Restructuring & Insolvency Newsletter - July 2018 | Decisions

Not every sale of a unit of production in an insolvency proceeding is free of VAT

Central Economic-Administrative Tribunal decision of March 21, 2018

Something that is identified in the insolvency proceeding as a “unit of production” for liquidation purposes does not necessarily have to be identified as an “independent economic unit” for the purposes of not being subject to VAT. For this to be so the unit of production has to be able to continue operating when the transfer takes place, which did not occur in the examined case where only isolated elements were transferred and no operational organization was contributed.

Exclusion from being a transfer of undertakings for labor law purposes in the decision awarding a unit does not relieve purchaser of liability

Supreme Court judgment (Labor Chamber) of April 26, 2018

If the award of a unit of production meets the requirements determined by labor law for a transfer of undertakings to be discerned, the transfer of an undertaking and its effects exist even if they have been expressly excluded in the award decision by the insolvency judge. The purchaser of the unit of production, therefore, could be liable for employment debts in respect of workers not taken on with the unit of production.

DGRN adopts Supreme Court’s view on the requirements to register assets coming from an insolvency proceeding

Decision of the Directorate-General of Registers and the Notarial Profession of May 17, 2018

In the case of a sale of an insolvent debtor’s asset in the liquidation phase, it falls outside the registrar’s assessment task to re-examine whether or not the requirements under article 155.4 of the Insolvency Law were verified in the insolvency proceeding where that verification was done in court with a favorable outcome. This judgment follows the theory enunciated in the judgment rendered by the Supreme Court (Chamber One), on November 21, 2017, which we mentioned in our earlier issue.

Subsequent ratification by insolvency administrator is sufficient for insolvent debtor to retain authority in proceedings in progress

Supreme Court judgment (Civil Chamber) of May 23, 2018

If under the rules on delegation of authority, the insolvency administrator hands over his functions by allowing the insolvent debtor to continue with the defense of its rights in a lawsuit, it must be interpreted that the insolvent debtor was de facto under the less severe supervision regime in relation to that lawsuit. For that reason, to be able to lodge an appeal within that specific proceeding, the insolvent debtor did not need prior authorization from the insolvency administrator, only subsequent ratification.

Supreme Court limits moratorium on enforcement of administrative and employment debts, compelling the insolvency practitioner to bring third-party complaints to assert a superior right

Supreme Court judgment (Civil Chamber) on May 30, 2018

The Supreme Court considered it reasonable that, if when the liquidation plan was approved, an enforcement of administrative or employment debts was practically completed, it should not be interrupted, compelling the insolvency practitioner to bring the relevant third-party complaint to assert a superior right to avoid any alterations to the order of priority in payment of claims in insolvency.

Article 18 of the European Insolvency Regulation does not apply to enforcement proceedings

Judgment by the Court of Justice of the European Union (CJEU) of June 6, 2018

Article 18 of the Insolvency Regulation in force (formerly article 15 of the repealed Regulation EU No 1346/2000) makes the law of the member state where the proceeding was opened apply to the effects arising from the proceeding being opened, in particular, the effects of the insolvency proceeding on judicial and arbitration proceedings pending in other member states and concerning the debtor's property. The CJEU has now clarified, however, that this article does not apply to enforcement proceedings brought against the debtor in another member state, only to substantive proceedings or proceedings seeking an order for payment.