Temple Chambers’ Post

Navigating personal and corporate debt https://lnkd.in/gPeKugiP <a href=""> - Monday 9 September 2024 Generally speaking, insolvency can occur when the liabilities of an individual or company are greater than the value of its assets and as a result, the individual or company are unable to pay their debts.   Personal insolvency There are a number of insolvency mechanisms which can be applied to individuals. These mechanisms are governed by the Insolvency Act 1986, with the three main forms being as follows: 1. Individual Voluntary Arrangements (IVA) IVAs are essentially contractual arrangements between an insolvent individual and their creditors. They allow a debtor to settle some or all of their debts at a discount and are tailorable to the situation to which they are applied. The individual will propose terms to their creditors and the creditors simply vote whether they are in favour or otherwise. If creditors holding 75% of the total sum owed agree to the terms, the IVA will be approved. Interestingly, it binds all creditors who were entitled to vote, irrespective of whether they took part or sought to reject the proposal. There are means of challenging an IVA but speed is of the essence and those wishing to challenge should contact a solicitor as quickly as they can. 2. Debt Relief Orders Debt Relief Orders are used when an individual is insolvent, but the assets and income are minimal. This mechanism can be used when the individual is unable to pay their debts, such debts are less than £50,000, and the total assets are less than £2,000, with disposal monthly income at £75.00 or less. If approved, the individual will be placed into a moratorium, which stops any creditors from taking action in respect of qualifying debts; essentially it is an attempt to provide relief. At the end of the moratorium, the individual will no longer be required to pay the sums that were owed. 3. Bankruptcy Bankruptcy is the most well-known mechanism of insolvency and certainly the oldest, with the first laws passed by King Henry VIII in 1542. Additionally, it is the only mechanism that can be initiated by a third party. In order to declare an individual bankrupt, the court must be satisfied that the debt is over £5,000, that the sums are immediately due and owing, and the debtor appears to be unable to pay said debts once they fall due. Of the mechanisms referred to above, bankruptcy has the most severe consequences for the individual. The bankruptcy order is made public and financial institutions will freeze any and all bank accounts related to the individual. As at the date of the order, all assets owned by the bankrupt are vested in a Trustee. The Trustee will liquidate all assets and distribute the sums to the creditors on an equal basis (e.g. pence in the pound ) That being said, as with IVAs and debt relief orders, the bankrupt is given a financial ‘clean slate’ and can...

📢 Debt Relief for Entrepreneurs in Bankruptcy Proceedings – Part 2 📅 You Have 30 Days to Act! If you're an entrepreneur who has completed bankruptcy proceedings, remember that you have 30 days to submit an application to establish a repayment plan for creditors. This is a crucial step to have the remaining debts, which were not settled during the bankruptcy, written off. This application is reviewed in a hearing, with creditors being notified via announcement. 📝 💼 Debt Relief Without a Repayment Plan? Bankruptcy law also allows for debt relief without establishing a repayment plan if your financial situation clearly shows that you are permanently unable to make any repayments. In this case, you must explicitly state this in the application, which must also be submitted within 30 days of the announcement of the end of bankruptcy proceedings. The legal basis here is Article 369(1a) of the bankruptcy law. ⚖️ ⏳ Conditional Debt Forgiveness A third option is conditional debt forgiveness. If no application to establish a repayment plan is submitted within 5 years of the decision becoming final, the debts will be written off. However, be cautious—if you fail to meet obligations such as submitting financial reports, this decision could be revoked. 🚨 ❗ Consequences of Revocation If the conditional debt forgiveness is revoked, the debts will not be written off. From an entrepreneur's perspective, it's crucial to avoid any situations that could lead to the revocation of this decision. 📌 What's Next? If everything goes according to plan and no application for a repayment plan is submitted within 5 years, the debts will be written off. In the next post, we will discuss the details of the repayment plan and its role in the debt relief process. Read more: https://lnkd.in/d6MbzGvz #DebtRelief #EntrepreneurBankruptcy #BankruptcyLaw #RepaymentPlan #ConditionalForgiveness #Debt #LegalAdvice #DebtFreeBusiness

