What form of stay or moratorium applies in insolvency proceedings against the continuation of legal proceedings or the enforcement of creditors’ claims? Does that stay or moratorium have extraterritorial effect? In what circumstances may creditors benefit from any exceptions to such stay or moratorium?

Restructuring & Insolvency (2nd Edition)

Indonesia Small Flag Indonesia

Upon the issuance of the Commercial Court decision declaring the bankruptcy of the debtor or granting the provisional PKPU, an automatic stay or moratorium of the debtor’s estate will be triggered. The rights of secured creditors' to enforce security (and the rights of any third parties to claim its assets that are under the control of the bankrupt debtor / debtor under the PKPU or the receiver/administrator) are subject to the automatic stay for a maximum of 90 (ninety) days in Bankruptcy Proceedings and the entire duration of the PKPU Proceedings. Under the Bankruptcy Proceedings, the automatic stay period may be less than 90 (ninety) days if the bankruptcy proceedings are terminated earlier or if the debtor enters the state of insolvency.

The automatic stay in this provision is aimed at:

a. increasing the possibility of composition; or

b. increasing the possibility to optimize the bankruptcy estate; or

c. enabling the receiver/curator to perform its duties optimally.

During the stay period under Bankruptcy Proceedings, no legal actions in order to obtain payment in respect of receivables may be brought before any court and the creditor and any third party are prohibited from executing or requesting attachment in respect of the collateral. During the stay period under the PKPU Proceedings:

  • the payment of debts to unsecured creditors cannot be made unless the payment is made to all creditors proportionally;
  • the debtor is not excused from making payments to its secured creditors;
  • if the debtor fails to pay the secured creditors, they are unable to enforce their security rights as they will be subject to a stay of proceedings for the full duration of the PKPU.

The stay mentioned above in both proceedings however is not applicable to the creditors’ claim that is secured with cash and the right of creditors to apply the set-off.

During the stay period, the receiver / administrator can use the bankruptcy / debtor’s estate in the form of either moveable or immoveable assets or sell the bankruptcy / debtor’s estate in the form of moveable assets under the control of the receiver in the framework of the continuation of the business of the bankrupt debtor / debtor in PKPU, when the reasonable protection for the interest of the secured creditors or the relevant third parties have been provided.

The elucidation of IBL further provides that the bankruptcy / debtor’s estate that can be sold by the receiver / administrator is limited to the inventory and/or current assets (moveable assets), although such assets are encumbered with in-rem security rights. Further, the reasonable protection refers to the protection that needs to be provided to protect the interest of the secured creditors or other third party whose rights are stayed. The transfer of such assets by the receiver / administrator results in the condition where the in-rem security right over the assets is deemed as terminated by the operation of law.

The protection may be in the form of among others:

a. the compensation on the decrease of the value of the bankruptcy / debtor’s estate;

b. the net proceeds from the sale;

c. the replacement of in rem security rights;

d. the reasonable and fair of the compensation as well as other cash payments (of the debt being secured).

IBL provides that as of the bankruptcy declaration of the debtor (i) any ongoing lawsuit against the debtor, in which the plaintiff requests for fulfillment of debtor’s payment obligation from the bankruptcy estate, shall by operation of law terminate; and (ii) any court enforcement order on any part of the bankruptcy estate which has been commenced before the bankruptcy declaration of the debtor is rendered shall immediately terminate and no further decision can be enforced. Any existing court attachment order that have been imposed on the bankruptcy estate shall be removed and, if necessary, the supervisory judge shall render an order to exercise the said removal (especially for the attachment over the registered land or vessel).

Notwithstanding the foregoing, if prior to the bankruptcy declaration of the debtor, the process for selling the debtor’s movable or immovable assets in the context of enforcement has reached a point that the selling date has been determined, then based on the approval from the supervisory judge, the receiver may continue the said sale on the expense of the bankruptcy estate and the sale the proceeds will constitute the bankruptcy estate (instead of being given to the petitioner for enforcement).

IBL provides that the bankruptcy estate shall include the entire property of the debtor at the time of the bankruptcy declaration as well as any property which he obtains in the course of the bankruptcy. In addition, IBL requires a creditor to compensate the bankruptcy estate or the debtor’s estate in PKPU in the amount that he has received in the case:

  • He who has no privileged right receives payments from the bankruptcy / debtor’s estate in PKPU located abroad after the bankruptcy declaration / PKPU decision;
  • He transferred all or part of his claims on the bankrupt debtor / debtor in PKPU to the third party with the intention that such third party will have privileged right for obtaining payments for such claims from the debtor’s assets located abroad (and will be deemed to have the knowledge that bankruptcy declaration / PKPU decision has been or will be rendered, unless can be proven otherwise);
  • He who transferred all or part of his claim/debt to third party which therefore has the opportunity to set-off abroad which is not permitted by IBL (will be deemed to have the knowledge that that bankruptcy declaration / PKPU decision has or will be rendered, unless can be proven otherwise).

