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Blog 2016

2016-11-11 Restructuring Directive published

Tuesday 22 November 2016 European Commissioner Věra Jourová, in charge of Justice, Consumers and Gender Equality, presented a Proposal for a Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU (COM)(2016) 723 final ('Restructuring Directive). It contains an Explanatory Memorandum (23 pages!) and the text with 47 recitals and 36 Articles. It enters into force 20 days after publishing in the Offficial Journal of the EU, and Member States (Article 34) shall implement '... the laws, regulations and administrative provisions necessary to comply with this Directive' 2 years from the date of entry into force. See for all related documents From the press release I tkake that the proposed Directive '... focuses on three key elements: • Common principles on the use of early restructuring frameworks, which will help companies continue their activity and preserve jobs. • Rules to allow entrepreneurs to benefit from a second chance, as they will be fully discharged of their debt aftera maximum period of 3 years. Currently, half of Europeans say they would not start a business because of fear of failure. • Targeted measures for Member States to increase the efficiency of insolvency, restructuring and discharge procedures. This will reduce the excessive length and costs of procedures in many Member States, which results in legal uncertainty for creditors and investors and low recovery rates of unpaid debts. The press realease goes on to provide that the new rules will observe the following seven '... key principles to ensure insolvency and restructuring frameworks are consistent and efficient throughout the EU: • Companies in financial difficulties, especially SMEs, will have access to early warning tools to detect a deteriorating business situation and ensure restructuring at an early stage. • Flexible preventive restructuring frameworks will simplify lengthy, complex and costly court proceedings. Where necessary, national courts must be involved to safeguard the interests of stakeholders. • The debtor will benefit from a time-limited 'breathing space' of a maximum of four months from enforcement action in order to facilitate negotiations and successful restructuring. • Dissenting minority creditors and shareholders will not be able to block restructuring plans but their legitimate interests will be safeguarded. • New financing will be specifically protected increasing the chances of a successful restructuring. • Throughout the preventive restructuring procedures, workers will enjoy full labour law protection in accordance with the existing EU legislation. • Training, specialisation of practitioners and courts, and the use of technology (e.g. online filing of claims, notifications to creditors) will improve the efficiency and length of insolvency, restructuring and second chance procedures. The 'Brussels staff' will move into the next phase of negotiating the proposal with the Member States and with the European Parliament. The Expert Group (I am one of its members) will continue advising the staff and, thus, the European Commission.  

2016-11-doc10 TRI Leiden news

Turnaround, Rescue and Insolvency (TRI) Leiden proudly presents its 11th newsletter, providing an overview of its recent research output and ongoing developments in the TRI field. Some of the topics in this newsletter are: Business Rescue - discussing current results at ELI Annual Conference in September 2016 in Ferrara (Italy), **it happens, the inaugural Address of Professor Reinout Vriesendorp, a seminar on hindsight bias in insolvency law, psychological influences in bankruptcy cases and the need for big data, and the 5th Annual Restructuring Conference in Kufstein (Austria) early October. tri-leiden-newsletter-november-2016 The reporters for the project Business Rescue are on Youtube (taken in a 35plus degrees faculty room!), see, whilst the Conference in Kufstein has been reviewed (in German) by prof. Exler. See indat-report-5-isr-2016

2016-11-doc9 Voorzitter RvA Stichting Digitrage

Persbericht: Bob Wessels Nieuwe Voorzitter Raad van Advies Stichting Digitrage Prof. mr. Bob Wessels (1949) is per 1 november 2016 benoemd tot voorzitter van de Raad van Advies van DigiTrage. Bob Wessels is juridisch adviseur en arbiter. Hij was ruim 25 jaar raadsheer-plaatsvervanger in het Gerechtshof Den Haag en 20 jaar lid/voorzitter van de vaste Geschillencommissie Achmea. Voor zijn emeritaat in 2014 was Wessels 25 jaar hoogleraar (Internationaal Insolventierecht, Universiteit Leiden 2007-2014, burgerlijk recht en handelsrecht, Vrije Universiteit Amsterdam 1988-2008). Hij heeft vele publicaties en onderzoeken op zijn naam staan, nationaal en internationaal. Sinds 2010 is hij Expert counsel van de Europese Commissie op het terrein van insolventievraagstukken. Hij is ook External Scientific Fellow bij het Max Planck Institute Luxembourg for Procedural Law. Wessels volgt prof. mr. Bert van Schaick op. De bestuursvoorzitter van DigiTrage, mr. Gijs Poorter zegt: “Bob Wessels brengt een schat aan ervaring en expertise mee om deze belangrijke positie in te vullen. Hij is een betrokken en inspirerend jurist die met humor en passie onze jonge organisatie verder kan vormgeven. Een waardig opvolger van Bert van Schaick die wij veel dank voor zijn rol bij onze start verschuldigd zijn.” Wessels: ‘Ik zie ernaar uit om met mijn collega’s in het bestuur en de Raad van toezicht van Digitrage te adviseren op het terrein van wat wij als de kernwaarden van geschillenbeslechting zien. En ook hoe deze in de telkens meer van belang wordende wereld van elektronische informatie- en communicatie kunnen worden gewaarborgd’, stelt Wessels. Noot voor de redactie: foto Bob Wessels is te downloaden via Profiel DigiTrage De stichting DigiTrage is in 2014 gestart met het aanbieden van digitale arbitrage voor incassozaken. De combinatie van een online procedure en arbitragewetgeving maakt het mogelijk om betalingsgeschillen laagdrempelig op te lossen tegen minder kosten. Met haar arbiters realiseert DigiTrage met recht een alternatief voor de overheidsrechter. Voor vragen en interviews kunt u contact opnemen met het secretariaat van DigiTrage, via mail of telefoon 088- 0505400.  

