What (briefly) is the insolvency process in your jurisdiction?

Lending & Secured Finance

Croatia Small Flag Croatia

The insolvency process in Croatia is regulated by:

  1. The Consumer Bankruptcy Act for personal borrowers.

    The bankruptcy procedure for personal borrowers may be conducted as out of court proceedings, proceedings before the court and since 1 January 2019 as simplified consumer bankruptcy proceedings.

    The consumer is considered to be insolvent if he cannot fulfil one or more due payment obligations for at least 90 consecutive days the amount of which in total exceeds HRK 30,000.00 and in case of simplified consumer bankruptcy proceedings this amount is lowered to HRK 20,000.00. The verification of the consumer’s conduct is only prescribed in relation to the proceedings before the court and it cannot be shorter than one year nor longer than five years.

  2. The Croatian Bankruptcy Act for commercial borrowers (it sets out a pre-bankruptcy and bankruptcy regime)

    Pre-bankruptcy proceedings can be initiated within 60 days after the company’s assets have been seized and it is conducted for the purpose of establishing the legal position of the debtor and its relationship towards the creditors with the aim of maintaining its activities. The pre-bankruptcy proceedings allow the debtor to write off a part of their debts towards the creditors and to repay the remaining debt in accordance with a pre-bankruptcy settlement. It shall be deemed that he creditors have accepted the restructuring plan if the majority of all creditors has voted in favour of it and if in each group the sum of claims of creditors who have voted in favour of the plan is two times higher than the sum of claims of creditors who voted against the adoption of the plan. If the debtor fails to comply with the pre-bankruptcy settlement, bankruptcy will be initiated.

    Bankruptcy proceedings are conducted for the purpose of collective settlement of the creditors of the bankruptcy debtor, by realising the debtors’ assets and distributing the funds to the creditors. Creditors are reimbursed from the value of the debtor’s assets, according to the percentage of their claims in relation to the total amount of all creditors’ debts, after the expenses of the proceedings have been paid, as well as privileged claims (e.g. employee salaries). Bankruptcy proceedings may be initiated by the company itself, by its creditors or by the Financial Agency.

    The law allowed the debtor to continue doing business during the course of bankruptcy proceedings but only for the maximum length of one and a half years since the initial hearing, unless an insolvency plan has been submitted to the judge in charge of the bankruptcy proceedings.

  3. The Law on the Procedure of Extraordinary Administration in Companies of Systemic Importance for the Republic of Croatia (the so- called “Lex Agrokor”) entered into force in April 2017.

    Companies of Systemic Importance for the Republic of Croatia are those who employ more than 5000 employees on average and their liabilities, alone or together with its subsidiaries or affiliated companies, amount to more than HRK 7,500,000,000.00. In the procedure of extraordinary administration, the procedural rules of the Croatian Bankruptcy Act regulating bankruptcy are applied in an appropriate manner. The only extraordinary administration procedure conducted so far is the one related to the Agrokor Group.

Czech Republic Small Flag Czech Republic

Insolvency proceedings are initiated upon filing of insolvency petition by creditor or debtor. In case of imminent insolvency, only the debtor may apply for insolvency.

The proceedings begin on the date when the insolvency petition is filed with a competent insolvency court in electronic or paper form. The court will publish commencement of proceedings within 2 hours (unless it has reasonable doubts about the insolvency merits). The court appoints an insolvency trustee and calls on creditors to register their claims (mostly within 60 days). Typically, it takes the court 5 to 12 months to declare the debtor bankrupt. Such ruling often also decides on a method of resolution of the bankruptcy (this may follow in a separate decision after several months in more complicated cases).

Bankruptcy resolution methods are as follows: (i) bankruptcy by liquidation which is applicable to all debtors, reorganisation (subject to meeting certain economic criteria) or discharge of debt for non-business individuals. Bankruptcy by liquidation is the most frequent method of solving the insolvency. A debtor may qualify for reorganization subject to the following conditions: (ii) it operates a business enterprise and (iii) its net turnover exceeds at least CZK 50m (approx. EUR 1.9m) or has more than 50 employees.

Finland Small Flag Finland

Finnish law recognises two forms of formal insolvency proceedings of corporate debtors: (i) bankruptcy and (ii) company administration.


Bankruptcy proceedings in Finland are governed by the Bankruptcy Act. If a company is insolvent, the company may, upon an application of the company or a creditor, be placed into bankruptcy. The primary prerequisite for initiating an insolvency proceeding is that the debtor is considered insolvent. Under Finnish law, a debtor is considered insolvent when the debtor is unable to pay its debts when due and this inability is not temporary.

The purpose of bankruptcy proceedings is to realise the assets of the bankrupt company and to use the realisation proceeds to pay off the company’s creditors in accordance with their priority ranking.

Company administration

Finnish company administration proceedings are governed by the Company Administration Act. The purpose of company administration proceedings is to allow an insolvent company, which is nevertheless considered ultimately as a viable business, to continue its existence and for the creditors to receive a greater aggregate recovery than would be possible in bankruptcy.

The commencement of company administration proceedings triggers a moratorium, providing the company with general protection from its creditors, both secured and unsecured. The moratorium is in force until the court confirms the administration programme, after which repayment of debt (including haircuts) will be covered and regulated by the administration programme.

The administration programme remains in force for a defined time period. The business activities of the company continue “as usual” during the administration programme, except for limitations deriving from the programme and some exceptions to the debtor’s capacity to control its assets. The administration programme generally ends when all liabilities subject to administration have been satisfied as provided in the programme, and other stipulated actions have been completed by the debtor company.

Germany Small Flag Germany

Proceedings commence with preliminary insolvency proceedings (which may be started on the application of creditors or the borrower’s management). A preliminary insolvency administrator is being appointed to administrate this process and also, in most cases, to take over the management of the insolvent company. Preliminary insolvency proceedings serve the purpose to assess whether a company is actually insolvent and whether there are sufficient assets available to cover the cost of insolvency proceedings.