Based on these provisions, it is viewed that the stay or moratorium under IBL in both Bankruptcy Proceedings and PKPU Proceedings shall have extra-territorial effect.

Further, IBL provides the secured creditors with a set of procedures for seeking relief from an automatic stay. According to IBL, the creditors or third parties whose rights have been stayed the possibility to file a petition to the receiver / administrator for the lifting of the stay or to amend the conditions of such stay (“Lifting Stay Petition”). If the receiver / administrator rejects this Lifting Stay Petition, that creditor or the third party may file the Lifting Stay Petition to the supervisory judge. The supervisory judge must, not later than 1 (one) day after receipt of the petition, order the receiver to immediately, by registered mail or courier, summon the said creditor and third party to be heard at the hearing on this Lifting Stay Petition. The supervisory judge must render a decision upon the Lifting Stay Petition within not later than 10 (ten) days as of the date the Lifting Stay Petition is submitted to the supervisory judge.

In rendering the said decision, the supervisory judge shall take into consideration the following:

a. the length of the stay period which has already elapsed;

b. the protection of the interests of the creditor and any related third party;

c. the possibility of composition being reached;

d. the impact of the stay on the operation and management continuity of the debtor's business and the settlement of claims against the bankrupt estate.

The matters to be considered by the supervisory judge do not limit the supervisory judge to consider other matters, to the extent it is necessary to safeguard and optimize the value of the bankruptcy estate.

The decision of the supervisory judge on the Lifting Stay Petition may take the form of either (a) a lifting of the stay for one or more creditors and/or (b) the imposition of conditions concerning (i) the length of the stay period and/or (ii) one or more security rights that may be enforced by the creditors. If the supervisory judge refuses to lift or amend the conditions of the stay, the supervisory judge is obligated to order the receiver to take adequate measures to protect the interests of the petitioners. Against this decision of the supervisory judge, the creditors or the third parties submitting this Lifting Stay Petition or the receiver may submit an objection to the Commercial Court no later than 5 (five) days after the date of rendering of the decision. The Commercial Court is obligated to decide on this objection within not later than 10 (ten) days as of the date of the objection is received. No appeal (in the form of either cassation or case review petition) may be submitted against the decision of the Commercial Court.

Canada Small Flag Canada

Bankruptcy
Protection from Creditors
As previously stated (see Question 4), once a debtor has become bankrupt, all of the debtor's property, wherever located, vests in the trustee subject to the rights of secured creditors. The trustee then proceeds to administer the estate for the benefit of the bankrupt's unsecured creditors. The BIA provides for an automatic stay of proceedings once the bankruptcy has commenced. The debtor's unsecured creditors are prevented from:

  1. exercising any remedy against the debtor or its property; and
  2. commencing or continuing any action, execution or other proceeding for the recovery of a claim provable in bankruptcy.

Extraterritorial Effect?
The bankruptcy stay is of national force and effect, but it does not have extraterritorial effect. Recognition proceedings must be sought in any jurisdiction outside of Canada for the stay to become enforceable in such jurisdiction (see Question 16).

Exceptions to Stay
The bankruptcy stay does not affect secured creditors, who are generally free to enforce their security outside of the liquidation process. The stay also does not affect the claims of holders of eligible financial contracts with the debtor or the actions of governmental, administrative and regulatory bodies such as the Crown and the provincial securities commissions in carrying out their regulatory or administrative duties, other than the enforcement of a payment ordered by the regulatory body.

Receivership
Protection from Creditors
The order appointing the court-appointed receiver will typically provide for a stay of proceedings against the receiver and debtor (see Question 4).

Extraterritorial Effect?
A receiver appointed under the BIA has jurisdiction across Canada, unlike a receiver or receiver and manager appointed under provincial legislation who has no power outside the province of its appointment. Accordingly, the stay of proceedings that is effective upon the court appointing a receiver under the BIA is of national force and effect – there is no need to seek recognition orders in each province.

The stay contemplated by a receivership order does not have extraterritorial effect. Similar to a bankruptcy, recognition proceedings must be sought in the jurisdiction outside of Canada for the stay to become enforceable in such jurisdiction (see Question 16).

Exceptions to Stay
The stay does not affect the claims of holders of eligible financial contracts with the debtor as well as the regulatory actions of governmental, administrative and regulatory bodies such as the Crown and the provincial securities commissions. The model receivership order specifically contemplates that there is no exemption provided to the receiver or the debtor from compliance with statutory or regulatory provisions relating to health, safety or the environment.

