Is mutual debt claims set-off admissible in restructuring proceedings?

By May 15, 2017August 28th, 2017Restructuring

Set-off is a procedural defence regulated by the Civil Code. A question, however, arises how the provisions of the Civil Code correlate with the provisions of the restructuring law.

Firstly, it needs to be stated that there are no limitations to the debt claims set-off provided that such debt claims are not under the arrangement with creditors procedure. Thus, it applies to the debt claims that have not been included in the arrangement due to their subject matter or effective date (in other words to the claims effective after the opening of the proceedings).

In principle, mutual debt claims set-off is also admissible with respect to the claims effective prior to the opening of the proceedings and with respect to the debt claims effective via acquisition by way of the repayment of the debt for which the buyer is personally or materially liable. In such a case, the buyer’s liability for the debt needs to be effective prior to the date of  filing the motion for the opening the restructuring proceedings by the persons authorized thereto.

In some cases  the set-off of the debtor’s claims against the claims of the creditor is admissible under the restructuring law provided that the debtor’s claim has been effective prior to the opening of the proceedings and the creditor’s claim against the debtor has become effective after their opening.

It must, however, be remembered that if a creditor wants to apply such set-off, he/she is obligated to submit a statement in this respect to the debtor and if the debtor is under the receivership, then to the official receiver.

Legislation provides for a 30 day time limit for the submission of such a set-off statement which runs as of  the day of the opening of the restructuring proceedings. If the grounds for such a statement shall arise at a later date (after the opening of the proceedings), then the aforementioned time limit starts running from the day the justified grounds for the set-off arise. In such a case the time limit is also a 30 day period. It is important to remember that the aforementioned time limit is final, which means that any statement submitted after its expiry shall be ineffective.

Author: Karolina Pacholska