Once this has been established, insolvency proceedings will commence and an insolvency administrator will be appointed by the insolvency court. Under the supervision of the court and under the control of the creditors (which may form a committee) the administrator will either sell the company as a going concern or liquidate individual assets. Goal of the insolvency proceedings is to fully satisfy the obligations of the insolvent company's creditors.

Insolvency proceedings will end once all assets have been liquidated and all proceeds from the liquidation have been distributed amongst creditors.

Spain Small Flag Spain

The Spanish insolvency regime is regulated by the Spanish Insolvency Act 22/2003, dated 9 July (the “Insolvency Act”). All debtors are subject to the same insolvency proceedings, namely "concurso de acreedores", which may lead to either the restructuring of the business or to the liquidation of the assets of the debtor.

A debtor is obliged to file for insolvency proceedings when it becomes insolvent (a debtor will be deemed insolvent if it fails to comply on a general basis with its outstanding obligations). In this case, the proceedings would be deemed as "compulsory insolvency procedure". In addition, the debtor may ask the Courts for a declaration of insolvency when it is foreseen that it will become "insolvent" in the near future. In this case, the insolvency proceedings would be deemed as "voluntary".

Differentiation must be made between two stages within the insolvency proceedings:

(a) The first stage is the determination of the assets and the liabilities of the debtor, leading to the preparation by the court receivers of the inventory and the creditors' list, respectively.
(b) The second stage leads either to an arrangement between the debtor and its creditors, or to the liquidation of the debtor's assets.

Philippines Small Flag Philippines

The law governing insolvency in the Philippines is Republic Act No. 10142 or the "Financial Rehabilitation and Insolvency Act (FRIA) of 2010. The FRIA identifies the following debt relief processes: voluntary or involuntary liquidation, voluntary or involuntary rehabilitation, pre-negotiated rehabilitation and insolvency of individual debtor. While there are details of the process which are unique to one or some of these processes such as the party who can file, the relief asked for, the receiver or liquidator, and the effects of each process, all follow substantially the same process as outlined herein.

The process is initiated by the filing of a verified petition with the Regional Trial Court having jurisdiction over the city or municipality where the principal office of the debtor corporation or residence of an individual debtor is located. If the court finds the petition sufficient in form and substance (meritorious, in liquidation), it will issue: (a) in the case of liquidation, a liquidation order declaring the debtor insolvent (and dissolved, in the case of a juridical debtor) and ordering the liquidation of the debtor, (b) in the case of rehabilitation, a commencement order suspending all actions or proceedings for the enforcement of claims against the debtor or enforcement of any judgment or other provisional remedies against the debtor and upon which issuance, the rehabilitation proceedings shall commence, (c) in the case of individual debtors, an order prohibiting the sale of the properties of the debtor and payment outside of the necessary or legitimate expenses of his business or industry and appointing a commissioner to preside over the creditors' meeting.

Creditors shall then convene to file their claims before the designated liquidator or receiver and to approve the liquidation or rehabilitation plan. The plan which addresses, among others, the payment of creditors, will be submitted to the court for confirmation. Upon confirmation, the plan shall be implemented by the liquidator or rehabilitation receiver or commissioner, as the case may be.

In liquidation, the court will issue an order ordering the SEC to remove the corporate debtor from the registry of legal entities upon determination that the liquidation has been completed. Upon receipt of evidence of the removal of debtor from the registry of legal entities at the SEC, the court shall issue an Order terminating the proceedings. Rehabilitation proceedings are terminated by order of the court either declaring a successful implementation of the Rehabilitation Plan or a failure of rehabilitation.

Turkey Small Flag Turkey

The main bankruptcy, concordat, rehabilitation or other similar insolvency proceedings to which a debtor may be subject to are:

(a) bankruptcy: commenced with the filing of a petition by either the debtor (i.e. a company or a merchant) or its creditors; and followed by a judgment from the commercial court that the debtor is bankrupt if it fails to raise objections or satisfy its creditors within specified time limits. Once a bankruptcy judgment is given, a creditor's options for debt collection will become subject to the Enforcement and Bankruptcy Law (Law No. 2004) which provides that the bankrupt's management will be taken over by a bankruptcy administrator for liquidation of the bankruptcy estate.

(b) concordat: either by way of abandonment of the debtor's assets or ordinary concordat. Concordat through abandonment of debtor's assets enables a debtor to make a general assignment of its assets for the benefit of its creditors. This type of concordat grants the creditors the right to dispose of debtor's assets and transfer its assets, in part or in whole, to third parties. In other words, the debtor would abandon its assets so that the creditors may liquidate the assets and use the proceeds for the collection of their debts. Ordinary concordat is an interim remedy available to the creditors of a debtor facing a financial difficulty or the debtor itself with which the debtor would be provided a relief (decrease on its debts and/or extension of maturity) with the approval of a certain majority of the creditors and the commercial court. In principle, ordinary concordat is meant to be granted to those which could potentially regain their solvent status or increase the value of assets as a result of concordat.

(c) restructuring of stock companies by way of conciliation: stock companies in financial distress but deemed to have ability to recover may file for restructuring in a bid to pay their debts in an extended payment plan or at a discount and to eliminate the risk of bankruptcy. In order to file for restructuring, the debtor would first have to convince its certain creditors which are willing to discuss a restructuring project. The debtor then has to invite its creditors interested in the project for voting. A majority representing at least (i) ½ of the voters and (ii) two-thirds of such creditors' receivables is required to submit the project to the courts. The debtor also has to provide the court with the restructuring project, its commercial books for the last three financial years, a report from an independent auditor confirming that the debtor is capable of implementing the project, documents evidencing the negotiation process, written consents of creditors to benefit from the project and a list of all other creditors.