Germany Small Flag Germany

After the opening of insolvency proceedings, general claims in regard to the estate cannot be pursued by suing. Instead, a creditor must register its claims with the insolvency administrator.

As of the opening of insolvency proceedings, legal proceedings regarding the debtor’s estate are suspended until (i) the administrator resumes such proceedings or (ii) the insolvency proceedings are terminated.

The same is true for enforcement of claims regarding the estate which are also suspended for the duration of the insolvency proceedings (Sec. 89, 90 Insolvency Code). Only creditors that can show that the respective asset does not belong to the estate on grounds of a right of segregation (Aussonderungsrecht, Sec. 47 Insolvency Code) may enforce their claim during insolvency proceedings.

The enforcement of title in immovable property that is encumbered with a mortgage or land charge is not blocked during insolvency proceedings, unless the insolvency administrator successfully files for a stay of enforcement according to Sec. 30d, 153b ZVG.

Creditors may benefit from such stay as individual creditors are not permitted to access the insolvency estate to the detriment of other creditors.

Pursuant to the rules of the European Insolvency Regulation 2015/848 and Sec. 335 Insolvency Code, German insolvency law, including, without limitation, the aforementioned stay does have extraterritorial effect.

South Africa Small Flag South Africa

Legal proceedings moratoria:
At any time after the presentation of an application for winding-up and before a winding-up order has been made, the debtor or any creditor or shareholder may:

  • where any action or proceeding by or against the company is pending in any court in South Africa, apply to such court for a stay of the proceedings; and
  • where any other action or proceeding is being or about to be instituted against the company, apply to court for an order restraining further proceedings in the action or proceeding.

When the court has made an order for the winding-up of a company or a special resolution for the voluntary winding-up of a company has been registered with the Companies and Intellectual Property Commission:

  • all civil proceedings by or against the debtor shall be suspended until the appointment of a liquidator; and
  • any attachment or execution put in force against the estate or assets of the company after commencement shall be void.

At the commencement of insolvency proceedings, a moratorium is placed on the enforcement of security against the insolvent debtor and accordingly a secured creditor may not realise that security itself, but must deliver it to the liquidator for realisation.

The stay or moratorium will not have extraterritorial effect.

In what circumstances may creditors benefit from any exceptions to such stay or moratorium:
Every person who, having instituted legal proceedings against a company which were suspended by a winding-up, intends to continue the same, and every person who intends to institute legal proceedings for the purpose of enforcing any claim against the company which arose before the commencement of the winding-up, shall within three weeks after the first creditors committee give notice to the liquidator that the proceedings will continue.

If notice is not given the proceedings shall be considered to be abandoned unless the court otherwise directs.

Brazil Small Flag Brazil

As previously mentioned, the decision that decrees the debtor’s insolvency stays the course of the statute of limitation and of all procedures and executions against the debtor, no matter where the procedures and executions are being processed, with the exception of procedures that claims a non-fixed amount, which may continue at the same court where they are proceeding, including proceedings outside Brazilian jurisdiction.

Czech Republic Small Flag Czech Republic

Generally, as of the moment in which the insolvency petition was filed, an automatic stay applies to the enforcement of any decision or foreclosure which would affect property owned by the debtor, as well as other property which forms a part of the estate. The enforcement of a decision or foreclosure may be ordered or commenced but cannot be consummated. However, in certain cases the insolvency court may decide that the enforcement of a decision or foreclosure may go forward.

As to the extraterritorial effect, the EC Regulation on Insolvency Proceedings and international treaties apply.

Cayman Islands Small Flag Cayman Islands

Once the Cayman Court has made a winding up order or made an order for the appointment of provisional liquidators, an automatic stay is imposed prohibiting any suit, action or other legal proceedings from being commenced or continued against the company without the leave of the Cayman Court and any rights of action against the company are converted into claims in the liquidation proceedings.

It is also possible that, in the period between the presentation of the winding up petition and the making of a winding up order, a creditor, member or the company itself may apply for an order staying any legal proceedings being pursued against the company before the Cayman Court or restraining further proceedings from being pursued before a foreign Court.

Notwithstanding the making of a winding up order, a secured creditor is not prohibited from enforcing any valid security interest. In addition, there is no prohibition against the continuation of legal proceedings or the enforcement of creditors' claims in a voluntary liquidation or in a restructuring by way of scheme of arrangement. However, it is often the case that the appointment of provisional liquidators is sought in conjunction with promoting a scheme of arrangement so that the company can take advantage of the statutory moratorium on claims and proceedings while the scheme is being implemented.

