor Company. The contracting authority may, at its discretion, not accept the request for a financial creditr. The Court noted the use of the word “may” instead of “shall” in Article 7(5) and, for this reason, held that in the case of financial debt, the law allows for “flexibility”. ; and it conferred discretion on the Tribunal even if default is established. If the facts and circumstances justify it, the Tribunal may suspend admission or even reject the application.

The Judgment in Vidarbha Industries arguably takes a more pragmatic approach to insolvency and seeks to provide respite to businesses that may have defaulted due to temporary financial difficulties but are otherwise solvent and viable. It makes economic sense not to push these companies into insolvency by following the rigid rule in Innovative.

The judgment, however, is not a good example of judicial lawmaking.

Legal stability and predictability are fundamental to the rule of law. The predictability of legal outcomes (particularly in the case of economic legislation) allows citizens and businesses to organize their affairs according to past legal precedents without fear of being disrupted by a judicial decision. To achieve these goals, our courts adhere to the doctrine of stare decision and follow the previous decision on the same issue.

Respect for precedents is not, however, an “inexorable command”. There may be good reasons to reverse or oppose a previous decision. However, the doctrine of watch the decision requires that, in doing so, the court look to the precedent in question and consider it carefully. I submit that the Court failed to do so in its decision in Vidarbha Industries which reverses the position defended in Innovative and Bharat Hi-Tech. He was referring to the Innovative for explaining the object and purpose of the Code, but totally ignored the part of the judgment which specifically dealt with the issue in dispute. And Bharat Hi-Tech, he didn’t even refer.

Arguably, the Court had good reasons for its decision in Vidarbha Industries, however, it should have explained its departure from the previous position taken in previous decisions. It is possible that these decisions (or their relevant parts) have not been brought to the attention of the Court. But then one would expect a more rigorous and thorough judicial determination from the Supreme Court, the declared law by which it binds all courts and all citizens.

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Sri Lanka to present IMF debt restructuring and rescue packages to creditors http://lorodinapoli.org/sri-lanka-to-present-imf-debt-restructuring-and-rescue-packages-to-creditors/ Sun, 18 Sep 2022 20:38:00 +0000 http://lorodinapoli.org/sri-lanka-to-present-imf-debt-restructuring-and-rescue-packages-to-creditors/ A vendor prepares Sri Lankan notes for bundling at a store in Colombo July 3, 2013. REUTERS/Dinuka Liyanawatte Join now for FREE unlimited access to Reuters.com Register LONDON, Sept 18 (Reuters) – Crisis-hit Sri Lanka will make a presentation to international creditors on Friday, outlining the full extent of its economic woes and its plans […]]]>

A vendor prepares Sri Lankan notes for bundling at a store in Colombo July 3, 2013. REUTERS/Dinuka Liyanawatte

Join now for FREE unlimited access to Reuters.com

LONDON, Sept 18 (Reuters) – Crisis-hit Sri Lanka will make a presentation to international creditors on Friday, outlining the full extent of its economic woes and its plans to restructure debt and bail out billions of pounds. dollars from the International Monetary Fund.

Years of economic mismanagement combined with the COVID-19 pandemic plunged Sri Lanka into its worst economic crisis since its independence from Britain in 1948, leading it to default on its sovereign debt. Read more

The country’s finance ministry said in a statement via law firm Clifford Chance that an online call on September 23 would be open to all of its external creditors and would be “an interactive session” in which attendees could ask questions. .

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Sri Lanka’s woes came to a head in July when then-president Gotabaya Rajapaksa fled the country and resigned after violent public protests.

His replacement Ranil Wickremesinghe managed to strike a preliminary deal with the IMF which, if formalized, would provide the country with $2.9 billion in loans over four years.

“The authorities intend to update their external creditors on the most recent macroeconomic developments, the main objectives of the reform package agreed with the IMF (…) and the next steps in the debt restructuring process”, indicates press release dated September 17.