2016-11-doc8 Threat to financial stability can curtail shareholders' rights

The global financial crisis has posed, among many other things, pressure of the rights of shareholders of banks when States were under a duty to improve these banks’ stability. An illustrative case has been decided by last week by CJEU 8 November 2016, C-41/15; ECLI:EU:C:2016:836 (Gerard Dowling and Ors v Minister for Finance of Ireland). Based on an EU loan to Ireland (up to 22.5 billion euros) the Irish gouvernment agreed to improve the stability of the financial sector in its country, an agreement to recapitalise Irish Life and Permanent plc (‘ILP’) before the end of July 2011 being a part of the deal. ILP is an institution, incorporated in Ireland. Its shares are held by Irish Life & Permanent Group Holdings plc (‘ILPGH’). The Irish central bank demanded ILP to increase its equity by 4 billion euros. In July 2011 the Minister of Finance proposed to the shareholder to provide a capital injection of 2.7 billion euros in ILP to facilitate the recapitalization. That proposal was rejected by the extraordinary general meeting of ILPGH held on 20 July 2011, which meeting mandated the directors of ILP to examine other recapitalisation options and to request, for that purpose, an extension of the recapitalisation deadline. Pursuant to the Irish Credit Institutions (Stabilisation) Act of 2010, in order to recapitalise ILP, the Minister prepared a Proposed Direction Order, which he submitted to the High Court, which adopted it in the terms sought, directing ILPGH to issue, in return for the capital injection of 2.7 billion euro, new shares to the Minister at a share price dictated by him, that is at a price 10% below the quoted share price of 23 June 2011. Consequently, the Minister obtained, without any decision having been made by the general meeting of shareholders of ILPGH, 99.2% of the shares of that company. In addition, the delisting of the company on the Irish and London Stock Exchanges was ordered. The shareholders of ILPGH clearly reject and a legal conflict is brought to the court. They are finding their arguments in the Second Directive. The Second Directive provides inter alia for the following: (i) ‘Shares may not be issued at a price lower than their nominal value, or, where there is no nominal value, their accountable par.’ (Article 8(1)), (ii) ‘Any increase in capital must be decided upon by the general meeting …’ (Article 25(1)), and (iii) ‘Whenever the capital is increased by consideration in cash, the shares must be offered on a pre-emptive basis to shareholders in proportion to the capital represented by their shares …’, and ‘The right of pre-emption may not be restricted or withdrawn by the statutes or instrument of incorporation ... (Article 29(1) and (4)). In summary, the Second Directive contains a preferential right for existing shareholders, it is required to issue a decision by the general meeting and forbids it to issue shares below nominal value. All these requirements are not respected in by the Irish Minister of Finance. The Irish High Court decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling (reformulated by the ECJ): must the articles mentioned be interpreted as precluding a measure, such as the Minister’s Direction Order, adopted where there is a serious disturbance of the economy and financial system of a Member State that threatens the financial stability of the European Union, the effect of that measure being to increase the share capital of a public limited liability company, without the approval of the general meeting of that company, new shares being issued at a price lower than their nominal value and the existing shareholders being denied any pre-emptive right to subscribe. The CJEU considers that the Minister’s Direction Order is not a measure taken by a governing body of a public limited liability company as part of its normal operation, but it is ‘… an exceptional measure taken by the national authorities intended to prevent, by means of an increase in share capital, the failure of such a company, which failure, …, would threaten the financial stability of the European Union’. The protection conferred by the Second Directive on the shareholders and creditors of a public limited liability company, with respect to its share capital, does – so concludes the CJEU – not extend to a national measure of that kind that is adopted in a situation where there is a serious disturbance of the economy and financial system of a Member State and that is designed to overcome a systemic threat to the financial stability of the European Union, due to a capital shortfall in the company concerned. The provisions of the Second Directive do not therefore preclude an exceptional measure affecting the share capital of a public limited liability company, such as the Direction Order, taken by the national authorities where there is a serious disturbance of the economy and financial system of a Member State, without the approval of the general meeting of that company, with the objective of preventing a systemic risk and ensuring the financial stability of the European Union, thus the CJEU referring by analogy to the judgment of 19 July 2016, Kotnik and Others, C 526/14, EU:C:2016:570) (See paragraphs 50-51). For this reason the CJEU dedides (i) that Article 8(1) and Articles 25 and 29 of the Second Directive are required by Member States of companies in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent, and (ii) that these articles must be interpreted as not precluding a measure, such as the Direction Order at issue in the main proceedings, adopted in a situation where there is a serious disturbance of the economy and the financial system of a Member State threatening the financial stability of the European Union, the effect of that measure being to increase the share capital of a public limited liability company, without the agreement of the general meeting of that company, new shares being issued at a price lower than their nominal value and the existing shareholders being denied any pre-emptive subscription right. Concluding: necessity knows no law (‘nood breekt wet’).

2016-11-doc7 Some recent articles

In November I will be teaching in Leiden 3x3hours for non-Dutch Advanced Master students. In addition to mandatory reading (on Blackboard) they may be interested in the following topics, all written by me: Case Note CJEU 10 December 2015, C-564/14 (Kornhaas v. Dithmar), in: European Company Law 13, no. 2 (2016): 82-83, also available via OHADA and the EU, in: Global Restructuring Review May 2016, 18-19, also available via Brexit and Insolvency – A View from the Continent, in: Oxford Business Law Blog 1 August 2016, Should the EU adopt the Model Law?, in: Global Restructuring Review August 2016, 27-28, also available via Three Paradigm Shifts in Recent Bank Insolvency Law, in: (2016) 31 Journal of International Banking Law and Regulation, pp. 396-400 (with prof. Matthias Haentjens), also available via