It is less than twenty-five years ago that in American legal literature the insolvency systems of some Western European countries were compared to a criminal law system. Everywhere the clock struck: liquidation of the business’s assets, piece-meal, everything to the creditors, with the result that the company had disappeared. In the original European Insolvency Regulation, which came into force in 2002, the term “restructuring” is mentioned (by accident?) only once in one of the recitals. The person we now know as “insolvency practitioner” (IP) in these days had the overarching European name “liquidator”.
Today, we know better. The shift from traditional liquidation to (preventive) restructuring of viable companies with financial difficulties has set in. The introduction of the debtor-in-possession (DIP) also changed the governance in restructuring processes. Debtors are no longer necessarily and completely deprived of the management of their assets and the control of their business by the appointment of an independent and impartial IP. Instead, restructuring and insolvency laws in EU Member States increasingly provide for one or more processes in which a DIP retains all or at least partial control over its assets and the businesses’ day-to-day operations.
Evidently, traditional liquidation still has a prominent place in the insolvency landscape. Some companies do not have a clear business plan, are lax with accounting or do not keep an eye on the liquidity of the company. Weak management just messes around at the expense of creditors. Such a company is of course hopeless, has no future and must be taken off the market with a strict liquidation process. In the EU, however, there is a new kid on the block: the DIP in charge of restructuring of a financial distressed, however viable business. There is a paradigm shift from piecemeal liquidation to (preventive) restructuring which has furthered the rescue of these businesses. This has changed the way the market, creditors and courts look at debtors and the role that debtors can and should play in it. No longer is the default approach to fully divest a debtor in favour of an IP. Instead, restructuring and insolvency laws increasingly provide for one or more processes where a DIP remains in control of its estate and of the business’ day-to-day activities.
What is the precise role within the broader governance of such a DIP-led processes? How can DIPs be entrusted to contribute to resolving the financial distress, with adequate governance, to ensure timely restructuring with the confidence of affected parties and other stakeholders? More fundamental questions arise, such as how should a DIP be legally qualified? Which debtors can qualify as DIPs? What are the rights and obligations of a DIP? What forms of supervision of a DIP are necessary and appropriate? Under what conditions can a debtor’s position as a DIP be terminated? Until now, the special role of the DIP in the governance of restructuring and insolvency processes has received limited attention. This is remarkable because the concept of the debtor as DIP raises various legal and practical questions. With a recent PhD research, defended first week in July 2025 at University of Leiden, the author, Gert-Jan Boon, has provided many questions with a motivated answer to fill the existing lacuna.
His book examines these questions by means of a comparative analysis of the role of the DIP in the US, the EU and in Dutch restructuring and insolvency law. In doing so, a model is developed for the governance of DIPs within restructuring and insolvency proceedings, and a distinction is made between different types of DIPs. To address the vacuum in European knowledge, the study examines DIPs and address questions, such as can a debtor as DIP be defined and legally characterised in US, EU and Dutch restructuring and insolvency laws? And comparing these legal systems what should be the requirements to become a DIP, its rights and duties, and what mechanisms should be employed to supervise a DIP, especially under Dutch restructuring and insolvency law?
From his comparative research the conclusions have been drawn in the form of recommendations in relation to (i) DIPs in restructuring and insolvency governance, (ii) requirements for becoming a DIP, (iii) rights and duties of a DIP, (iv) supervision of a DIP, and (v) ceasing as a DIP and thus the termination of a DIP-process.
The author of this detailed study submits that a DIP is a simple and straightforward concept, allowing a debtor in a restructuring or insolvency process to take care of his own business, also when resolving the financial problems that threaten the future of the debtors’ business. It is submitted that, where the governance of restructuring and insolvency processes has more far-reaching implications than one would expect, an improved process of corporate governance and creditor governance should be incorporated in the restructuring and insolvency governance system. This raises many questions on how to regulate the position of the debtor in relation to various other actors involved in such a process (‘practitioners in the field of restructuring’, other bodies assisting or supervising the debtors, such as CROs). DIP governance, therefore, imposes a balancing exercise especially for legislators and courts in regulating the governance in such processes. This is not new, because DIP processes are not unknown in the EU. Nonetheless, determining what checks and balances are needed is still very much in development. The study has analysed the approaches adopted in US, EU and Dutch restructuring and insolvency processes. It reviewed the logic and limits of these approaches and has aimed to provide a framework for structuring and broadening our understanding of DIP governance.
Following the recent rise of new and reformed DIP processes in the EU and beyond, the insights of this study will be tested as in practice various questions on DIP processes, in particular the DIP governance, will no doubt arise in future dealings with DIPs. At the same time – the author submits and the end of his over 500 pages long study – it is clear, “… the DIP is here to stay.”
During the last years, EU Member States have implemented the Preventive Restructuring Directive (2019/1023), so the DIP-concept is freshly backed into domestic insolvency systems. I certainly do not want to claim that Europe has now entered an enlightened era, but that fundamental changes in the law in the EU have taken place is crystal clear. They should still take place, by further elaborating and detailing the currently new concept of the DIP and its rights and obligations. So that it is still clear what a DIP can and may do and in what way its actions can be monitored. The DIP is here to stay, but in a way that confidence in the sound process can continue to exist.
The study is important for (litigation-hungry) advisors of creditors and shareholders, serving the interests of their client in those systems where the DIP is has been worked out in a fragmented manner. Legislators from EU Member States as well as the legislative branch of the EU can directly benefit from the study, as we know that in the midst of last decade certain preventive restructuring frameworks (with a DIP in control) have been included in the European Insolvency Regulation (recast) (EIR 2015). But what was known ten years ago about what we know now about the DIP? Its position has certainly not been structurally thought through in the text of the EIR 2015, so that there is uncertainty about which obligations and rights of the DIP exist under the Regulation. This also makes it unclear, if a preventive restructuring framework of country A is recognized in countries B and C, what exactly the rights and obligations of the DIP and of the parties affected by the framework are.
More recently, in the European Commission’s Proposal for a harmonisation of certain aspects of insolvency of 2022, the DIP was reiterated as a form of governance in the context of both the so-called “pre-pack proceedings” as well as the simplified winding-up of micro-enterprises, embracing a clear move away from an appointed IP process towards DIP-controlled regimes. The European Commission’s staff, who are currently working on the latest changes, would be wise to make use of this recent, broadly based and detailed study.
Of course, the question remains for everyone whether, and to what extent, the American way of thinking about the DIP, and its interpretation in case law, can be applied in the European landscape, where the cultural and socio-economic circumstances are different between Member States themselves, but certainly just as different from the more market-oriented USA. And surely, the questions raised (and the recommended directions for answers) become more complex in the context of cross-border cases. Is a DIP representing a debtor in a foreign restructuring and insolvency process? What room is left for a DIP in the case of concurrence with an IP is a foreign or domestic proceeding? Can the legislator clearly and in detail, within a reasonable period of time, implement the changes that the market asks for needs? Is the DIP here to stay?
Reference
J.M.G.J. Boon, Debtors in Possession. A Comparative Legal Study of the Role of Debtors in US, EU and Dutch Restructuring and Insolvency Law, Ph.D Leiden, 2025, to be published by Wolters Kluwer in 2025.
This is a slightly adapted version of a regular column Bob Wessels is writing for Global Restructuring Review (GRR) on the topic of cross-border restructuring and insolvency in a European context. GRR is a subscription-only publication and the column appeared in GRR on 10 July 2025. See www.globalrestructuringreview.com.