European Insolvency Law: Deus Ex Machina?

According to the EC, the proposed directive intends to shift the focus from liquidation toward opportunities for distressed companies to restructure early on in order to prevent insolvency and ensure that entrepreneurs get a "second chance" after a bankruptcy.1 The proposal was preceded by...

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Bibliographic Details
Published in:American Bankruptcy Institute journal 2017-07, Vol.36 (7), p.34
Main Authors: Gallagher, Adam, Klimscha, Florian
Format: Article
Language:English
Subjects:
Bankruptcy laws
Bankruptcy reorganization
Business failures
Competent authority
Contract negotiations
Debt
Efficiency
EU directives
Insolvency
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Summary:According to the EC, the proposed directive intends to shift the focus from liquidation toward opportunities for distressed companies to restructure early on in order to prevent insolvency and ensure that entrepreneurs get a "second chance" after a bankruptcy.1 The proposal was preceded by an EC recommendation issued in 2014 for certain minimum standards.2 While the recommendation did not have a binding effect and was widely disregarded by European Union (EU) member states, it was an important step reflecting the ongoing change of paradigm. Facilitating Negotiations and Stay-of-Enforcement Actions Currently, in most EU member states, debtors either lose certain powers of control during restructuring proceedings (eg., France and the Netherlands) or are left in possession of them but under the supervision of an insolvency practitioner (ieg,, Austria, Germany, Estonia, Finland and France) or the competent court (e.g., Belgium).6 To encourage enterprises to deal with their financial difficulties at an early stage and apply restructuring measures, the proposal provides that debtors accessing restructuring measures shall remain totally or partially in control of their assets, as well as their dayto-day businesses. The stay shall initially be limited to a maximum period of no more than four months with the option of an extension up to 12 months (to be granted upon the request of the debtor or creditors, provided that there is evidence of progress in the restructuring and no unfair prejudice to affected parties' interests).· Although many of the member states1 insolvency frameworks currently do provide for such extendable (e.g., France,...
ISSN:1931-7522