The Cayman Islands liquidation and provisional liquidation regimes are capable of recognition in other jurisdictions. As such, notwithstanding that the automatic moratorium on claims does purport to have automatic extraterritorial effect, as a matter of practicality it will be a matter of foreign law as to whether or not the moratorium would apply extraterritorially (e.g. whether or not a particular foreign Court would recognize the moratorium without question, whether it would require the claimant to obtain leave from the Cayman Court before proceeding or some other approach). Such matters may well be fact sensitive. Accordingly, it is generally prudent to obtain recognition and supporting relief in other relevant jurisdictions, especially in circumstances where, as a matter of Cayman Islands law, the automatic stay does not apply to secured creditors in any event.

Japan Small Flag Japan

Upon the commencement of bankruptcy proceedings, civil actions and civil execution proceedings with respect to bankruptcy claims are suspended, and bankruptcy creditors are prohibited from commencing new civil actions or civil execution proceedings. This moratorium does not have extraterritorial effect, but if any foreign creditors received payments, the “hotchpot rule” shall be applied to such creditors. The “hotchpot rule” prohibits a creditor who has received part payment in respect of its claim in a foreign insolvency proceeding from receiving a payment for the same claim in bankruptcy proceedings in Japan regarding the same debtor, so long as the payment to the other creditors of the same class is proportionately less than the payment the creditor has already received. Exercising security interests is not prohibited, and secured creditors may collect their claims regardless of the filing or commencement of bankruptcy proceedings. Civil actions brought by claim holders on the estate are not suspended and will not be prohibited.

Upon the commencement of special liquidation proceedings, civil execution proceedings are suspended and creditors are prohibited to commence new civil execution proceedings. However, civil actions are not suspended and will not be prohibited. This moratorium does not have extraterritorial effect and the “hotchpot rule” is not provided for special liquidation proceedings. Exercising a security interests is not prohibited, and secured creditors may collect their claims regardless of the filing or commencement of special liquidation proceedings.

New Zealand Small Flag New Zealand

Voluntary administration
In voluntary administration, a moratorium on claims is automatically imposed upon appointment of an administrator. The moratorium restricts any Court proceedings being taken against the company, without leave of either the administrator or the Court. The moratorium also prevents creditors (including lessors) enforcing charges, taking possession of the company's property, and enforcing guarantees given by directors (or relatives).

The moratorium does not, however, restrict a creditor that holds a general security interest over company property from enforcing its charge, provided that the creditor enforces its interest no later than ten working days after the administrator's appointment.

Deed of company arrangement (DOCA)
As discussed further in question 8, one of the potential outcomes of voluntary administration is the approval of a deed of company arrangement (DOCA) by the creditors of the company at the "watershed meeting" held to determine the future of the company.

If a DOCA is approved by the relevant majorities of creditors (majority in number and 75% in value of debt owed by the company) at the watershed meeting, all unsecured creditors (and secured creditors who voted in favour) are bound by the terms of that DOCA to the extent that the creditors' claims arose prior to the stipulated cut-off date. Any moratorium imposed by the terms of the DOCA is binding on all creditors that are bound by the DOCA, no Court approval is necessary.

The extent to which a moratorium imposed on creditors operates depends entirely on the terms of the DOCA in question. It is common for a DOCA to prevent creditors who are bound from taking any enforcement action against the debtor company. Whether a DOCA prevents security enforcement by creditors depends on whether the particular secured creditor(s) are bound by the DOCA. Similarly, the ability for creditors to exercise rights other than security enforcement depends on the terms of the DOCA.

Liquidation
Upon the commencement of liquidation of a company no person may commence or continue legal proceedings against the company or exercise or enforce a right or remedy over or against the property of the company.

However the rights of a secured creditor to take possession of, realise or otherwise deal with the property of the company over which that creditor has security continue unabated by anything arising from the liquidation itself.

Accordingly a secured creditor may (for example) appoint a receiver over the relevant security assets notwithstanding the appointment of a liquidator.

Creditors Compromise
A Court may grant orders staying proceedings or enforcement for a ten day period from the date notice of the compromise is given.

Once a creditors compromise is approved (as discussed further in question 8), it is binding upon the company and all creditors that received notice of the compromise. Any moratorium imposed by the compromise is binding on the class of creditors that are bound by the compromise, no Court approval is necessary.

The extent to which a moratorium imposed on creditors operates depends entirely on the terms of the compromise in question. It is common for compromises to prevent creditors from taking any enforcement action against the debtor company. Whether a compromise prevents security enforcement by creditors depends on whether the particular secured creditor(s) are within the class of creditors that are bound by the compromise. Similarly, the ability for creditors to exercise rights other than security enforcement depends on the terms of the compromise.

Scheme of Arrangement
The terms of a Court approved scheme of arrangement may include some form of moratorium or restraint on creditor enforcement. Any moratorium imposed by a scheme of arrangement is binding on the class of creditors that are bound by the scheme of arrangement.