Practical Guide to Bankruptcy and Suspension of Debt Payment Obligations (PKPU) in Indonesia 1. Definition and Legal Basis Bankruptcy is a condition where a debtor is unable to pay debts that are due and collectible. It is governed by Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations (PKPU). 2. Bankruptcy Filing Process Only creditors with debts that are due and payable can file for bankruptcy at the Commercial Court. Disputes over the amount of debt must be resolved before a bankruptcy ruling through the Renvoi Process. 3. Time Limits for PKPU Suspension of debt payment obligations (PKPU) has a maximum time limit of 270 days. No extensions are allowed after this period ends. 4. Rights of Creditors and Debtors Creditors have the right to file claims if the debtor defaults. Debtors are entitled to request debt restructuring during the PKPU process. Taxes are prioritized in the distribution of bankrupt assets. 5. Role of Curators in Bankruptcy Curators are responsible for managing and liquidating the bankrupt assets. Curators can act without court approval to seize bankrupt assets. Curator appointments should consider the complexity of the case and the number of creditors involved. 6. Industrial Relations Disputes and Bankruptcy If a debtor is involved in an industrial relations dispute at the Industrial Relations Court (PHI), the process at PHI may be deemed void if the debtor is declared bankrupt. 7. Sale of Bankrupt Assets The sale of assets via auction does not require a judge's approval, except for sales conducted privately. 8. Bankruptcy of Legal Entities in Liquidation Legal entities undergoing liquidation can still be declared bankrupt as long as the process of asset liquidation has not been complet

📢 Debt Relief for Entrepreneurs in Bankruptcy Proceedings – Part 2 📅 You Have 30 Days to Act! If you're an entrepreneur who has completed bankruptcy proceedings, remember that you have 30 days to submit an application to establish a repayment plan for creditors. This is a crucial step to have the remaining debts, which were not settled during the bankruptcy, written off. This application is reviewed in a hearing, with creditors being notified via announcement. 📝 💼 Debt Relief Without a Repayment Plan? Bankruptcy law also allows for debt relief without establishing a repayment plan if your financial situation clearly shows that you are permanently unable to make any repayments. In this case, you must explicitly state this in the application, which must also be submitted within 30 days of the announcement of the end of bankruptcy proceedings. The legal basis here is Article 369(1a) of the bankruptcy law. ⚖️ ⏳ Conditional Debt Forgiveness A third option is conditional debt forgiveness. If no application to establish a repayment plan is submitted within 5 years of the decision becoming final, the debts will be written off. However, be cautious—if you fail to meet obligations such as submitting financial reports, this decision could be revoked. 🚨 ❗ Consequences of Revocation If the conditional debt forgiveness is revoked, the debts will not be written off. From an entrepreneur's perspective, it's crucial to avoid any situations that could lead to the revocation of this decision. 📌 What's Next? If everything goes according to plan and no application for a repayment plan is submitted within 5 years, the debts will be written off. In the next post, we will discuss the details of the repayment plan and its role in the debt relief process. Read more: https://lnkd.in/d6MbzGvz #DebtRelief #EntrepreneurBankruptcy #BankruptcyLaw #RepaymentPlan #ConditionalForgiveness #Debt #LegalAdvice #DebtFreeBusiness