Sweden Small Flag Sweden

Under Swedish law, a debtor company may be subject to one of two types of insolvency proceedings – (i) bankruptcy pursuant to the Swedish Bankruptcy Act (Sw. konkurslag (1987:672)) and (ii) reorganization pursuant to the Swedish Company Reorganization Act (Sw. lag (1996:764) om företagsrekonstruktion)).


Pursuant to the Swedish Bankruptcy Act, if a company is unable to rightfully pay its debts as they fall due and such inability is not merely temporary, it is deemed insolvent and can be declared bankrupt following a bankruptcy petition filed with the court by the debtor or by a creditor of the debtor.

When declared bankrupt, a receiver in bankruptcy (Sw: konkursförvaltare) is appointed by the court and will work in the interest of all creditors with the objective of realizing the debtor’s assets and distributing the proceeds among the creditors. The purpose of bankruptcy proceedings is to wind up the company in such a way that the company’s creditors receive as high a proportion of their claims as possible. The receiver in bankruptcy is required to safeguard the assets and can decide to continue the business or to close it down, depending on what is deemed preferable for all the creditors. In general, the receiver in bankruptcy is required to sell the assets of the debtor as soon as possible and to distribute the proceeds in accordance with statutory rules. In the interim, the receiver will take over the management and control of the company and the company’s directors and/or managing director will no longer be entitled to represent the company or dispose of the company’s assets. All creditors (unless they have a right to separate an asset from the bankruptcy estate) wishing to assert claims against the company that is declared bankrupt need to participate in the bankruptcy proceedings.

When distributing the proceeds, the receiver must follow the mandatory provisions of the Swedish Rights of Priority Act (Sw: Förmånsrättslag (1970:979)), which states the order in which creditors have a right to be paid. As a general principle, in bankruptcy proceedings competing claims have equal right to payment, in relation to the size of the amount claimed, from the debtor’s assets. However, preferential or secured creditors, where such preference follows by law, have the benefit of payment before other creditors. There are two types of preferential rights: specific and general preferential rights. Specific preferential rights are vested in certain specific property and give the creditor right to payment out of such property. General preferential rights cover all property belonging to the insolvent company’s estate in bankruptcy, which is not covered by specific preferential rights. Claims that do not carry any of the abovementioned preferential rights or exceed the value of the security provided for such claim (to the extent of such excess), are non-preferential and are of equal standing as against each other.

Company reorganization

The Swedish Reorganization Act provides companies facing economic difficulty with an opportunity to resolve these without being declared bankrupt. A petition for company reorganization may be presented by the debtor or a creditor of the debtor. Corporate reorganization proceedings may as a main rule continue for an initial period of three months from commencement but may, under certain conditions, be extended for up to one year.

An administrator is appointed by the court and supervises the day to day activities and safeguards the interests of creditors. However, the debtor remains in full possession of the business except that, for important decisions such as paying a debt that has fallen due prior to the order of reorganization, granting security for a debt that arose prior to the order, undertaking new obligations or transferring, pledging or granting rights in respect of assets of a substantial value for the business, the consent of the administrator is required. However, the absence of such consent does not affect the validity of the transaction.

Upon an order by the court under the Swedish Reorganization Act, the administrator must notify the creditors of the reorganization proceedings and will draw up a reorganization plan specifying the proposed action to be taken to resolve the debtor’s problems. A creditors’ meeting will be held at which the creditors will be given the opportunity to express their opinions as to whether the reorganization should continue. Upon the request of any of the creditors, the court shall appoint a creditors’ committee of at most three persons. The administrator shall, if possible, consult with the creditors’ committee prior to taking any important decisions.

The corporate reorganization proceedings do not have the effect of terminating contracts with the debtor and, during the reorganization procedure, the debtor’s business activities continue as normal. However, the procedure includes a suspension of payments to creditors and the debtor cannot pay a debt that fell due prior to the order without the consent of the administrator and such consent may only be granted should there be exceptional reasons for doing so and any petition for bankruptcy in respect of the debtor will be stayed. A moratorium also applies to execution in respect of a claim or enforcement of security during corporate reorganization proceedings unless the security assets are in the physical possession of the secured creditor or any agent acting on behalf of such creditor.

The debtor may apply to the court requesting public composition proceedings (Sw: offentligt ackord), which means that the amount of a creditor’s claim may be reduced. The proposal for a public composition must meet certain requirements such as that a sufficient proportion of the creditors which are allowed to vote, in respect of a sufficient proportion of the outstanding claims, vote in favor of such public composition. Creditors with set off rights and secured creditors will not participate in the composition unless they wholly or partly waive their set off rights or priority rights. Should the security not cover a secured creditor’s full claim, the remaining claim will, however, be part of a composition.

United States Small Flag United States

The Federal insolvency process is outlined in Title 11 of the United States Code (the “Bankruptcy Code”), which provides the options for several types of insolvency proceedings. Most (but not all) business entities and individuals are eligible to become debtors under the Bankruptcy Code. A bankruptcy case is commenced by filing a petition of relief under the following chapters of the Bankruptcy Code.

Chapter 7 Liquidation: Chapter 7 governs court-supervised liquidation procedures for eligible individuals and business entities. A third-party trustee is appointed to administer the case and liquidate the debtor’s non-exempt assets, the proceeds of which are distributed to the debtor’s creditors as set forth in the Bankruptcy Code.

Chapter 9 Municipal reorganization: Chapter 9 allows eligible municipalities (including governmental entities such as cities, counties, municipal utilities, taxing districts and school districts) to implement plans of reorganization to address issues and causes of municipal financial distress.

Chapter 11 Reorganization: Chapter 11 governs reorganization proceedings and can be commenced voluntarily or involuntarily. Notably, there is no requirement that a debtor be insolvent to commence a Chapter 11 case. Chapter 11 debtors typically remain in control of their business operations (as debtors-in-possession), though a chapter 11 trustee can be appointed under certain circumstances. The ordinary goal of a chapter 11 debtor is to emerge from bankruptcy under a court-approved plan of reorganization setting forth how the reorganized debtor will pay creditors and relieving the debtor of certain specified obligations. Chapter 11 can also be used to execute court-supervised sales of some or all of a debtor’s assets, thereby allowing for sales that might otherwise be difficult or impossible on an out-of-court basis.