The extent to which a moratorium imposed on creditors operates depends entirely on the terms of the scheme of arrangement in question.

Statutory management
While a company is under statutory management, there is a broad ranging moratorium which prevents any proceedings or enforcement action being taken or continued by any person (including secured creditors) against the corporation without the statutory manager’s consent. There is also a prohibition on the transfer or removal of any assets of the company without the statutory manager’s consent.

Extra-territorial effect
The moratoriums which apply in respect of the insolvency processes referred to above are not expressed to be restricted in the territorial scope of their application.

However, the extra-territorial effect of such moratorium will depend upon the ability, under the law of the relevant foreign jurisdiction (in which the moratorium is sought to apply), for the insolvency official to obtain orders from a foreign court to stay proceedings or enforcement, as part of recognition and assistance of that insolvency process by the foreign court.

Singapore Small Flag Singapore

A company proposing or intending to propose a scheme may apply to Court for a moratorium against, inter alia, all legal proceedings from continuing or commencing against the company, the appointment of receivers, the realisation of any security over the property of the company, and the execution, distress, or other legal process against the company’s property. Upon the making of such an application, the company will be entitled to an automatic interim 30 day moratorium (which may be extended by application to the Court).

A company applying for a moratorium in support of a scheme may also seek an order from the Court to have the moratorium bind all creditors outside of Singapore, as long as they are subject to the in-personam jurisdiction of the Singapore Courts.

Similarly, upon the filing of an application for Judicial Management, no steps may be taken to enforce any charge or security over the company’s assets, and no other proceedings or legal process may be commenced or continued against the company.

A creditor affected by a moratorium may apply to Court for leave to continue or commence proceedings against the debtor company. In deciding whether to grant leave, a Court will weigh the interests of the creditor against the need to grant the debtor room to carry out an effective scheme or meet the aims of judicial management.

British Virgin Islands Small Flag British Virgin Islands

N/A

Denmark Small Flag Denmark

Under Danish insolvency law, a moratorium may only be agreed voluntarily between a debtor and the debtor’s creditors or as part of restructuring proceedings filed for or completed. As long as restructuring or bankruptcy proceedings filed for are pending, unsecured creditors are also barred from pursuing their claims.

A moratorium does not release the debtor from payment of the debt but for as long as the moratorium is maintained, the creditors cannot levy execution against the debtor or file a petition in bankruptcy against the debtor.

As a result of the circumstance that it cannot be requested that a Danish bankruptcy order be acknowledged abroad (with the exception of the Nordic countries) a moratorium only has extraterrestrial effect in connection with bankruptcy and restructuring proceedings if the country of the foreign creditor acknowledges the Danish insolvency proceedings. The reason for this is that Denmark has not yet acceded to the Insolvency Regulation of the EU. However, it must be mentioned that several countries will acknowledge Danish bankruptcy/restructuring proceedings in accordance with UNCITRAL’s model law on cross border insolvency.

• In what circumstances may creditors benefit from any exceptions to such stay or moratorium?

The question is not understood.

China Small Flag China

After the court accepts a bankruptcy filing, the measures that have been adopted to preserve the debtor’s property should be discharged, any enforcement proceedings suspended, and any pending civil action or arbitration discontinued and not resumed until the administrator takes over the property of the debtor. Chinese law provides details for conversion of an enforcement procedure into a bankruptcy procedure, or specifically, if the party subject to enforcement in an enforcement procedure is an enterprise legal person and has the ground to be bankrupted, the enforcement applicant or the party subject to enforcement may apply for conversion of the enforcement procedure into a bankruptcy procedure. A bankruptcy procedure initiated in accordance with Chinese law has legal effect on the debtor’s assets located outside China, so a stay or moratorium has extraterritorial effect, subject to the acknowledgement by the foreign court concerned.

Australia Small Flag Australia

Receivership

There is no moratorium in receivership and creditors may take action against the company including initiating court proceedings, but such actions are treated as unsecured claims (subordinated to the claims of the secured creditors who appointed the receiver). The receiver will be in control of the company’s material assets and is permitted to realise such assets for the benefit of the secured creditor only (with any surplus being provided to the company capable of being distributed to unsecured creditors).

Voluntary administration and liquidation

An automatic moratorium operates following the appointment of a voluntary administrator or upon the winding up of a company. Consequently, civil legal proceedings cannot be commenced except, in the case of a voluntary administration, with the administrators consent or leave of the court and in the case of liquidation, with the leave of the court.

Under the Cross-Border Insolvency Act 2008 (Cth), foreign creditors, save for tax and penal debts, have the same rights regarding the commencement of, and participation in, insolvency proceedings as an Australian creditor. All foreign claims must be converted into Australian currency for the purposes of the insolvency process.

