Insolvency planning or
bankruptcy planning finds its roots in the bankruptcy | Insolvency Code that came into being in Germany on January 1, 1999. This insolvency code replaced all other three legislative regimes: the
Bankruptcy Act, the Composition Act and the Joint Execution Act.
Insolvency proceedings pursuant to the Insolvency Code are the only judicial proceedings available in Germany for the bankruptcy of corporations. These proceedings start with the petition filed by the bankrupt corporation or the creditor to the Insolvency country.
The
insolvency prerequisite in the Code mandates the corporation to either show that it is unable to meet its payment obligations that have become due or that its liabilities exceed the value of its assets. The management of a corporation that meets either of these criteria is obliged to file for insolvency or bankruptcy within a period of three weeks. The corporation may also file a petition for insolvency once it establishes that it will be unable to meet existing payment obligations as and when they fall due in the future.
The insolvency planning or bankruptcy planning is a regular insolvency procedure the opening of which results in an automatic stay. The automatic ban is a ban on all creditors making any attempts to gain possession of the debtor's assets and a ban on the debtor taking any measures that would reduce its estate.
In UK, banks have in fact developed the "London Approach", under the co-ordination and the dominant authority of the Bank of England. Under this approach, banks that detect the indicators of a crisis at their debtor companies are discouraged from immediately starting to call on their securities, which would propel the companies even further and faster into
insolvency | bankruptcy. The London approach propagates that these bankrupt companies should not take such hasty actions. And, therefore, initially should start discussions with the debtor and the other creditors (banks, suppliers, etc.) to try and sound out solutions that might possibly allow the company to be rescued.
The efforts are on in order to make this kind of approach a global code of conduct and not just an approach limited to UK. The Lenders' Group of the International Federation of Insolvency Professionals, INSOL International, has agreed to recommend an eight-point code of conduct it has compiled as the world-wide standard for the conduct of all major creditors facing insolvency and bankruptcy.
Many solicitors are well versed and well equipped with all these new emerging trends in insolvency planning and bankruptcy planning as well as the traditional intricacies involved in it. Having an extensive network of like-minded professional law firms across the world, solicitors has all that any corporate can require while
planning insolvency or bankruptcy.
Author: John Smit
Pindoria Solicitors has not written this article and hence takes no responsibility or liability for it. Please contact the author directly to know more about estate planning, Insolvency planning or bankruptcy planning.
