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2016-11-11 Restructuring Directive published

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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: ec.europa.eu/newsroom

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.