Chapter 12 Farmers and fishermen: Family farmers and fishermen with regular annual income are eligible for relief under Chapter 12. A Chapter 12 debtor proposes a plan to repay its creditors over a period of time and is allowed to make seasonal payments.

Chapter 13 Individual restructuring: Chapter 13 is available to individuals with regular income and allows them to restructure under plans of repayment. These plans usually contemplate a repayment scheme three to five years in length. Chapter 13 debtors can typically protect their property from foreclosure as long as they make payments according to their plan.

Chapter 15 Cross-border insolvencies: A foreign debtor with an insolvency case pending in another country may file a petition under Chapter 15, which allows a cooperative administration of the debtor’s insolvency proceedings in the United States and the country in which the main insolvency proceeding is taking place.

Other wind-down and dissolution mechanisms are available under various state laws for certain entities which are not eligible to be debtors under the Bankruptcy Code (such as insurance companies). However, these procedures are typically more restricted and may vary on a state-by-state basis.

Switzerland Small Flag Switzerland

In the event of a Swiss obligor’s insolvency, insolvency proceedings may be initiated in Switzerland and Swiss insolvency laws will then govern these proceedings. In addition, Swiss debt enforcement and insolvency laws may be applicable in case of an enforcement of assets located in Switzerland. The enforcement of claims, security interests and questions relating to insolvency and bankruptcy in general are dealt with by the Swiss Debt Enforcement and Bankruptcy Act (DEBA).

Under Swiss insolvency laws, insolvency proceedings are not initiated by the competent insolvency court ex officio, but rather require that the debtor or a creditor files a petition for the opening of insolvency proceedings based on an application for commencement of enforcement proceedings and the threat of insolvency (as discussed in the paragraphs below). Moreover, insolvency proceedings must be initiated by the debtor itself according to Swiss corporate law in the event of over-indebtedness (Überschuldung) or can be initiated by a creditor according to Swiss insolvency laws in the event that the debtor has obviously and permanently discontinued to pay its debts as and when they fall due or has acted fraudulently, or is attempting to act fraudulently to the detriment of its creditors. Furthermore, a debtor may also initiate insolvency proceedings if it declares itself insolvent (zahlungsunfähig) before court. Generally, pursuant to the Swiss corporate law, a debtor is over-indebted when its liabilities exceed the value of its assets, which must be assessed pursuant to the accounting standards of the Swiss Code of Obligations and on the basis of a balance sheet to be drawn up (i) on the basis of the liquidation value of the debtor’s assets and (ii) – to the extent there is still a going concern scenario – based upon the going concern value. If the interim balance sheet shows that the creditors’ claims are neither covered by assets valued at liquidation values nor at going concern values, the debtor’s board of directors has to notify the bankruptcy court, provided that creditors of the debtor do not agree to subordinate their claims in the amount necessary to cover the over-indebtedness (article 725 of the Swiss Code of Obligations). The debtor’s board of directors is obliged to file for insolvency without delay and non-compliance with this obligation exposes the board of directors to damage claims and, in extreme cases, to sanctions under criminal law. Under certain circumstances, the auditors of an over-indebted company are obliged to file for insolvency.

If a creditor wants to initiate insolvency proceedings, it has to file an application for commencement of enforcement proceedings (Betreibungsbegehren) with the competent debt collection office (Betreibungsamt). With respect to unsecured claims, the competent debt collection office is located where the debtor is registered or resident. The debt collection office will then serve the debtor with the writ of payment (Zahlungsbefehl). There is no material assessment of the claim at this stage. The debtor may within ten days upon having been served with the writ of payment, file an objection (Rechtsvorschlag) to bring the procedure to a halt and obtain an individual stay of proceedings. No reasons need to be given for such objection. The debt collection office notifies the creditor of the objection.

For claims based on an enforceable judgment, the creditor can without any further delay file an application to lift this stay with the court (Rechtsöffnungsbegehren). For claims not based on an enforceable judgment, but on a certified and/or signed document evidencing the claim, provisional lifting of such stay can be applied for in summary proceedings (provisorische Rechtsöffnung). In the event the objection is set aside in these summary proceedings, the debtor may bring an action in ordinary court proceedings for negative declaration that the creditor’s claim does not exist (Aberkennungsklage).

The creditor may then ask the debt collection office to continue the enforcement proceedings (Fortsetzungsbegehren) in relation to an existing writ of payment having full force and effect. The competent debt collection office delivers a bankruptcy warning (Konkursandrohung) to the debtor. The insolvency court may take preliminary measures to secure property of the debtor in case this is requested by a creditor and required to secure the creditor’s rights. After receipt of the bankruptcy warning (Konkursandrohung), the creditor may petition the opening of insolvency proceedings. The competent insolvency court decides upon the insolvency without any delay, provided that there are no reasons which would lead to a suspension of the insolvency court’s decision. In addition, the debtor has the right to file a request for a moratorium. The parties may file an appeal against any decision taken by the insolvency court.

The insolvency court orders the continuation of insolvency proceedings if certain requirements are met, in particular if there are sufficient assets to cover at least the costs of the insolvency proceedings. If the assets of the debtor are not expected to be sufficient, the insolvency court will only order to continue insolvency proceedings if third parties, for instance creditors, advance the costs of the insolvency proceedings themselves. In the absence of such advancement, the insolvency proceedings will be closed for insufficiency of assets (Einstellung des Konkursverfahrens mangels Aktiven). Alternatively, the insolvency office may request the insolvency court to resolve upon summary insolvency proceedings (summarisches Konkursverfahren), if the assets are not sufficient to cover the cost of ordinary insolvency proceedings and the actual facts of the case are not complicated. Also, in such case, creditors have the right to request ordinary insolvency proceedings.

