European Preventive Restructuring
Directive (EU) 2019/1023
Abstract
Paulus
European Preventive Restructuring
The European Directive (Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2020 on preventive restructuring frameworks, on discharge of debts and disqualification, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt) has to be transposed into national legislation by 26 June 2021.
The main features of the Directive are:
-
the obligatory making available of early warning systems;
-
the obligatory creation of an insolvency avoidance mechanism;
-
the determination of certain insolvency related officers’ duties;
-
the uniformisation of discharge rules among member states; and
measures to increase the national insolvency laws’ efficiency.
Zusammenfassung
Paulus
European Preventive Restructuring
The European Directive (Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2020 on preventive restructuring frameworks, on discharge of debts and disqualification, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt) has to be transposed into national legislation by 26 June 2021.
The main features of the Directive are:
-
the obligatory making available of early warning systems;
-
the obligatory creation of an insolvency avoidance mechanism;
-
the determination of certain insolvency related officers’ duties;
-
the uniformisation of discharge rules among member states; and
measures to increase the national insolvency laws’ efficiency.
- I–XVIII Titelei/Inhaltsverzeichnis I–XVIII
- 1–9 Introduction (Paulus) 1–9
- 1–4 A. General overview; structure 1–4
- 1–3 I. The goals of the Directive 1–3
- 3–4 II. Structure 3–4
- 4–6 B. Historical development 4–6
- 6–7 C. Relationship to EU 2015/848; cross-border issues 6–7
- 7–9 D. Global positioning of the new instrument 7–9
- 9–35 Directive (EU) 2019/1023 of the European Parliament and of the Council 9–35
- 36–85 Title I: General Provisions 36–85
- 36–59 Article 1. Subject matter and scope (Dammann) 36–59
- 36–37 A. Purpose 36–37
- 37–46 B. Proceedings and measures falling within the scope of the Directive 37–46
- I. Preventive restructuring frameworks
- II. Proceedings leading to a discharge of debts
- III. Measures to increase the efficiency of procedures concerning the restructuring, insolvency and discharge of debt
- 46–46 C. Group of companies 46–46
- 46–48 D. Excluded classes of debtors 46–48
- 48–49 E. Excluded categories of claims 48–49
- 49–50 F. Possibility to limit preventive restructuring framework to financial restructuring? 49–50
- 50–50 G. The size of the debtors 50–50
- 50–59 H. The relationship between the Directive, the EIR 2015 and Brussels Ia 50–59
- I. Cross-border aspects of preventive restructurings
- II. The relationship between the Directive and the EIR 2015
- III. The scope of the EIR 2015
- IV. The scope of the EIR 2015 in light of the Directive
- V. The consequence of the application of the EIR 2015 to restructuring frameworks
- VI. The advantage of the two-step model
- VII. The application of Brussels Ia
- VIII. The relationship between the Directive and the Transfer Directive
- 60–78 Article 2. Definitions 60–78
- 60–61 A. Purpose of the norm (Paulus) 60–61
- 61–76 B. Definitions 61–76
- I. lit. 1: Restructuring (Dammann)
- II. lit. 2: Affected parties (Veder)
- III. lit. 3: Equity holder (Garcimartin)
- IV. lit. 4: Stay of individual enforcement actions (Richter)
- V. lit. 5: Executory contract (Richter)
- VI. lit. 6: Best-interest-of-creditors test (Veder)
- VII. lit. 7: New financing (Lynch Fannon)
- VIII. lit. 8: Interim financing (Lynch Fannon)
- IX. lit. 9: Entrepreneur (Paulus)
- X. lit. 10: Full discharge of debt (Paulus)
- XI. lit. 11: Repayment plan (Paulus)
- XII. lit. 12: Practitioner in the field of restructuring (Veder)
- 76–78 C. Par. 2 (Paulus) 76–78
- I. Insolvency
- II. Likelihood of insolvency
- III. Micro, small and medium-sized enterprises (‘SMEs”)
- 78–85 Article 3. Early warning and access to information (Rammeskow) 78–85
- 78–79 A. Purpose of the norm 78–79
- 79–79 B. Duty of Member States to establish early warning tools 79–79
- 79–80 C. Should early warning tools also apply to consumers etc.? 79–80
- 80–83 D. Which early warning tools must be available? 80–83
- I. Alert mechanisms
- II. Advisory services
- III. Directors’ duties to act upon an early warning
- 83–83 E. Information to employee representatives on early warning tools 83–83
- 83–83 F. Easy accessible online information about early warning tools 83–83