Introduction In accordance with the Insolvency and Bankruptcy Code (IBC), the definition of "financial debt" has been subjected to a comprehensive review by the judicial system. As a result, courts and tribunals have provided in-depth insights into the many types of financial transactions. During a recent case, the National Company Law Appellate Tribunal (NCLAT) discussed the question of whether or not an advance payment made in accordance with an oral agreement for the acquisition of shares is considered to be "financial debt" in accordance with the Insolvency and Bankruptcy Code (IBC) (citation: (2024) ibclaw.in 63 NCLAT). A Comprehensive Understanding of the Concept of "Financial Debt" The International Business Code (IBC) gives a thorough definition of the term "financial debt" in its section 5(8). This definition encompasses not only a debt but also any interest that is given in exchange for the worth of money over their lifetime. Section 5(7) states that the term "financial creditor" refers to any person or organisation that is owed a financial debt. This definition includes any people or entity. In spite of the fact that the definition is so broad, the judicial system continues to have the authority to determine what constitutes "financial debt." The Meaning of 'Financial Debt' in the International Business Code has been shaped by a number of significant precedents. It is significant that the Supreme Court has decided that loans that do not incur interest are included in the definition of the phrase "financial debt." In addition to the fact that it is vital to place an emphasis on the understanding of the time value of money, transactions that indicate the economic impact of borrowing may also be characterised as "financial debt." The verdict of NCLAT: It has been decided by the Supreme Court that loans that are not subject to interest and are given to a corporation in order to sustain its commercial operations are regarded to be "financial debt." The IBC is guaranteed to include a wide variety of financial agreements as a result of this verdict, which shows the enormous range of the term. The National Company Law Tribunal (NCLAT) overturned a verdict by the National Company Law Tribunal (NCLT) and declared that a security deposit, which includes interest, given by a corporate debtor is regarded to be "financial debt." When establishing the parameters of a financial transaction, it is essential to take into account the time value of money, as this highlights the relevance of this component. Through the Corporate Insolvency Resolution Process (CIRP), the National Company Law Appellate Tribunal (NCLAT) has confirmed that when a corporate debtor gives a guarantee, the entity in question becomes a financial creditor. This pertains to a loan for a group entity. The understanding of financial transacti

In March 2024, the Singapore Court of Appeal in Kyen Resources Pte Ltd (in compulsory liquidation) and others v Feima International (Hongkong) Ltd (In Liquidation) and another matter [2024] SGCA 7 clarified the limits to a liquidator’s ability to assert crossclaims to defeat claims in a creditor’s proof of debt. The court additionally clarified the law on transnational issue estoppel for cases where separate insolvency proceedings are ongoing in different jurisdictions.   The case concerned two companies in liquidation, Feima and Kyen. Feima’s liquidators had lodged a proof of debt against Kyen for US$49,355,996.30. Kyen’s liquidators rejected Feima’s proof of debt and alleged that Kyen had crossclaims against Feima that exceeded the claim in Feima’s proof of debt. Feima argued that because Kyen had previously asserted the same crossclaims in the Hong Kong liquidation of Feima and was rejected, Kyen should be estopped from asserting the same crossclaims in Singapore.   First, the court held that a crossclaim by a company in liquidation cannot be accounted for in the adjudication of an unsecured creditor's proof of debt in circumstances where a set-off is not available. In this case, Kyen’s crossclaims could not form the subject of insolvency set-off. This was because Kyen's crossclaims, which were for dishonest assistance and knowing receipt, involved no mutual credits, mutual debts, or other mutual dealings with the claim in Feima's proof of debt. Although the court noted that other forms of set-off like equitable set-off may also be permitted in the proof of debt process, the court declined to express a firm view on its permissibility as Kyen did not rely on equitable set-off.   Second, the court held that where the crossclaim asserted by the liquidators is substantially disputed and factually complex, the liquidator may be required to apply to the court for directions on resolving the crossclaim instead of summarily dealing with it in the adjudication process.   Third, the court decided that Kyen was not estopped by the doctrine of res judicata from pursuing the same crossclaims in the Singapore liquidation of Kyen after their proof of debt for the same crossclaims were rejected in the Hong Kong liquidation of Feima. In this case, the dispute was transnational and involved two separate liquidations under two different jurisdictions. The crossclaims were also asserted before the Singapore and Hong Kong courts for distinct purposes, and in proceedings that were distinct in nature. In these specific circumstances, the court held that the doctrine of res judicata was not applicable and no forum election needed to be made.   Read more here: https://lnkd.in/ga3_VBsH, https://lnkd.in/gN4gPBja #liquidation #insolvency #restructuring