Belgium Small Flag Belgium

As a general rule, ongoing legal proceedings are not impacted by the opening of insolvency proceedings. In case of a bankruptcy, however, the bankruptcy trustee must decide whether to continue the litigation. If the litigation is not in the interest of the bankrupt’s estate, a trustee has the right to file a discontinuance (which implies that the trustee is no longer pursuing or challenging the claims at dispute).

The general rule does not apply in case the enforcement of creditors’ claims. The opening of an insolvency procedure (in some cases temporarily) suspends all enforcement proceedings, although certain exceptions exist (e.g. the enforcement of a pledge on financial collateral or specific receivables is not affected by the insolvency).

The opening of an insolvency procedure by a Belgian court shall be recognized in all other EU Member States, pursuant to Article 19 of the Insolvency Regulation 2015/848.

The Netherlands Small Flag The Netherlands

As a result of the bankruptcy all legal proceedings against the bankrupt are stayed and all attachments on the debtor's assets are terminated by operation of law. Secured creditors are in principle not affected by a bankruptcy (unless a cooling-off period is ordered by the bankruptcy court).

The EU Insolvency Regulation (nr. 2015/848) (the Insolvency Regulation) is applicable in the Netherlands. Therefore, the initiation of an insolvency proceeding by a Dutch court shall be recognized in all other EU Member States.

United States Small Flag United States

Upon the filing of a bankruptcy proceeding, the automatic stay is triggered, thereby protecting the debtor and the property of the estate. Subject to certain exceptions, at that point, no creditors may pursue collection efforts, foreclosure actions or other enforcement actions against the debtor without first obtaining authority from the court. Section 362 of the Bankruptcy Code provides that a creditor may not “create, perfect, or enforce” a lien against the estate, thereby preventing all creditors, subject to certain exceptions, from taking any action to enforce a security interest or improve its position relative to other creditors after the filing of the bankruptcy petition. The automatic stay expressly prohibits acts to obtain possession of “property of the estate,” thus generally barring creditor collection efforts with respect to estate property located both within and outside the U.S.

The Code provides certain exceptions to the automatic stay under section 362(b), including criminal proceedings, enforcement of a governmental unit’s police or regulatory powers, and a non-debtor party’s right to close out securities or financial contracts, among others. Similarly, pursuant to section 362(d), upon the creditor’s request and following a hearing, the court may grant relief from the automatic stay in the following circumstances: (i) “for cause” such as lack of adequate protection, (ii) if the debtor does not have equity in the property and the property is not necessary to effectively reorganize, (iii) with respect to a stay of an act against single asset real estate in certain circumstances and (iv) where with respect to a stay of an act against real property, under certain circumstances the bankruptcy was part of a scheme to hinder, defraud creditors.

France Small Flag France

As seen previously, insolvency proceedings trigger an automatic stay (moratorium) on claims which prevents creditors from suing the debtor for payment and enforcing the securities.
That stay or moratorium have extraterritorial effect if the French insolvency law appears applicable in accordance with European law (Regulation 2015/848) or International law because of the “universal” effect of the French insolvency law. However, Article 8 of Regulation 2015/848 provides a limit to that universal effect: the opening of insolvency proceedings in a European Member State shall not affect the rights in rem of creditors or third parties in respect of assets belonging to the debtor which are situated within the territory of another European Member State.

Luxembourg Small Flag Luxembourg

Following the declaratory judgment of bankruptcy, all creditors must file a proof of claim. During both reorganization proceedings and bankruptcy, individual legal actions by privileged and unsecured creditors against the debtor are suspended.

However, “bankruptcy proof” secured creditors, such as security receivers under the Financial Collateral Law and mortgagees, can freely take enforcement action regardless of the bankruptcy proceedings. Both secured creditors and mortgagees are being considered as outside of the bankruptcy estate (“hors masse”) and are not, in principle, subject to ordinary distribution and priority rules. In other words, they will be entitled to enforce their rights without the Commercial Court’s approval.

In practice, such creditors will also file a proof of claim in order to secure their claims in case the enforcement of their security does not fully repay their debt.

Romania Small Flag Romania

In certain conditions, during the conducting of the insolvency prevention proceedings, which we shall describe herein below in the next item, a provisional stay of enforcements is possible. At the same time, from the opening date of the insolvency procedure, all individual enforcement proceedings shall be stayed de jure. Practically, all creditors may enforce their receivables only in the insolvency procedure, without the creditors’ headquarters or other aspects relating to territoriality having any relevance. In certain conditions, creditors having a mortgage right may request the lifting of such stay and the immediate sale of the asset that is the object of their security, but in the insolvency procedure as well and provided that the procedure expenses have been paid.

