Control of a Legally Approved Arrangement Providing for the Conversion of Receivables into Shares in the Proceedings by the Registry Court

Abstract

The commented judgment is one of the more and more frequently appearing judgments important for the interface between insolvency law, in this case restructuring law, and company law. In most cases, these judgments are symptoms of resolving the so-called hard cases, in connection with a conflict of interest that may arise between the participants of the restructuring proceedings – creditors and economic owners of capital companies such as shareholders or stockholders. In the judgment, the court resolved the doubt if a decision approving the arrangement on the basis of which the share capital was increased, against which a complaint is lodged in the restructuring proceedings (art. 165 p. 7 of the Restructuring Law), may be subject to control by the registry court. Referring to the declaratory nature of the entry in the National Court Register, the court took the position that such control was inadmissible due to the emergence of share rights as of the date of the legally binding decision approving the arrangement. The commentary, in principle, approves the main thesis indicating that such control could prove useful in exceptional and particularly justified cases (hard cases), creating an opportunity to reverse the effects of a defective arrangement approval decision or to prevent the effects of a “directed” hostile takeover.