Recent Developments
Italy—Italian law decree No. 83 of 22 June
2012 (the "Decree") has introduced significant amendments
to several provisions contained in the Italian Insolvency
Act, governing, among others, the following major
pre-insolvency restructuring proceedings: (a) the
debt-restructuring agreement (accordo di ristrutturazione dei
debiti) pursuant to Article 182-bis ("Art.
182-bis Agreement"); and (b) the arrangement with
creditors (concordato preventivo) pursuant to Article 160
("Arrangement with Creditors"). With respect to such
restructuring proceedings, the Decree provides for the following
main amendments: (i) faster, easier access to an Arrangement with
Creditors that was reformed along the lines of the key principles
underlying the chapter 11 process in the U.S. Bankruptcy Code; (ii)
a new form of Arrangement with Creditors aimed at ensuring the
continuity of an insolvent debtor as a going concern
(concordato con continuità aziendale); (iii)
enhanced protection of new financing granted in connection with
restructuring proceedings; and (iv) certain amendments to
provisions regulating the repayment of nonconsenting creditors
under an Art. 182-bis Agreement.
Italy—Amendments to legislation governing the
Italian Antitrust Authority
(Autorità Garante della Concorrenza e
del Mercato, or "AGCM"), including
expansion of the AGCM's powers, were recently introduced
pursuant to Italian Prime Minister Mario Monti's governmental
"decree on liberalisation". The changes include:
(i) merger-control thresholds that will apply cumulatively rather
than alternatively; and (ii) replacement of the current mandatory
merger-control filing fee with a mandatory fee of €0.08
(US$0.098) per thousand of a company's turnover (whether or not
a merger transaction is actually registered) to all companies with
turnovers exceeding €50 million. The changes grant AGCM
additional powersto protect against unfair contractual provisions
in business-to-consumer agreements, as well as unfair commercial
practices impacting micro-businesses with fewer than 10 employees
and turnovers not exceeding €2 million. Other measures
enacted as part of the decree affect class actions, which may now
be commenced for the protection of collective interests (in
addition to individual homogeneous consumer rights), and the
jurisdiction of specialised intellectual property sections of the
Italian courts, which has been expanded to encompass claims for
damages for EU as well as national antitrust infringements. For a
more complete description of the amendments, please see our
Jones Day Commentary, "New 2013 Italian Antitrust and Competition Law
Rules".
Spain—On 11 July 2012, the Eurogroup signed a
memorandum of understanding ("MOU") for the restructuring
of Spain's financial system. The MOU splits Spanish
financial entities into four different groups, the members of which
are to be designated in October, after the completion of bank
stress tests. Group 0 will include entities that do not need to
increase their capital requirements. Group 1 will include entities
already controlled by the Spanish Fund for Orderly Bank
Restructuring (Fondo de Reestructuración Ordenada
Bancaria). Group 2 will include entities that need to
strengthen their capital and cannot do so via private investors (if
viable, these entities could receive public cash injections;
otherwise, they will be wound up). Group 3 will include entities
that need to strengthen their capital and are in a position to call
on the markets, or have other private means to do so. The MOU also
stipulates that entities requiring public aid will have to transfer
distressed assets to a state-held "bad bank".
Spain—Spanish savings banks could be forced to
sell industrial assets. Spain's savings banks could be
preparing sales of industrial assets and minority stakes, ranging
from stakes in listed and unlisted companies to interests in
renewable-energy projects and toll roads, once a €64
billion (US$78.44 billion) European rescue package for the sector
comes into force. The first €30 billion tranche of aid has
already been agreed to by Spain's European partners.
Spain's EU partners also agreed to ease Spain's deficit
targets, although new budget cuts have been approved by the
government.
Spain—The Spanish government approves new budget
cuts. On 13 July 2012, Prime Minister Mariano Rajoy
released his fourth set of budget measures in seven months, a
package intended to reduce the budget deficit by €65
billion (US$79.68 billion) over two and a half years. The measures
include: (i) an increase in the rates of value-added tax
("VAT") from 18 to 21 per cent; (ii) an increase in VAT
rates applicable to public transportation, hotels and processed
foods from 8 to 10 per cent (the VAT on bread, medicine and books
remains at 4 per cent); (iii) suspension of Christmas bonuses for
public-sector employees; (iv) a cut in jobless benefits beginning
with the sixth month of unemployment; (v) a 30 per cent cut in
councillors in some areas; and (vi) a 20 per cent cut in 2013
subsidies for political parties and unions.
