EU Commission proposes Directive on business insolvency and restructuring frameworks

EU Commission proposes Directive on business insolvency and restructuring frameworks

The EU Commission has issued a proposal for a Directive on preventive restructuring frameworks, a second chance for businesses and measures to increase the efficiency of restructuring, insolvency and discharge procedures. The proposal has been draw up as part of the Capital Markets Union Action Plan and the EU's Single Market Strategy and is intended to contribute to removing barriers to the free flow of capital and build on national regimes that work well.

The proposed Directive focuses on three key elements:

• common principles on the use of early restructuring frameworks, which are intended to help companies continue and preserve jobs;
• rules to allow entrepreneurs a second chance through the full discharge of their debt after a maximum period of three years; and
• targeted measures for Member States to improve the efficiency of insolvency, restructuring and discharge procedures.

The proposed rules have been drawn up on the basis of certain key principles to ensure the consistency of EU insolvency and restructuring frameworks. Among other things, the principles include early warning tools for debtors, access to early restructuring for viable enterprises and a time limited 'breathing space' from enforcement action for debtors. Dissenting minority creditors and shareholders would be able to be outvoted under strict conditions in order not to jeopardise restructuring and new financing would be protected to increase the chance of a restructuring being successful.

The proposed Directive will be subject to the ordinary legislative procedure and, once adopted by the co-legislators, will have to be transposed into national law in Member States.

Alongside the text of the proposed Directive, the Commission has also published a series of questions and answers (Q&As), a high-level factsheet and a series of factsheets that set out a brief overview of the current insolvency rules in each Member State.