Veterans of the debt crisis cite particularly difficult elements in Sri Lanka.

The impoverished population that forced Rajapaksa to flee has yet to come to terms with Wickremesinghe, considered by many to be of the same political ilk, and who faces bristling opposition.

The country’s borrowings are so complex that estimates of the total range from $85 billion to well over $100 billion. Perhaps most difficult of all, the competing regional powers of China, India and Japan must also find common ground on how to reduce the debt owed to them by Colombo.

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Reporting by Marc Jones; Editing by Richard Chang

Our standards: The Thomson Reuters Trust Principles.

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NCLT Delhi Breach of Regulation cannot be reasoned to initiate CIRP http://lorodinapoli.org/nclt-delhi-breach-of-regulation-cannot-be-reasoned-to-initiate-cirp/ Sat, 17 Sep 2022 10:14:25 +0000 http://lorodinapoli.org/nclt-delhi-breach-of-regulation-cannot-be-reasoned-to-initiate-cirp/ The operational creditor and the debtor company entered into an agreement after which post-dated checks were issued to the operational creditor by the debtor company. Subsequently, the operational creditor withdrew the means of transaction. However, the debtor company did not comply with the terms of the settlement. In view of the foregoing, the operational creditor […]]]>

The operational creditor and the debtor company entered into an agreement after which post-dated checks were issued to the operational creditor by the debtor company. Subsequently, the operational creditor withdrew the means of transaction. However, the debtor company did not comply with the terms of the settlement. In view of the foregoing, the operational creditor requested the revival of the means.

The National Company Law Tribunal (NCLT), New Delhi Bench, recently declined to revive a preferred plea under Section 9 of the Insolvency and Bankruptcy Code 2016. The plea had been withdrawn on an earlier occasion due to a settlement agreement reached between parties which subsequently failed.

The bench consisting of Dharminder Singh (judicial member) and LN Gupta (technical member) reiterated that breach of the terms and conditions of a settlement agreement does not fall within the scope of operational debt under the IBC and that this could not be a reason for triggering the CIRP.

The Section 9 Petition was filed by Bajaj Rubber Company, whereby the initiation of the Corporate Insolvency Resolution Process (CIRP) was requested.

The operational creditor and the debtor company entered into an agreement after which post-dated checks were issued to the operational creditor by the debtor company.

Subsequently, the operational creditor withdrew the means of transaction.

However, the debtor company did not comply with the terms of the settlement. In view of the foregoing, the operational creditor requested the revival of the means.

The bench noted that breach of terms and conditions could not be grounds for triggering CIRP.

The request to revive the petition was now rejected.

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Personal bankruptcy and business liquidation http://lorodinapoli.org/personal-bankruptcy-and-business-liquidation/ Tue, 13 Sep 2022 08:09:24 +0000 http://lorodinapoli.org/personal-bankruptcy-and-business-liquidation/ On August 8, 2022, the Australian Financial Security Authority (AFSA), the Australian Securities and Investments Commission (ASIC) and the Australian Restructuring Insolvency and Turnaround Association (ARITA) released a joint guide detailing how personal bankruptcy and liquidation of a company can interact. The guide was first published in 2017 and has since been updated in July […]]]>

On August 8, 2022, the Australian Financial Security Authority (AFSA), the Australian Securities and Investments Commission (ASIC) and the Australian Restructuring Insolvency and Turnaround Association (ARITA) released a joint guide detailing how personal bankruptcy and liquidation of a company can interact. The guide was first published in 2017 and has since been updated in July 2022.

The joint publication provides guidance for corporate directors and other business people to help them understand their rights and responsibilities in the event of personal bankruptcy and business liquidation. It provides useful information to advisers regarding the potential consequences and options available if their client is a director or shareholder of a company in financial difficulty. The guide also emphasizes the importance of seeking competent professional advice and acting on that advice.

