Proposal for European rules on restructuring and
second chance procedures
The new set of rules will be open to address both large and small businesses, entrepreneurs and consumers. Entrepreneurs and consumers shall benefit from a flexible restructuring framework, helping them to bring their business or private economy back on track. A suspension of enforcement actions will allow them to develop and agree with their creditors on a restructuring plan. After a maximum period of three years and subject to certain conditions, full discharge of their debt will be granted, according to the proposed directive. This shall encourage entrepreneurship and increase the rate of self-employment.
Also from an investor perspective the proposal is positive news, as it reduces the burden of risk assessment when considering cross-border investments within the EU's single market. Moreover, pre-insolvency restructuring procedures are supposed to contribute to higher recovery rates.
Under the proposed directive, loans that are required to implement a restructuring plan or to allow a business to continue to operate during negotiations of a restructuring plan will – under certain conditions – be protected against contestation and the lender's claims under such loans will be preferential in a following insolvency. This shall incentivise banks to financially support a restructuring plan and its implementation. Furthermore, these measures shall reduce the number of non-performing loans.
The role of the courts in the proposed restructuring process is limited to the protection of the interests of certain involved parties, such as e.g. dissenting creditors when it comes to a restructuring plan or the lenders of new financing in the context of a restructuring plan. In such cases, the restructuring plan must be approved by a court. The draft directive also provides for judges and practitioners in the field of re-structuring and second chance to have the necessary expertise and specialisation.
It is expected that the directive will be passed by mid-2017. From its entering into force, the Member States will have two years' time to implement the directive.
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Dr Christina Griebeler, M.I.C.L.
Lawyer (Rechtsanwältin),
Advokat (Sverige), Partner
T +49 - 69 - 97 40 12 - 39
M +49 - 172 - 677 53 72