[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN ISRAEL] 41
creditors while allowing it to remain active and without appointment of a trustee. During the period of the protective negotiations, a complete stay of proceedings shall not apply but the creditors may not file an application for a commencement of insolvency proceedings order against the corporation and may not call for the immediate repayment of debt. If the temporary provision shows positive results in practice, there are good chances it will be prolonged. Prior to the enactment of the Law, Israeli courts generally did not allow a debtor to terminate agreements simply because a receiver believed that it could receive a better return within an alternative commercial framework. While the prior statutory framework permitted courts in insolvency proceedings to terminate "burdensome" or "unprofitable" executory contracts, courts generally did not allow licensors to terminate agreements that were moderately profitable. Section 70(d) of the new Insolvency Law provides that a court may allow for the cancellation of all or part of an executory contract if the court determines that such cancellation is either "required for the economic rehabilitation" of the debtor or alternatively will "increase the proportion of the debt that will be repaid to the creditors". The court may approve the cancellation of the contract after giving the other party to the contract the opportunity to voice its position, and may, at the request of the other party, order the cancellation of only part of the contract, if it is found to be sufficient for economic restoration or to reduce such debt rate. If an existing contract is revoked under this section, all of the corporation's rights and obligations under the contract will cease, but will not be revoked to prejudice another person's rights and obligations but to the extent
necessary to release the corporation and its assets. Proceedings for individuals Under the new Law, a substantial part of the administration of insolvency proceedings related individuals has been moved from the court to administrative authorities. Insolvency proceedings below NIS150,000 will be administered entirely by the Enforcement and Collection Authority. Insolvency proceedings above NIS150,000 will be conducted before the official receiver (the Insolvency Commissioner) and, if relevant, before the court with respect to further, more specific matters. At the end of this audit by the Collection Authority/Insolvency Commissioner a payment plan is established, at the end of which the debtor will receive a discharge. The default scenario is a payment period of three years. The court reserves the right to increase or decrease the period depending upon the circumstances of the case. If the debtor has no proven financial ability to pay the creditors, he may be granted an immediate discharge. According to the new law a person who is in bankruptcy proceedings, and who owns an apartment registered with the Israel Lands Administration or the Land Registry - may find himself in a particularly problematic situation. This is because the current legislation abolishes the protection afforded by the Tenant Protection Act to the debtor and his family members residing in the property he owns. Hence in some cases it does not necessarily pay off for debtors to resort to insolvency proceedings, e.g., when the debtor owns a real estate property whose value according to the appraiser's assessment is significantly higher than the debtor's debts. If the value of the
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
Made with FlippingBook Online newsletter maker