More specifically, the guide states:

1. where a party may be liable for the debts of its business,

2. what happens if someone goes bankrupt, including the impact on their business

3. what happens if an individual’s business goes into liquidation, including the impact on their personal debts, and

4. practical advice on how to avoid unreliable advisers and how to receive correct advice.

Personal liability for professional debts

It is important to understand what is involved in both bankruptcy and liquidation and how they interact.

Many people operate their business through a corporation. This is so to avoid personal liability for business debts of the business and to protect their personal assets in the event of business bankruptcy. This is because the corporation owns the assets of the business and is liable for all debts incurred in the course of operating that business. The individual, as a director or shareholder, is generally not personally liable for trade and other debts of the business. However, if the business and the individual cannot pay their debts as they come due, the business may go into liquidation and the individual may go bankrupt.

Individuals may also become personally liable for director sanctions if their company fails to:

• respond to a pay as you go (PAYG), goods and services tax (GST) or superannuation guarantee charge (SGC) in full, or

• file tax returns by the required due date.

Banks or financial providers may also require individuals to post a personal guarantee against any unpaid liabilities of a business. This means that if the company cannot pay, the individual becomes legally responsible for the debts of the company. When a business goes bankrupt, it can lead to increased pressure from creditors demanding payment. If a company continues to carry on business after becoming insolvent and incurs debts that it cannot pay as they come due, the person may become personally liable for those debts if the company goes into liquidation, whether that person provided or not a personal guarantee. .

If a person operates the business in their own name or in partnership with another person, rather than through a corporation, then that person will be personally liable for the debts of the business and may go bankrupt if they do not is unable to pay these debts.

Consequences of personal bankruptcy

An individual can go bankrupt in 2 ways:

1. by their own choice via a debtor’s petition – known as voluntary bankruptcy, or

2. because a court orders an individual to declare bankruptcy at the request of one or more of his creditors — via a creditor’s petition.

A trustee in bankruptcy — a qualified licensed professional responsible for administering the bankrupt’s estate — is appointed.

What happens to a bankrupt’s business?

If an individual goes bankrupt, he cannot continue as a company director. Any shares they hold in the company will pass (or vest) to their trustee in bankruptcy who can manage them as they see fit. The trustee can choose to liquidate the company or sell shares in order to use the funds to pay creditors. The bankrupt has an obligation to assist an appointed liquidator in the liquidation process, including providing the liquidator with information regarding the activities, assets, affairs and financial condition of the company.

Alternatively, the trustee may choose to take no action if the company has no assets or if there is little or no value in the company. If this happens, a creditor can ask the court to put the company into liquidation and appoint a liquidator.

Consequences of the liquidation of an individual’s business

A company can be put into liquidation in 2 ways:

1. By resolution of shareholders — known as voluntary liquidation, or

2. Because a court orders the liquidation of a company, usually based on a creditor’s request for liquidation — known as judicial liquidation.

If an individual’s business goes into liquidation, a liquidator — a qualified licensed professional to administer the liquidation of the business — is appointed. Other options or processes may help a person deal with their company’s debts and may enable them to continue trading. These options include small business restructuring or voluntary administration.

Impact on an individual’s personal liabilities

If an individual’s business goes into liquidation, responsibility for the administration of the business passes to the liquidator. The person, as a director, must assist the liquidator and provide him with information regarding the affairs, property, business and financial situation of the company. However, the individual no longer has control of the business; rather, it is the liquidator who decides how the liquidation should proceed. Unless the individual is bankrupt, he remains liable:

• their separate personal debts — for example, their personal credit card,

• the social debts they have guaranteed,

• any debts they owe the business — for example, to repay a loan received from the business,

• unpaid employer pension contributions,

• certain tax debts, and

• any debts incurred if the company continued its activities while it was insolvent.

