Objections for the record – when are they advisable?

Jolanta Mąsiorska

In an article for Rzeczpospolita Piotr Szymczyk explains the nature of objections for the record and how to use them. When is such an objection necessary? How to raise one correctly and why should you use the mechanism judiciously? See the article for answers to all these questions.

Setoff during bankruptcy – is it always available?

Having got the news of their customers going bankrupt, many creditors wonder if they can resort to setoff. The answer is “yes, but …”.

It is generally admissible to perform a setoff vis-à-vis a bankrupt counterparty. But, crucially, that is on condition that both claims (yours and the other party’s) exist at the time bankruptcy is declared.

Why is it important?

For a company having had a course of substantial mutual dealings with a bankrupt counterparty (e.g. where they were simultaneously supplier and customer vis-à-vis each other), setoff can a way to mitigate losses. Instead of filing a proof of claim (and then waiting for years in the hopes of recovering at least a fraction of the total amount), the creditor may “enforce” its claim by offsetting it against a debt it otherwise owes to the debtor. This helps to mitigate liquidity risks, accelerate settlement for accounting purposes and avoid engaging in what often turns out to be lengthy insolvency procedures.

Referring to invoice date can be misleading!

Creditors sometimes believe their claim arose on the date they issued their invoice. Yet, from the point of view of civil law, their claim may well have arisen earlier, e.g. on completion of service, delivery of goods or some other occurrence giving rise to the duty to pay. This can be crucial for determining whether their claim exists at the time bankruptcy is declared and, thus, whether setoff is available. You will want to ensure this issue is carefully analysed as it can give you a real chance to reduce your losses.

Conclusion?

If you want to use setoff, you should first check if your claim existed already when your counterparty was declared bankrupt. This is a fundamental requirement allowing for an effective setoff.

Are you in doubt if your claim is open to being set off? Or perhaps you need help filing a proof of claim? By all means do contact us. We will help assess the situation and guide you step-by-step throughout the entire process.