Upon the opening of formal insolvency proceedings (Konkurseröffnung), the right to administer and dispose over the business and the assets of the debtor passes to the insolvency office (Konkursamt). Assets which are subject to a pledge and similar security rights are considered to be part of the debtor’s estate (Konkursmasse). The insolvency office has full administrative and disposal authority over the debtor’s estate, provided that certain acts require the approval of the insolvency court. The creditors’ meeting may appoint a private insolvency administration (private Konkursverwaltung) and, in addition, a creditors’ committee (Gläubigerausschuss). In such case, the private insolvency administration will be competent to maintain and liquidate the debtor’s estate. The creditors’ committee has additional competences.

Insolvency results in the acceleration of all claims against a debtor (secured or unsecured), except for those secured by a mortgage on the debtor’s real property, and the relevant claims become due upon insolvency. As a result of such acceleration, a creditor’s bankruptcy claim consists of the principal amount of the debt, interest accrued thereon until the date of insolvency, and (limited) costs of enforcement. Upon insolvency, interest ceases to accrue. Only claims secured by a pledge enjoy a preferential treatment insofar as interest that would have accrued until the collateral is realised will be honoured if and to such extent as the proceeds of the collateral suffice to cover such interests.

All creditors, whether secured or unsecured (unless they have a segregation right (Aussonderungsrecht), wishing to assert claims against the debtor need to participate in the insolvency proceedings in Switzerland. Swiss insolvency proceedings are collective proceedings and creditors may generally no longer pursue their individual claims separately, but can instead only enforce them in compliance with, and subject to, the restrictions of Swiss insolvency laws. Therefore, secured creditors are generally not entitled to enforce any security interest outside the insolvency proceedings. In the insolvency proceedings, however, secured creditors have certain preferential rights (Vorzugsrechte). Generally, entitlement to realise such security is vested with the insolvency administration. Realisation proceedings are governed by Swiss insolvency laws which provide for a public auction, or, subject to certain conditions, a private sale. Proceeds from enforcement are used to cover (i) enforcement costs, (ii) the claims of the secured creditors and (iii) any excess proceeds will be used to satisfy unsecured creditors.

Typically, liabilities resulting from acts of the insolvency administrator after commencement of formal insolvency proceedings constitute liabilities of the debtor’s estate. Thereafter, all other claims (insolvency claims—Konkursforderungen), in particular claims of unsecured creditors, will be satisfied pursuant to the distribution provisions of Swiss insolvency laws, which provide for certain privileged classes of creditors, such as a debtor’s employees. Certain privileges can further result for the Swiss government and its subdivisions based on specific provisions of federal law. All other creditors will be satisfied on a pro rata basis if and to the extent there are funds remaining in the debtor’s estate after the security interests and privileged claims have been settled and paid in full.

Swiss insolvency laws also provide for reorganisation procedures by composition with the debtor’s creditors. Reorganisation is initiated by a request with the competent court for a stay (Nachlassstundung) pending negotiation of one of the several statutory types of composition agreement with the creditors and confirmation of such agreement by the competent court.

As an alternative solution to insolvency, the debtor (or, under certain circumstances, a creditor) may seek a reorganisation under protection of the court or composition with creditors (Nachlassverfahren) by applying to the competent composition court (Nachlassgericht) for a moratorium (Nachlassstundung) and submitting, besides other documents, a tentative reorganisation plan. Such protection from the court can be sought by the debtor before over-indebtedness has materialised. The court immediately decides whether or not to grant the provisional moratorium (provisorische Stundung) for a maximum period of up to four months. With its decision the court appoints a provisional commissioner (provisorischer Sachwalter), unless circumstances would justify not to do so. In case circumstances would justify it, the competent composition court (Nachlassgericht) may withhold a public announcement of the granting of the provisional moratorium, provided third party interests are well protected. In such case, (i) the creditors and other authorities will not be notified, (ii) debt collection proceedings may still be initiated or further pursued (unless challenged by the debtor) and (iii) a provisional commissioner (provisorischer Sachwalter) must be appointed in all circumstances. In case it is obvious that there are no chances for a successful reorganisation of the company or a composition agreement (Nachlassvertrag), the competent composition court (Nachlassgericht) opens insolvency proceedings over the debtor. In case the moratorium has been granted provisionally (provisorische Stundung) and in case during the period of the provisional moratorium a reorganisation of the company or a composition agreement (Nachlassvertrag) appear to be achievable, at a time before the provisional moratorium has expired, the court approves the definitive moratorium usually for further four to six months (definitive Stundung) and appoints a commissioner (Sachwalter). The court may, where deemed necessary, also appoint a creditors’ committee (Gläubigerausschuss) for the purpose of supervising the commissioner. The commissioner calls a meeting of creditors (Gläubigerversammlung) which has to approve the draft composition agreement according to specific majority rules. The composition agreement (Nachlassvertrag) is subject to the approval of the composition court. The DEBA essentially provides for three different types of composition agreements: The ordinary composition agreement (ordentlicher Nachlassvertrag), the composition agreement with assignment of assets (Nachlassvertrag mit Vermögensabtretung) and the composition agreement in insolvency proceedings (Nachlassvertrag im Konkurs). During a definitive moratorium, debt collection proceedings cannot be initiated and pending proceedings are stayed. Furthermore, the debtor’s power to dispose of its assets and to manage its affairs is restricted. In case of a pledge, the secured party is not entitled to proceed with a private liquidation until the confirmation of the settlement by the competent court. A secured creditor participates in the settlement only for the amount of its claim not covered by the collateral. The moratorium does not affect the agreed due dates of debts (contrary to bankruptcy, in which case all debts become immediately due upon adjudication). However, a debtor may, subject to consent by the commissioner (Sachwalter), terminate long-term agreements (Dauerschuldverhältnisse) (other than employment agreements) without notice (even if the agreements notice periods provide for), provided (i) the continuation of the long-term agreement (Dauerschuldverhältniss) would impede or at least seriously challenge the intended financial recovery and (ii) provided the counterparty to such long-term agreement (Dauerschuldverhältniss) is held harmless (it being understood that the respective claim would be a claim in the composition proceeding (Nachlassforderung)). Interest payments will be stopped for unsecured claims during the moratorium (unless otherwise explicitly provided for in the composition agreement). The moratorium aims at facilitating a rehabilitation of the debtor under the protection of the court or the conclusion of one of the above composition agreements. Any composition agreement needs to be approved by the creditors and confirmed by the competent court. With the judicial confirmation, the composition agreement becomes binding on all creditors, whereby secured claims are only subject to the composition agreement to the extent of a shortfall of enforcement proceeds. Privileged claims must be paid in full.