The liquidator will investigate the affairs, property, business and financial condition of the company. This includes determining whether there are any assets worth recovering for the benefit of creditors. The liquidator will also investigate the existence of a claim against the person as director or shareholder, in particular for:

• not prevent the company from negotiating and incurring debt while it is insolvent, and/or

• breaches of duties by directors.

If an individual does not go bankrupt, the liquidation of the company only resolves the obligations of the company to its creditors; it does not resolve the individual’s separate personal debts or guarantees, for which the individual will always remain liable.

Practical steps

The joint publication by AFSA, ASIC and ARITA also offers practical advice for business owners facing financial difficulties, to seek qualified professional advice and act on that advice.

Consult a qualified lawyer

Business failure can lead to complicated legal outcomes, including asset recovery actions and penalties against the offending individual, if they fail to meet their legal obligations. In addition, declaring bankruptcy can have serious consequences.

Therefore, a person who may encounter financial difficulties in their business is advised to consult a qualified lawyer as soon as possible. Other professionals to consult may include a registered trustee or liquidator. Many trustees are also liquidators; however, by law, they cannot act in both capacities at the same time for an individual and their business. Once appointed, a trustee or liquidator acts for the benefit of the creditors of an individual or company and not for the benefit of an individual personally.

Beware of unreliable advisors

Some advisers may target individuals or business owners whose businesses or individual circumstances may be facing financial difficulties and are therefore likely to take actions that may be illegal. Such actions can result in serious consequences for individuals and business executives, including heavy fines or jail time. It is important that individuals know what they are paying for and that advice received does not result in a breach of law or duty. Warning signs of an untrustworthy advisor include:

• contact a person unexpectedly,

• remain reluctant to provide advice in writing; a written record of advice is always recommended,

• presenting himself as a “friendly” fiduciary or liquidator,

• suggest the transfer of assets belonging to an individual or his company to another party or company without that party or company paying the full value of these assets; such action could harm the individual’s claims or those of the company’s creditors, and

• advising a person to withhold or delay the transmission of his business documents to his fiduciary or the transmission of the books and records of the company to its liquidator; it is an offence.

Sources: ASIC, Personal Bankruptcy and Liquidation of a Company, August 8, 2022, accessed September 10, 2022.

AFSA, Updated Personal Bankruptcy and Business Liquidation Guidelines, August 8, 2022, accessed September 10, 2022.

ARITA, Personal Bankruptcy and Business Liquidation Guidance Document, August 8, 2022, accessed September 10, 2022.

ASIC, Information Sheet 42 (INFO-42), Director Insolvency, accessed 10 September 2022.

CCH Pinpoint ®, Bankruptcy, accessed September 10, 2022.

CCH Pinpoint ®, Insolvency Law Reform, accessed September 10, 2022.

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Ways to Avoid Defaulting on a Personal Loan http://lorodinapoli.org/ways-to-avoid-defaulting-on-a-personal-loan/ Sun, 11 Sep 2022 08:02:06 +0000 http://lorodinapoli.org/ways-to-avoid-defaulting-on-a-personal-loan/ Recently, I hosted some friends at my home. One topic that quickly took up most of our chat time was the pros, and of course, the cons of having so many downloadable loan application software floating around in the ether. During this conversation I revealed how I had to access a personal loan from one […]]]>

Recently, I hosted some friends at my home. One topic that quickly took up most of our chat time was the pros, and of course, the cons of having so many downloadable loan application software floating around in the ether.

During this conversation I revealed how I had to access a personal loan from one of them and although the interest rate was, in my opinion, unreasonably high, at the moment i announced that i paid it back quite easily, a friend of mine looked surprised and commented with an almost high-pitched exclamation, “How could you pull it off so easily?”

I asked him, “Withdraw what? Take the loan or pay it?”, he replied to the latter of course, to which I gave him a confused look. He then complained that he was so in debt to two applications, family and friends, that he could no longer go to either for a line of credit to cancel any loans outside of his usual pay, especially from one of the apps that had already started issuing late payment penalties.