The UK—On 1 May 2012, the Chancery Division of
the English High Court handed down its ruling in
Re JT Frith Ltd (Young v Kenneth)
[2012] EWHC 196 (Ch), concerning the ability of a secured
lender to share indirectly in funds set aside for unsecured
creditors. Section 176A (2) of the Insolvency Act 1986
provides that in cases where a floating charge has been granted
over all of a company's assets, the liquidator, administrator
or receiver must make a "prescribed part" of the
company's net assets available for the benefit of unsecured
creditors. A secured creditor may share in the "prescribed
part" only if it: (i) releases its security; and (ii) shares
as an unsecured creditor.
In Frith, a junior secured creditor of a company in
liquidation was held to have effectively surrendered its security
interest by submitting both a deed of release and proof of debt
stating that it held no security in the company. As a result, it
was allowed to participate in the "prescribed part". The
significance of the case is that the junior secured creditor was
also party to an intercreditor agreement with a senior secured
creditor which contained a subordination clause requiring the
junior lender to turn over any recoveries received from the debtor
to the senior lender until the latter had been repaid in full. The
result was that the senior secured lender was able to benefit
indirectly from the prescribed part, even though it had already
relied on its security and was therefore unable to participate in
the prescribed part directly. This outcome was upheld by the court,
as the intercreditor agreement was seen as a separate contractual
matter between the junior and senior lenders and did not therefore
undermine Section 176A (2).
Belgium—The Company Code has been amended to
permit the liquidation of companies in a single step.
Pursuant to the amendment, which became effective on 17 May 2012, a
company can be dissolved and liquidated in a single legal
instrument if: (i) no liquidator has been appointed by the
shareholders; (ii) a statutory auditor has confirmed that the
company has no outstanding liabilities; and (iii) all shareholders
have approved the company's dissolution and liquidation. The
assets held by the company on the date of its dissolution must be
transferred to the shareholders by means of an agreement that is
not provided for specifically by the new rules. The one-step
liquidation process aims to facilitate the liquidation of dormant
companies or the exit of shareholders after disposal of the
company's assets. However, given that all companies have
liabilities (whether in the form of outstanding bills, contingent
tax liabilities or otherwise), a one-step liquidation process will
be possible only where one or more shareholders or third parties
have agreed to assume these liabilities before the liquidation. For
this reason, the new regulation may not be as successful as
anticipated by the legislature.
Newsworthy
Jones Day is acting as antitrust counsel to the London
Metal Exchange ("LME") in connection with a £1.4
billion (US$2.2 billion) acquisition offer by Hong Kong Exchanges
and Clearing Limited ("HKE"), Hong Kong's stock
exchange operator. The 135-year-old LME is the world's
largest metals market, accounting for 80 per cent of global trading
in nonferrous metals. HKE's offer follows plans announced
earlier this year to expand into commodities, marking a major move
away from its slow-growing equities business. The deal would give
China, which accounts for 42 per cent of global consumption of
nonferrous metals like aluminium, copper, nickel and zinc, more
power in influencing how metal prices are set in global
trading.
Jones Day is advising London & Stamford Property Plc
in connection with the formation of a central London residential
joint venture (the "Joint Venture") and the Joint
Venture's entry into contracts with Project Red Limited, a
subsidiary of Qatari Diar, to acquire Moore House for £147
million (US$230 million). Moore House forms part of the
prestigious Grosvenor Waterside development and occupies a
prominent position at the front of the development on Ebury Bridge
Road in London, immediately south of the Chelsea Barracks
development.
Jones Day is advising The Lubrizol Corporation in
connection with its acquisition of Lipotec SA, a
Barcelona-headquartered leader in the development, manufacturing
and sale of ingredients for personal-care products based on three
core technologies: peptide-based active cosmetic ingredients,
delivery systems and biotechnology products. The purchase includes
Lipotec's active cosmetic ingredients business, along with its
subsidiaries, DiverDrugs and Lipofoods. The acquisition complements
Lubrizol's global personal-care ingredients business,
strengthening its offering of high-performance technology solutions
to marketers of formulated skin-care products.
Jones Day hosted a panel discussion in London, entitled
"Distressed Investment Opportunities and Real Estate Finance
in Europe", on 19 June 2012. The panel comprised
William Ackman (CEO, Pershing Square), John Barakat (head of real
estate finance, M&G Investments), Gad Caspy (head of commercial
real estate EMEA, Deutsche Bank), Wilbur L. Ross, Jr. (chairman and
CEO, WL Ross & Co.), Max Sinclair (head of the UK division,
Eurohypo) and Van Stults (managing director, Orion Capital). Jones
Day partner Andrew D. Barker chaired the discussion. The panel
discussed a number of issues relevant to real estate investors and
lenders in Europe, including the opportunities created by bank
deleveraging, currency risk within the eurozone, the impact of
regulatory change and new sources of debt finance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