Finally pursuant to article 219 DEBA all non-secured creditors of a Swiss obligor would be part of the same (third) class of creditors in an insolvency. As regards agreements or clauses of agreements governing the relevant priority of payments amongst creditors belonging to the same (third) class of creditors (the Priority of Payments), it cannot be excluded that any insolvency official would treat all such creditors belonging to the same class indiscriminately and consider the Priority of Payments as a mere arrangement amongst creditors of the estate in relation to their respective claims vis-à-vis the estate and pay them out on a pro rata and pari passu basis, in which case the relevant creditors may have to rely on the redistribution by the creditors , which, however, would be enforceable under Swiss law.

United Kingdom Small Flag United Kingdom

England and Wales have three insolvency procedures applicable to companies generally (administration, liquidation and administrative receivership).

Administration is the main rescue procedure for insolvent companies. It provides a stay on all action against the company (including the enforcement of security) and facilitates pre-packaged sales.

Administration may be commenced by the company, its directors or one of its creditors. It must be shown that the company is insolvent, or likely soon to be insolvent. The directors, company or a 'qualifying floating charge holder' may appoint an administrator either by applying to court for an administration order or by simply completing prescribed forms and filing them at court. Most floating charge holders satisfy the criteria to be a 'qualifying floating charge holder'. Other creditors seeking an administration appointment must apply to court for an administration order. Directors or the company must inform any qualifying floating charge holders of their intention to appoint an administrator, in order to give the charge holder an opportunity to appoint his preferred administrator. For the same reason, subordinated qualifying floating charge holders must inform priority charge holders of their intention to appoint an administrator.

Once appointed, the administrator (who must be a qualified insolvency practitioner and is usually an accountant) takes over the management of the company. The directors’ powers effectively cease.

The administrator’s costs and expenses are paid out of the proceeds of floating charge assets. He has full powers to run and manage the company, including a power to borrow money and grant security over the company’s assets.

Before accepting his appointment the administrator must form the view that he will be able either to rescue the company (the focus is on the company itself rather than the business carried on by the company) as a going concern or, (if that is not reasonably practicable) to procure a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or, if neither of these options are reasonably practicable, he may be appointed to perform his functions in order to realise some or all of the company’s property for the benefit of one or more secured or preferential creditors. However he is only allowed to pursue this objective if he can do so without unnecessarily harming the interests of the company’s unsecured creditors. There is no need for the administrator (or the party who appoints him) to identify in advance which of the objectives the administration will achieve, and indeed, the objective may change throughout the course of the administration. Regardless of who appointed him or her, the administrator owes his duties to the company’s creditors as a whole.

Liquidation (or 'winding up') is a terminal process and can be entered either by court order (at the instigation of the company, its directors or a creditor) or by the company voluntarily resolving to put itself into liquidation by resolution of its members and (in the case of a creditor voluntary liquidation) nomination of a liquidator by the creditors.

On appointment, the liquidator, who must be a qualified insolvency practitioner, becomes the agent of the company and the directors’ powers cease (though in a voluntary liquidation the directors may retain some powers if the liquidator or company, or the creditors, so choose). It is unusual for a company in liquidation to continue to trade. The objective of the process is to realise as many of the company’s assets as possible and distribute the proceeds to the appropriate creditors. The liquidator owes his duty to the creditors as a whole. Once all distributions have been made, the company will be dissolved.

A provisional liquidator (in relation to compulsory liquidation) can be appointed at any time after presentation of a winding-up petition to court and before the winding-up order is made. Provisional liquidators are usually appointed by creditors in order to preserve the assets of the company until the hearing.

The circumstances under which an administrative receiver may be appointed to a company were severely restricted in 2003, when the process was largely superseded by administration. Administrative receivership is therefore beyond the scope of this guide.

England and Wales also have two formal restructuring tools which are schemes of arrangement and company voluntary arrangements.

Jersey Small Flag Jersey

Jersey Insolvency Procedures. The main Jersey insolvency procedures for a Jersey company are:

a) a creditors’ winding up under the CJL. This is commenced by a special resolution of the shareholders and, despite its name, cannot be commenced by a creditor; and
b) a désastre under the Bankruptcy (Désastre) (Jersey) Law 1990 (the Désastre Law). This may be commenced on application to the Royal Court by a creditor owed a liquidated sum of not less than £3,000, the Jersey company itself or, in some circumstances, the Jersey Financial Services Commission. If a creditors’ winding up has already commenced when a declaration of désastre is made, the winding up terminates.

The CJL also contains provisions relating to just and equitable winding up and schemes of arrangement.

On a creditors’ winding up, liquidators are appointed, usually by the creditors. The liquidators will stand in the shoes of the directors and administer the winding up, gather in assets, settle claims and distribute assets as appropriate. After the commencement of the winding up, no action can be taken or continued against the Jersey company except with the leave of court. This does not prevent secured creditors enforcing their pre-existing security against the property of the Jersey company. The corporate state and capacity of the company continues until the end of the winding up procedure, when the company is dissolved.