This was really confusing to me and my other friends, as we had always assumed that this friend was not only quite well off, but had a bigger and more consistent stream of income than the rest of us. Further investigation into why he was having such difficulty repaying not just one, but multiple loans, sheds some light on what his challenges were. And while some may consider this a trivial subject, it’s important to note that, like my friend, many are struggling with the pressure of loan repayments and may need some of the advice this article may have to offer. So, without necessarily disclosing my friend’s private affairs, we are going to think seriously about personal loans, and above all, how to make them easy to repay.

Applying for a loan or otherwise, we’ve all had one need or another, requiring a quick financial solution, and in more cases, than it took to access any kind of credit facility, no matter what. The source. To be clear, there is no crime or shame in taking out a loan or accessing a personal credit facility, the challenge is almost always, not the interest rate or its duration, but how we use the loan and the repayment itself.

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Now, from a purely business perspective, and if you’re even a little familiar with how accounting works, you should understand that the moment you accept a loan, personal or otherwise, this facility goes on someone else’s books as an asset since you are now indebted to that institution or person not only for the loan, but also for the interest to be incurred on it. Likewise, this loan enters your own books as a liability, regardless of the good intention of your use of the funds, and for the same reason.

Passives are always a pain, and it’s best to get rid of them as quickly as possible to avoid incurring further passives, mostly in the form of penalties or worse, foreclosures. A good reason is that they prevent us from achieving other, sometimes more important goals, and on a more psychological level, it just helps you sleep better at night. So here are some strategies to consider when considering repayment plans that could help you clear your personal loans faster.

Do you really need to take this loan to start?

Although this is a slight deviation from the actual topic, this should be the very first step to accessing a personal loan. Ask yourself the all-important question if, to begin with, you really need to take it. Having easily liquidated savings or wealth answers this question very quickly. Obviously, the more money you can set aside for a rainy day and resist the temptation to steal very often, especially on non-essential things, the more, if not more, you’ll have when you really do. need. Thus, you must learn to adopt a strict savings culture and even if you earn a salary today, ask yourself a crucial question before accessing a loan, “Let’s say I lose my job tomorrow, have- I have enough reserves to repay my debt, and over the agreed period?” If the answer is “yes”, then by all means, however, if the answer is “no”, then hope does not is not a strategy you should rely on to pay off your debts.

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It’s time to change your lifestyle

It’s easy to think that if your answer to the above question about being able to easily repay your loan means business is business as usual, then think again. Murphy’s Law states that “if something can go wrong, it will…”, and as another common saying goes, “even the best-laid plans sometimes go to extremes”. Accessing a loan means you have to discipline yourself enough to understand that until the debt is paid, you should keep luxury spending at bay. Even if you take out a personal loan for a luxury vacation, as soon as you answer yes to the question of whether you can repay the loan if something goes wrong, you should immediately seek to erase that liability from your books by reducing any other excesses. , yes , even cable, Netflix subscription and restaurant meals, until the current debt is paid, and in full.

This way, not only will you have more confidence in your eligibility to access another loan, but if the need arises, your creditors will also be willing to grant you another line.

Try to pay more than the minimum payments, and regularly

Before accessing a loan, always be sure to check whether you have a prepayment break or bonus. While some lenders charge penalties for prepayments due to interest payment charges they stand to lose if they no longer have your loan as an asset on their books, most of them appreciate more than well and even offer rewards for it. So if, for example, your loan is to have a repayment period of 30 days, rather than waiting until the very last day and minute to repay, break it up into blocks of 4 weeks and allocate a minimum amount to be paid to a particular day of each week then add a little something on top of that. So on the day of last week, you pay less than the previous weeks. The same strategy can also apply if you are indebted to an individual even without an interest rate tied to the credit terms.