Introduction In a landmark judgment delivered on 02.04.2024, the NCLAT provided crucial insights into the interpretation of financial debt under the Insolvency and Bankruptcy Code (IBC), 2016, particularly emphasizing the broad spectrum covered by the concept of the time value of money. This judgment, *Arunkumar Jayantilal Muchhala Vs. Awaita Properties Pvt. Ltd. and Anr.*, marks a pivotal step in understanding the nuances of financial transactions within the insolvency framework. Understanding the Context: Time Value of Money's Significance Background of the Case The case revolved around a dispute regarding the initiation of the insolvency resolution process against the corporate debtor, highlighting the intricate nature of financial debts and the encompassing scope of the time value of money. The Core Issue: Exploring Time Value of Money At the heart of the dispute was whether various forms of benefits or value accruing to the creditor, other than regular interest, can be considered under the ambit of the time value of money, thus constituting a financial debt. Key Provisions and Legal Interpretations The Concept of Financial Debt under IBC The IBC defines financial debt as a debt along with interest, if any, which is disbursed against the consideration for the time value of money. NCLAT's Interpretation on Time Value of Money The tribunal elaborated that the time value of money is not confined to regular or timely returns received for the duration for which the amount is disbursed but also encompasses any other form of benefit or value accruing to the creditor as a return for providing money for a long duration. "The concept of time value of money has nowhere been defined in the IBC. Time value of money is not only a regular or timely return received for the duration for which the amount is disbursed as an amount in addition to the principal, but also covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration." The Decision to Admit the Section 7 Application The tribunal underscored that once the Adjudicating Authority is subjectively satisfied that there is a debt and a default has been committed by the Corporate Debtor, and the Section 7 application is complete in all respects, it must admit the application. Implications of the Judgment For Financial Creditors This judgment broadens the scope of what can be considered as financial debt, allowing creditors to include various forms of economic benefits received over the duration of the loan as part of their claims. For Resolution Professionals Resolution professionals must now take a holistic view of the benefits accruing to creditors, beyond traditional interest payments, when evaluating claims and formulating resolution plans. Impact on Insolvency Proceedings This judgment s

Several legal avenues are available under various laws and regulations to recover business debt quickly in India. Here’s a structured overview of the most effective methods: Legal Framework for Debt Recovery 1. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002:   - This act allows banks and financial institutions to recover outstanding loans without court intervention. Secured creditors can take possession of collateral and sell it to recover debts.    - The process involves issuing a notice to the debtor, allowing them a specified period to repay before the creditor can auction the collateral. 2. Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993:   - This act established Debt Recovery Tribunals (DRTs) to expedite the recovery process for debts owed to banks.    - Creditors can file cases in DRTs for quicker resolution than traditional courts, which can be burdened with lengthy procedures. 3. Insolvency and Bankruptcy Code (IBC), 2016:   - If a debtor defaults on significant debts, creditors can initiate insolvency proceedings under the IBC. This process includes appointing insolvency professionals and forming a committee of creditors to oversee debt resolution.  Steps for Quick Debt Recovery - Negotiation: Start by negotiating directly with the debtor to reach a settlement. This is often the quickest method if both parties are willing. - Demand Notice: If negotiations fail, issue a formal demand notice stating the amount owed and requesting payment within a specific timeframe.  - Legal Notice: If the demand notice does not yield results, send a legal notice through a lawyer, outlining the legal basis for your claim and potential consequences for non-payment. - Summary Suit: For fixed amounts, file a summary suit under Order 37 of the Civil Procedure Code (CPC). This fast-tracks recovery by assuming the creditor's claims are true unless contested by the debtor. - Debt Recovery Tribunal (DRT): If other methods fail, approach the DRT for recovery. The tribunal can issue orders for payment or seizure of assets more swiftly than regular courts - Cheque Bounce Proceedings: If payment was made via cheque that bounced, initiate proceedings under Section 138 of the Negotiable Instruments Act, which has specific timelines for recovery actions. Additional Considerations Arbitration: If your contract contains an arbitration clause, consider resolving disputes through arbitration, which can be quicker than court proceedings. - Execution of Decree: Once you obtain a court decree in your favor, you can execute it through court processes to recover your dues effectively. By leveraging these legal frameworks and strategies, businesses in India can enhance their chances of recovering debts efficiently and within a shorter timeframe.