On a declaration of désastre, title of all property of the debtor (whether located in Jersey or elsewhere) vests automatically in the Viscount, an official of the Royal Court of Jersey. From the date of declaration, a creditor has no other remedy against the property or person of the debtor, and may not commence or continue any legal proceedings to recover the debt. This does not prevent secured creditors enforcing their pre-existing rights against the property now vested in the Viscount, as the Viscount takes the property of the debtor subject to security.

Shares of a company which is subject to a creditors’ winding up or a désastre may not be transferred without the consent of the liquidators or the Viscount, as the case may be. As noted above, this does not apply to a creditor with a perfected security interest over the shares created under SIL from enforcing its security.

The liquidators, on a creditors’ winding up, may exercise all powers of the Jersey company as may be required for its winding up. The liquidators also have express powers to pay its debts.

The Viscount, on a désastre, has wide powers to sell all or part of the debtor’s property, carry on the business of the debtor as far as is necessary for its beneficial disposal, pay debts, enter into compromises and arrangements with creditors, and exercise any authority and power in respect of the debtor’s property which the debtor could otherwise have exercised.

The liquidators or the Viscount may apply to the Royal Court of Jersey for, amongst other things, an order that the directors of the Jersey company be personally responsible for the debts and liabilities of the Jersey company on the grounds of wrongful trading.

The liquidators or the Viscount (as applicable) will apply the realised assets of the Jersey company in the following order:

a) payment of the fees and expenses of the liquidators or the Viscount;
b) payment of up to six months’ salary and holiday pay and bonuses of any employee (subject to statutory limits);
c) certain amounts due in respect of health insurance, social security, income tax, rent and parish rates; and
d) payment of all proved debts.

The vast majority of Jersey companies carry on business outside Jersey, so paragraphs b) and c) above will not usually apply.

Hong Kong Small Flag Hong Kong

The main types of insolvency proceedings to which a company may become subject under Hong Kong law are receivership, compulsory liquidation and creditors' voluntary liquidations. In particular, lenders may consider the appointment of a receiver (where available) as an option for enforcing their security (although such an appointment can occur outside insolvency). In addition, creditors' schemes of arrangement may be proposed (which may be propounded outside insolvency), either as a standalone compromise or arrangement or in conjunction with formal insolvency proceedings.


A creditor may appoint a receiver either by making an application to the court or, if the contractual terms of the relevant security document grant a right of appointment to the creditor, pursuant to such contractual terms, so as to safeguard its interests.

The appointment must be in writing and, in the case of real estate, be registered with the Hong Kong Land Registry. In the case of a corporate debtor, the Hong Kong Companies Registry must be notified of the details of the appointment within seven days of the appointment. Although the receiver is usually appointed by the lender, it is always provided in the underlying security documents that the receiver is the debtor's agent. In order to avoid incurring any liability, the lender should not interfere with, or direct, the receiver's activities. The receiver's powers are generally regulated by the underlying security documents and normally include powers to take possession and to sell the property.

Compulsory Liquidation

Compulsory liquidation (or winding-up) involves the appointment by the court of a liquidator, typically upon the application of a creditor, to wind up the company, realise its assets and distribute them to creditors according to their ranking. A winding-up petition is not usually favoured by secured lenders if other more convenient enforcement options are available.

Following the presentation of a winding-up petition, the court can appoint a provisional liquidator to safeguard the assets of the company. A liquidator will be subsequently appointed by the court, having regard to the resolutions passed at the first creditors' meeting and the first meeting of contributories (in practice, the contributories are typically the shareholders).

The liquidator controls the liquidation under the supervision of the court. A creditors' committee (the committee of inspection) may be appointed to work with the liquidator in relation to certain matters. For example, the court or the committee of inspection must approve compromises with creditors and the commencement of litigation.

Secured lenders can enforce their security whilst the company is in liquidation. Although there is an automatic stay on all actions and proceedings against the company, in case court proceedings have to be commenced for a secured lender to enforce its security, it can anticipate the liquidator will consent to, or the court will readily allow, the lifting of the stay.

Creditors' Voluntary Liquidation

A creditors' voluntary liquidation may be commenced by the passing of a special resolution that the company be wound up. Such voluntary liquidation would be a creditors' voluntary liquidation if and a certificate of solvency that the company is able to pay its debts in full within the 12 months from the commencement of the winding is incapable of being issued. A meeting of the creditors of the company must be summoned for a date not later than 14 days after the meeting of the company at which the resolution for voluntary winding up is to be proposed. Notice of the creditors' meeting must be posted to the creditors at least seven days before the date of creditors' meeting.

A statement of affairs of the company must be tabled at the relevant meeting of creditors and any nomination of a liquidator by the meeting of creditors will prevail over any contrary nomination made by the shareholders.

There exists an alternative procedure that allows the directors to commence a voluntary winding-up in circumstances where the company cannot by reason of its liabilities continue its business and it is not reasonably practicable to commence the winding-up in any other way. The directors would need to file a winding-up statement with the Hong Kong Companies Registry and meetings of members and creditors would need to be summoned within 28 days of such filing. Misuse of this procedure carries a penalty, including a fine and imprisonment.

The directors' powers in relation to the company cease during the period of the provisional liquidator's appointment, except where the committee of inspection, if there is one, or otherwise the creditors, agree that they can continue for limited purposes (i.e. as necessary for enabling the directors to comply with the relevant provision of Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) ("CWUMPO") or with the court's sanction). Secured lenders can enforce their security whilst the company is in liquidation. While there is no moratorium on proceedings against the company by a secured creditor, the court has a discretion to stay legal proceedings on the application of a creditor, contributory or the liquidator.