Switzerland Small Flag Switzerland

The opening of bankruptcy proceedings has the effect that all pending debt enforcement proceedings against the insolvent debtor are stopped and no new debt enforcement proceedings may be commenced. This restriction does not apply (i) to claims arising after the opening of bankruptcy and (ii) where the secured creditor enforces into collateral posted by a third party for the debts of the insolvent debtor.

Further and in general, all pending civil law proceedings to which the insolvent debtor is a party are automatically stayed upon the opening of bankruptcy and are only resumed once the schedule of admitted claims has been published. During such stay, the statute of limitation does not continue to run. The stay in principle extends to all civil law proceedings irrespective of the (Swiss or foreign) venue. While the Swiss bankruptcy authorities have no meaningful way of enforcing the stay abroad, they may refuse to admit claims against the insolvent debtor resulting from such foreign proceedings to the schedule of claims.

The opening of moratorium proceedings has the same effects, i.e. all debt enforcement proceedings are stopped and all pending non-urgent civil law proceedings are stayed. As an exception, creditors whose claims are secured by real estate may continue with the debt enforcement but are precluded from foreclosing on the real estate.

Please refer to question 1 above for enforcement options for secured creditors.

Israel Small Flag Israel

A liquidation order will automatically trigger a stay of all proceedings against the company, unless otherwise permitted by the court. Any transaction in the company's assets or any proceeding with respect to the company made after the date of the liquidation order shall not have any force and effect.

A stay order is not mandatory in case of Arrangement proceedings. A stay order in Arrangement proceedings is granted for a period of nine months, which may be extended by three months periods. The stay order will prevent any proceedings taken against the company, including the foreclosure of any pledge, the crystallization of floating pledge or receipt of possession of any asset under retention of title, unless authorized by the court. Such court approval will be granted only if the pledged or retained asset does not guarantee proper protection to the creditor, or if granting of such approval shall not harm the chances of recovery.

The existing law does almost not refer specifically to the extraterritorial effect of the stay order or moratorium. In practice, the cooperation and recognition of the relevant foreign court may be required in order to enforce such proceedings in foreign jurisdiction.

In the well-known Israeli case of the collapse of Urbancorp Inc., a Canadian company with Canadian assets raising debt by issuance of traded bonds to the the Israeli public capital market, the Canadian court recognized the Israeli proceedings as foreign main proceedings, to which an automatic stay of proceedings applies.

The new Insolvency Law set forth specific provisions, based on the UNCITRAL Model Law on Cross-Border Insolvency, and international standards, in order to regulate the relation between different proceedings in different jurisdiction or the proceedings with respect to a debtor having assets of creditors in different countries. Under such provision if the Israeli court recognized a foreign proceeding as a foreign main proceeding, it will order a stay of proceedings.

Bermuda Small Flag Bermuda

In a compulsory liquidation, once a winding-up order is made or a provisional liquidator appointed, an automatic stay prohibits creditor action (but without extraterritorial effect).

Secured creditors remain entitled to enforce their security.

The automatic stay does not apply in a voluntary liquidation. However, the court can consider a liquidator’s application to grant a stay of creditor action from the date of the shareholders’ resolution, which is when the MVL or CVL is deemed to commence.

Ireland Small Flag Ireland

Examinership

The automatic stay on creditor action commences on the filing of the papers in the court office on an ex-parte basis. The statutory moratorium can last for up to a maximum of 100 days by which time the examiner must have formulated his proposals for a scheme of arrangement. The moratorium is ineffective in relation to rights in rem by way of security in assets located outside of Ireland. Prohibited creditor action includes the appointment of a receiver, enforcement of security, repossession of goods on lease, hire purchase or supplied on retention of title (without the consent of the examiner), liquidation etc. No proceedings may be instigated against the company except b leave of the Court and the Court may, on the application of the examiner, make any order as it believes proper in relation to existing proceedings including an order to stay those proceedings.

Scheme of arrangement

Before a scheme of arrangement is proposed, an application can be made to the Court by the company itself, its directors, any creditor or member or, the liquidator appointed to the company (if applicable) for a moratorium on enforcement to stay all proceedings and restrain further proceedings against the company or its property for such period as the Court deems fit (as opposed to the maximum 100 day period applicable to examinership).

Liquidation

Compulsory liquidation: No proceedings or other creditor action can be commenced or continued against a company in compulsory liquidation without leave of the Court. Where a winding up petition has been presented to the Court, but the Order for winding up has yet to be made, the company or any creditor or contributory can apply to the Court to stay any proceedings until the winding-up petition has been determined.