Details about Section 5(8) of IBC :- Section 5(8) of the Insolvency and Bankruptcy Code (IBC), 2016 defines the term "financial debt", which is central to insolvency proceedings in India. The section specifies what qualifies as a financial debt and provides clarity on claims that can be considered for initiating the Corporate Insolvency Resolution Process (CIRP). Key Aspects of Section 5(8): Definition: Financial debt refers to a debt that is disbursed against the consideration for the time value of money. It includes, among other things: Money borrowed against interest. Any amount raised through financial instruments like bonds, debentures, or other similar securities. Amounts raised under any credit facility or loan. Lease or hire-purchase agreements if such arrangements are classified as a financial lease. Receivables sold or discounted other than on a non-recourse basis. Derivatives and other financial transactions. Specific Inclusions: Section 5(8) explicitly includes certain types of debt, such as: Liability arising from a guarantee or indemnity for any financial debt. The unpaid dues of any forward sale or purchase agreement (if such dues are intended to be adjusted over time). Time Value of Money: A distinguishing factor of financial debt is the consideration of "time value of money," making it different from operational debt under the IBC. This aspect emphasizes the long-term benefit to the lender, typically seen in loans or similar financial arrangements. Purpose in IBC: Establishes the eligibility of creditors (financial creditors) to initiate CIRP. Grants financial creditors voting rights in the Committee of Creditors (CoC) based on the proportion of the financial debt owed to them. Importance of Section 5(8): It ensures clear differentiation between financial debt and operational debt, which is crucial for priority and repayment hierarchy in insolvency resolution. It facilitates the efficient resolution of insolvency by allowing financial creditors to have a more significant role in decision-making processes.

What is an Individual Voluntary Arrangement (IVA)? An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors, providing an alternative solution to bankruptcy for managing your debts. With an IVA, you make affordable monthly payments to a Supervisor over a set period. Once the IVA is completed, any remaining debt is written off. During the IVA, all interest and charges are frozen, and creditors must stop their payment demands. One key advantage of an IVA is that it offers more control over your assets compared to bankruptcy. Pros of an IVA Redirect Calls: Any creditor calls can be referred to your Supervisor. Legal Protection: As a legally binding contract, an IVA protects you from legal actions such as court proceedings, bailiff actions, and bankruptcy related to the debts included in the arrangement. Eligibility: Private individuals, couples (joint IVAs), sole traders, and directors of limited companies can apply. Professional Acceptance: Certain professionals, like solicitors or accountants who cannot practice as bankrupts, can enter into an IVA with their professional body's consent. Asset Protection: You can safeguard your property and other assets from creditor actions and possession proceedings. Flexibility: If your circumstances change, the terms of the IVA can be adjusted, such as pausing contributions during unemployment. Bank Account Operation: You can operate a bank account and manage your finances during the IVA. Choice of Practitioner: You can choose the Insolvency Practitioner and firm handling your case. Less Stigma: An IVA carries less social stigma compared to bankruptcy and is not publicly advertised except for being listed on the IVA register. Asset Exclusion: Certain assets, typically business-related, but potentially including your home, can be excluded from the IVA. Creditor Binding: Creditors are bound by the IVA terms even if they voted against it, provided they hold less than 25% of the voting rights. Cons of an IVA Compliance: Non-compliance with the IVA terms can lead to early termination, restoring creditor rights and potential legal action. Borrowing Restrictions: Borrowing is only allowed with the Supervisor's approval during the IVA. Equity Release: If you own a property with equity, you may need to attempt to remortgage after the fourth year. If this isn't possible, the IVA usually extends for an additional year. Debt Threshold: An IVA may be unsuitable if your total unsecured debt is less than £15,000. Creditor Agreement: At least 75% of creditors voting at the meeting must agree to the IVA. Well-drafted proposals typically meet this requirement. Setting Up an IVA The process usually takes 4-6 weeks to finalise your proposals, which then need your approval before being sent to creditors. Creditors require a further two weeks' notice before their meeting. Overall, the process generally takes 6-8 weeks. #IVA #support