Look for ways to earn extra income

Let’s face it, the main reason you had to access a loan in the first place was that your current income simply didn’t match your financial needs at the time. If you’re the type that doesn’t like being limited in particular on what and how you spend money, it might be time to increase your revenue stream by a pipeline or two. Several articles on this site have been exhaustive on this subject, so we will move on…

Do not use one loan to repay the other

As tempting as the idea may seem at first glance, in more than one case, taking out one loan, interest-free or interest-free, to pay off another, simply leads to sinking deeper into more debt and more headaches. head than at the start. In some foreign cases this may be an acceptable step to take, but don’t make a habit of it, remember, “even the best-laid plans…”

Consider the “snowball” method of paying off debt

This is a great tactic if you have more than one loan to repay. This usually involves starting with your smallest loan, paying it off, then rolling that same payment schedule over to the next loan, then working your way up to the largest. This method can help you build momentum as each balance is paid off and eventually, once you are debt free, you can finally start saving.

On the other hand, you can try the “Avalanche” method

The Avalanche method focuses on paying off the largest loan, especially with the highest interest rate first. Similar to the Snowball method, when the higher interest rate debt is paid off, you put that same money towards the next high interest rate loan and so on until you are done. Focusing on loans that are more expensive to carry, in the long run, would effectively mean you would have to pay less over time and eventually have more to appropriate.

Refinance your loan if you have to

If it becomes clear that you still can’t meet your loan deadline, it may be time to discuss refinancing terms with your creditor and ask for an extended repayment term. Be warned, however, despite the extended period, refinancing also carries heavy interest charges.

Restructure your debt if you have to

Unlike refinancing which simply gives you an extended repayment period on your loan, it not only helps you negotiate an extension but also a lower interest rate. Be warned that this is however only accepted by creditors, in more than one case when it has become clear that insolvency is imminent, in cases such as you lost your job or other scenarios. Creditors will give you time to get your affairs in order, but for a slightly longer term and will only reduce the previously agreed interest rate when they have to.

Drop the old cargo

We sometimes have things or items of some value that have been lying around our homes or office for some time and with no apparent use. Auctioning these old items is also a great strategy for raising enough money to offset your debt without necessarily having to rely on payday to come to your rescue. Plus, it’s a good way to declutter your surroundings while you’re at it.

Conclusion

There have been several laudable initiatives by regulators and financial institutions to promote inclusion in our financial ecosystem, such as digitizing access to credit facilities. In a way, this is a good thing because it increases our awareness of loans and other financial matters. Above all, however, responsible borrowing must be ingrained in borrowers to help them build a healthy credit score and a balanced life, without being overly dependent on borrowing.

Borrowing, especially on the now popular online creditor apps, certainly helps you meet some short-term priorities, even if your current financial situation may not be up to scratch, but it also means properly assessing your needs and your ability to repay, before you even take the loan, then by adhering to the simple practices above to help you stay on schedule when it comes to clearing your loans without anyone knocking on your door or not. ‘call your friends and loved ones to report your credit default.


Essien Brain is a business consultant, with expertise in digital marketing, crowdfunding, pitch decks and business plan/proposal formulation and design.

mcbrainandcompany@gmail.com. +234703-444-6041

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Bankruptcy and creditor liquidation filings will increase http://lorodinapoli.org/bankruptcy-and-creditor-liquidation-filings-will-increase/ Mon, 05 Sep 2022 14:49:12 +0000 http://lorodinapoli.org/bankruptcy-and-creditor-liquidation-filings-will-increase/ The Insolvency Service introduces changes to deposits made to initiate creditor bankruptcies and court-ordered liquidations. The motion filing, the amount that must be paid upfront to seek an order, will increase in any case where a motion is filed in court on or after November 1, 2022. There will be no change to the filing […]]]>

The Insolvency Service introduces changes to deposits made to initiate creditor bankruptcies and court-ordered liquidations.

The motion filing, the amount that must be paid upfront to seek an order, will increase in any case where a motion is filed in court on or after November 1, 2022.