Voluntary liquidations: No stay automatically arises when a company is placed into voluntary liquidation. Notwithstanding, the liquidator, any creditor or contributory of the company may apply to the Court for a stay on enforcement. On any such application, the Court will have regard as to whether the claim can be dealt with in the course of the liquidation and will apply certain factors to ensure that one creditor does not obtain an advantage over the other creditors.

Receivership

No restrictions apply to a company in receivership save that the relevant assets over which the receiver is appointed will fall outside of the pool of assets available to satisfy claims of the company’s other creditors.

United Kingdom Small Flag United Kingdom

The widest form of moratorium is offered by administration. In administration, no third party can without the consent of the administrator or the court’s permission: (i) take steps to enforce security or otherwise repossess property (including a landlord’s right of forfeiture by peaceable re-entry); or (ii) institute or continue any legal process (including legal proceedings, execution, distress and diligence) against the company or its property.

In a liquidation, no action or proceedings can be continued or raised without the leave of the court. Secured creditors may however take steps to enforce their security or repossess assets which are not actually owned by the company (such as goods subject to a retention of title clause).

A company voluntary arrangement (CVA) can also offer a moratorium (including in respect of security enforcement) in certain exceptional circumstances applying to small companies (i.e. a company satisfying two or more of the following criteria: (i) turnover of less than £6.5m, (ii) balance sheet of less than £3.26m or less than 50 employees). A scheme of arrangement (unless combined with an administration) does not offer a moratorium.

Unlike in the US, a moratorium under English law does not purport to have extraterritorial effect. Its recognition under the laws of another jurisdiction will depend on applicable treaty arrangements. For example, EU Member States that are signatories to the EU Insolvency Regulation recast will give assistance to the English proceeding (including by recognising the related moratorium in the relevant Member State) where it can be established that the COMI of the debtor is in, or such debtor has an establishment in, England (although see Question 20).

Mexico Small Flag Mexico

The Insolvency Judgement will cause the suspension of all judicial proceedings of creditors against the relevant insolvent entity. In addition, the Insolvency Judge may grant certain injunctive reliefs that may include the temporary suspension of: (i) all payment obligations entered before the Insolvency Judgment, except for such payments that are required for the operation of the insolvent entity; and (ii) the foreclosure or liquidation of assets of the insolvent entity, except for secured guarantors that can start their foreclosure process over their collateral

The suspension of judicial proceedings as well as other injunctive reliefs, are not intended to have automatic extraterritorial effects but could have them if the foreign courts cooperate with the Mexican insolvency courts. Please note that such cooperation is more likely to apply when both countries have and international treaty in place that deals with reciprocity.

Spain Small Flag Spain

The Judge of the insolvency proceeding has the jurisdiction in exclusive and exclusion. It implies that the Judge will have the competency to judge all the procedures that affect the estate of the debtor. Inclusive procedures that are developing in other countries if the applicable law established it (art.8 SIA).

Regarding to the others initiated proceedings, the declaratory procedures and the arbitral proceedings where the debtor is a party, that there are in process at the moment of the insolvency proceeding being declared open, shall continue to be substantiated before the same court as that hearing such until their conclusion (art. 51 and 52 SIA). Likewise, the enforcement and coercive collection could continue until approval of the liquidate phase, administrative enforcement proceedings in which payment orders have been handed down and labor enforcements in which insolvent debtor’s aggregate assets has been seized may continue, if prior to the date of the declaration opening the insolvency proceedings, but as long as the assets subject to seizure are not necessary to continue the debtor’s activity (art. 55 SIA). And the execution proceeding that no affect necessary assets to continue the debtor’s activity, they could be continues until its conclusion.

On the other hand, when the execution proceeding affect necessary assets to continue the debtor’s activity, the procedure shall be stayed. However, it could be restarted if (i) the encumbered asset is declared as an asset which is not necessary to continue with the debtor’s professional or business activity (art. 56 SIA), or (ii) it is adopted a composition that no affect the creditor, (iii) or 1 years has passed since the DIP without the opening of the liquidate phase (art. 56 and 57 SIA).

Portugal Small Flag Portugal

As a rule, the pending enforcement proceedings filed against the debtor or other proceedings affecting the debtor’s assets are suspended with the declaration of insolvency. The only exception is the case in which there are other parties, besides the insolvent, in the enforcement proceedings, in which case enforcement may proceed only against those. The debtor’s assets at the date of declaration of insolvency are seized to this proceeding, as well as any assets and rights obtained by the debtor while the insolvency proceeding is pending.

Other pending legal proceedings that affect assets of the debtor’s insolvency estate may proceed, but they are annexed to the insolvency proceeding, if the insolvency administrator so requests. The effects on pending proceedings in other states are governed by the rules of that jurisdiction.

Updated: June 5, 2018