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Chapter 7 Return and Imputation
Jurisdiction | United States |
7. Return and Imputation
To better understand the rules of the EIR Recast concerning return and imputation (Article 23), one should be reminded of the principle of equal treatment of creditors in insolvency proceedings that underpins the system of the EIR Recast. This principle highlights that, unless special rules apply (e.g., regarding rights in rem), all similarly situated creditors should equally participate in the distribution of insolvency proceeds. However, in practice there can be situations when a creditor obtains more than other creditors, thus raising equality and fairness concerns.
Article 23(1) EIR Recast describes a situation in which a creditor obtains total or partial satisfaction of its claim on the assets belonging to the debtor situated within a territory of a Member State other than the state of the main insolvency proceedings. If this satisfaction happens after the opening of the main insolvency proceedings, the creditor must return what it has obtained to the insolvency practitioner. As explained in the Virgós-Schmit Report, this rule is the consequence of the universality of the main proceedings, which encompass all the debtor's assets, wherever situated, and affect all the creditors (para. 172). Otherwise, if each creditor can individually enforce its claim, the principles of collective satisfaction and equality of creditors will inevitably be breached.
For Article 23(1) EIR Recast to apply, several conditions should be satisfied. First, the creditor needs to get partial or total satisfaction of the claim. Second, such satisfaction should come from the debtor's assets. Third, the expropriated assets should be located in a Member State different from the state of the insolvency forum. Non-Member States are therefore excluded. If the creditor receives satisfaction from the debtor's assets located in a non-Member State, it shall be lex concursus determining the effects of such satisfaction, not the EIR Recast. Fourth, satisfaction has to happen after the opening of the main insolvency proceedings. The time of the opening of proceedings is linked to the time at which the judgment opening insolvency proceedings becomes effective, regardless of whether the judgment is final or not (Article 2(8) EIR Recast). Fifth, the obligation to return what has been acquired is subject to exceptions arising from Article 8 ("Third parties' rights in rem") and Article 10 ("Reservation of title"). Realization of a right in rem under the applicable lex...
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Request your trial- American Bankruptcy Institute
- European Union Regulation on Insolvency Proceedings: An Introductory Analysis
- Front Matter
- About the Authors
- About the Editor
- Acknowledgments
- Table of Contents
- Preface
- Chapter 1 EIR Recast Background
- Chapter 2 Scope of EIR Recast
- Chapter 3 International Jurisdiction
- Chapter 4 Law Applicable to Insolvency Proceedings and Their Effects
- Chapter 5 Recognition and Enforcement of Insolvency and Related Judgments
- Chapter 6 Powers of Insolvency Practitioners
- Chapter 7 Return and Imputation
- Chapter 8 Public Policy Exception
- Chapter 9 Insolvency Registers
- Chapter 10 Lodgment of Claims
- Chapter 11 Secondary Insolvency Proceedings
- Chapter 12 Communication and Cooperation in Insolvency
- Chapter 13 Insolvency Proceedings of Members of a Group of Companies
- Chapter 14 Other Issues
- Chapter 15 EIR Recast and Brexit
- Chapter 16 APPENDICES
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