Creditors' schemes of arrangement

A creditors' scheme of arrangement is a statutory, binding compromise reached between a company and its creditors. As noted above, it is not an insolvency procedure. A creditors' scheme of arrangement must be (a) approved by more than 75% in value and majority in numbers of the company's creditors attending a meeting in person or by proxy and (b) sanctioned by the court. The rights of secured and preferred creditors cannot be affected without their consent and thus, secured creditors may enforce their security prior to the scheme becoming effective or otherwise expect to stand outside the scheme. However, once a scheme of arrangement has been sanctioned by the relevant classes of creditors and the court, it will bind all such creditors and may, depending on its terms and its approval by secured creditors, restrict the rights of secured creditors.

Note that Hong Kong does not currently have any debtor protection insolvency procedure, such as the UK administration order or Chapter 11 of the US Bankruptcy Code, so the rights of security holders are generally unaffected by a liquidation nor a scheme of arrangement, because neither a liquidation nor a scheme of arrangement (until implemented) provides for a stay or moratorium on security enforcement.

Austria Small Flag Austria

According to the Austrian Insolvency Act (Insolvenzordnung) the insolvency proceedings can either be executed as (i) reorganisation proceedings (Sanierungsverfahren) or (ii) bankruptcy proceedings (Konkursverfahren). Reorganisation proceedings aim to help the debtor to continue the business of the company, whereas bankruptcy proceedings aim to end the company and liquidate all remaining assets.

(i) Reorganisation proceedings (Sanierungsverfahren)

Reorganisation proceedings can be administered by the debtor itself (Sanierungsverfahren mit Eigenverwaltung) or administered by a court appointed liquidator (Sanierungsverfahren ohne Eigenverwaltung). Only the debtor can initiate the proceedings.

As requirement for the reorganisation proceedings the debtor has to provide to the court a restructuring plan with a minimum debt repayment quota of at least 20 per cent or, if the debtor wants to administer the reorganisation himself (Eigenverwaltung), a quota of at least 30 per cent payable within two years upon the approval of the restructuring plan. If this requirement cannot be achieved bankruptcy proceedings will start.

The effects of the opening of reorganisation proceedings take effect at the beginning of the day following the public announcement (in the Austrian “Ediktsdatei”) of the contents of the reorganisations proceedings. After the public announcement, the insolvency court convenes the first creditor's meeting. Within a specified period, the creditors of the reorganisations proceedings are requested to file their claims. The time for filing claims ends 14 days before the general creditor´s meeting (allgemeine Prüfungstagsatzung). The general creditor´s meeting itself takes place 60 to 90 days after the opening of the reorganisations proceedings and serves to examine whether and to what extent filed claims are to be taken into account in the reorganisations proceedings. The creditor´s meeting has to approve the restructuring plan. If the creditors do not approve the restructuring plan the reorganisation proceedings will be transformed to bankruptcy proceedings (please see below).

The restructuring proceedings formally end with the approval of the restructuring plan. The debtor then hast to fulfil the restructuring plan and provide the payments to the creditors according to the restructuring plan otherwise the insolvency proceedings will be reopened.

(ii) Bankruptcy proceedings (Konkursverfahren)

Bankruptcy proceedings apply if the restructuring of the company is not possible, i.e. the required quota can not be achieved. The bankruptcy proceedings are initiated by either the debtor or a creditor. The effects of the opening of insolvency proceedings take effect at the beginning of the day following the public announcement (in the Austrian “Ediktsdatei”) of the contents of the bankruptcy proceedings. The insolvency court always appoints a liquidator when the proceedings are opened. One of the most important tasks of the liquidator is the administration and realisation of the assets involved in the insolvency proceedings.

Regarding the time schedule for the bankruptcy proceedings (for filing the claims etc) the rules for the reorganisation proceedings apply (see above). If the liquidator has obtained sufficient proceeds from the liquidation of the assets involved in the bankruptcy proceedings, he may distribute such proceeds between the creditors of the bankruptcy proceedings. If all the assets are distributed among the creditors, the bankruptcy proceedings have ended.

Mexico Small Flag Mexico

In Mexico, the insolvency process is a federal judicial procedure to which companies turn to engage in negotiations with their creditors upon the occurrence of an insolvency event. If the federal insolvency court admits an insolvency claim, the debtor's debt service is suspended and the court appoints a receiver whose function is to manage the operations of the debtor while it negotiates the restructure debt and/or reorganize its operations.

During the commercial insolvency process, the debtor is still able to continue the course of its business and operations, as its operating flows are positive. Therefore, and in order to avoid further damage to the value of the debtor, the debtor continues to operate during a period of insolvency. If the agreement is reached, the creditors waive some part of the overdue debts and the latter emerges from the insolvency proceeding owing less.

In the event that the desired agreement is not reached during the stipulated period, the debtor enters into a bankruptcy process in which its assets are liquidated in order to make payments to the creditors until they are exhausted. The priority of creditors in a bankruptcy is established in the Bankruptcy Law.

Bosnia & Herzegovina Small Flag Bosnia & Herzegovina

In general, opening and implementation of insolvency proceedings in FBH, RS and BD is regulated by the FBH Law on Insolvency Proceedings, RS Law on Insolvency and BD Law on Insolvency, Compulsory Enforcement and Liquidation.

Insolvency process is generally initiated by a proposal in writing submitted to the competent court either by the company itself or company’s creditors who have a legal interest. The court will assess whether the proposal is well founded, and if it decides that insolvency proceedings will be initiated it can undertake actions to secure the assets of the company in insolvency, as well as appoint an insolvency administrator who will manage the company in insolvency in order to maximize eventual payments to creditors. Insolvency estate will be formed from the assets of the company which will be used for, repayment of creditors’ claims according to their insolvency ranking.

Upon opening of the insolvency proceedings, creditors shall report their claims relating to the insolvency estate within 30/60 days. Exceptionally, creditors may report their claims after the expiry of such deadline, in specific situations explicitly stipulated in the relevant laws.

Updated: June 5, 2019