There will be no change to the filing of the arbitrator’s petition when the individual files for bankruptcy on their own.

Changes to repositories

Current fees Price from November 1, 2022
Filing of bankruptcy petition from creditors £990 £1,500
Filing of the application for liquidation of the company £1,600 £2,600

Each case of bankruptcy or liquidation of a creditor administered by an official receiver is financed – in part – by a deposit paid by the applicant to start the process.

The filing contributes to the official receiver’s administration costs, with the remainder of their costs being recovered through fees against assets realized during the bankruptcy or liquidation proceedings.

If there are sufficient assets to recover all fees and costs, the deposit is returned to the party that initiated the insolvency.

Fees have not changed since April 2016. The number of insolvency cases has fallen to a historic low, and the majority of the remaining cases have insufficient asset values ​​to recover administrative costs.

The increased bond will allow the Insolvency Service to continue to effectively administer and investigate insolvencies, maximizing outcomes for creditors while mitigating the risk of cost recovery being passed on to the taxpayer.

There will be no change to the filing of the arbitrator’s petition when the individual files for bankruptcy on their own.

This change was implemented by an amendment to the legislation. The Insolvency Proceedings (Costs) (Amendment) Order 2022 was tabled in Parliament on 5 September 2022.

For more information about these changes, please contact: DepositsChange.2022@insolvency.gov.uk.

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The government borrows 420 billion pula from small creditors http://lorodinapoli.org/the-government-borrows-420-billion-pula-from-small-creditors/ Sat, 03 Sep 2022 16:00:00 +0000 http://lorodinapoli.org/the-government-borrows-420-billion-pula-from-small-creditors/ Louise Maureen Simeon – The Filipina Star September 4, 2022 | 00:00 MANILA, Philippines — The government borrowed a total of 420.45 billion pesos in the first retail treasury bond (RTB) issue under the Marcos administration in a bid to bail out state coffers for various recovery projects. The Office of the Treasury on Friday […]]]>
Louise Maureen Simeon – The Filipina Star

September 4, 2022 | 00:00

MANILA, Philippines — The government borrowed a total of 420.45 billion pesos in the first retail treasury bond (RTB) issue under the Marcos administration in a bid to bail out state coffers for various recovery projects.

The Office of the Treasury on Friday closed RTB-28, a 5.5-year bond designed for retail investors as a lower-risk, higher-return savings vehicle, after a week of supply.

Since its launch on August 23, the Treasury has raised a total of 420.448 billion pesos, well above the target supply of 30 billion pesos.

Of this amount, 108.5 billion pesos came from a bond exchange offer expiring on September 13, December 14, December 6 this year and February 11, 2023.

The coupon rate is 5.75%, higher than the BVAL benchmark rate of 5.434% and 5.64%, which is the norm for the securities.

National Treasurer Rosalia de Leon argued that the outcome of the auction showed investor confidence in government securities and the economy as a whole.

De Leon said she was “very” pleased with the results of the auction, adding that the exchange offer reduces rollover risk and extends maturity.

The Treasury sold the RTBs for as little as P5,000. Interest payments will be paid quarterly over the life of the bond.

Chief Financial Officer Benjamin Diokno said earlier that RTBs are an important part of the government’s fundraising efforts to finance the development of programs for a sustainable, inclusive and broad-based economy.

Proceeds from the issuance will be allocated to boost the country’s agricultural sector, infrastructure, education and health systems, among others.

He pointed out that RTBs are safe, low-risk and affordable, allowing Filipinos to contribute to nation-building and increase their savings, at the same time.

RTBs have been the best-performing financial instrument in the Treasury bond portfolio for the past two decades.

The Treasury has been issuing RTBs since 2001 to support financial inclusion and literacy for Filipinos by making government securities more accessible to retail investors.

Since 2001, the government has raised over P4,370 billion from RTBs. RTBs now represent 35% of outstanding government Treasury securities.

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