- 83–85 G. Support to employees’ representatives 83–85
- 85–249 Title II: Preventive Restructuring Frameworks 85–249
- 85–97 Chapter 1. Availability of preventive restructuring frameworks 85–97
- Article 4. Availability of preventive restructuring frameworks (Garcimartin)
- A. Purpose
- B. Structure
- C. Availability of preventive restructuring frameworks
- D. Suspicious debtors
- E. Viability test
- F. Number of times
- G. Procedural aspects
- H. Initiative
- 97–141 Chapter 2. Facilitating negotiations on preventive restructuring plans 97–141
- 97–103 Article 5. Debtor in possession (Veder) 97–103
- A. Purpose of the norm
- B. Debtor-in-possession
- C. Appointment of a practitioner in the field of restructuring
- D. Practitioner in the field of restructuring
- 103–124 Article 6. Stay of individual enforcement actions (Richter) 103–124
- A. General comments
- B. Specific parameters of the stay
- C. The debtor’s powers and duties during the stay
- 124–141 Article 7. Consequences of the stay of individual enforcement actions (Richter) 124–141
- A. General comments
- B. Specific rules related to the stay
- 141–220 Chapter 3. Restructuring plans 141–220
- 141–146 Article 8. Content of restructuring plans (Veder) 141–146
- A. Purpose of the norm
- B. Minimum content of the plan
- C. Checklists
- D. Third-party releases
- 146–167 Article 9. Adoption of restructuring plans (Dammann) 146–167
- A. Introduction
- B. Preliminary remark: the concept of ‘affected parties’
- C. Submission of restructuring plans, Article 9 par. 1
- D. Voting rights, Article 9 par. 2 and 3
- E. Classes of creditors, Article 9 par. 4 and 5
- F. Voting Majorities, Article 9 par. 6
- G. Agreement with the requisite majority, Article 9 par. 7
- 167–176 Article 10. Confirmation of restructuring plans (Garcimartin) 167–176
- A. Purpose
- B. Need of confirmation
- C. Conditions
- D. Viability and Insolvency tests
- E. Procedure
- 176–189 Article 11. Cross-class cram-down (Veder) 176–189
- A. Purpose of the norm
- B. Cross-class cram-down
- C. Request for confirmation by the debtor or with the debtor’s agreement
- D. Conditions for confirmation of a non-consensual plan
- E. Practitioner in the field of restructuring
- 189–198 Article 12. Equity holders (Garcimartin) 189–198
- A. Purpose
- B. Structure
- C. Definition of equity holders
- D. Alternatives
- 198–209 Article 13. Workers (Lynch Fannon) 198–209
- A. Purpose
- B. Emergence of Article 13 in the legislative development of the Directive
- C. Purpose
- D. Interface with other EU employment legislation
- E. Alternative restructuring proposals, frameworks and approaches
- 209–214 Article 14. Valuation by the judicial or administrative authority (Dammann) 209–214
- A. Purpose
- B. The valuation of the business as a going concern
- C. The liquidation value of the business
- D. Judicial valuation only where the plan is challenged
- E. The procedure to lodge a challenge
- F. The appointment of experts
- G. Best practice for the transposition of Article 14 of the Directive
- 214–216 Article 15. Effects of restructuring plans (Richter) 214–216
- A. The effects of restructuring plans
- 216–220 Article 16. Appeals (Paulus) 216–220
- A. Purpose
- B. Appeal
- 220–238 Chapter 4. Protection for new financing, interim financing and other restructuring related transactions 220–238
- 220–229 Article 17. Protection for new financing and interim financing (Lynch Fannon) 220–229
- A. Introduction
- B. History
- C. Purpose
- D. Protection for new and interim financing
- E. Priority for new and interim financing
- F. Conclusion
- 229–238 Article 18. Protection for other restructuring related transactions (Lynch Fannon) 229–238
- A. Purpose and background
- B. The scope of Article 18: introduction
- C. The scope of the Article: specific provisions
- D. Implementation of Article 18 – The role of the judiciary and or administrative authority
- E. Protection from actions or measures which render the transactions void, voidable or unenforceable
- 238–249 Chapter 5. Duties of directors 238–249
- Article 19. Duties of directors where there is a likelihood of insolvency (Corno)
- A. Purpose of Article 19 and of the implementing Member States’ rules
- B. Ambit of application
- C. Duties of directors as one of the minimum standards for preventive restructuring procedure
- D. The long way to Article 19
- E. Issues to be imposed on directors by Member States as a minimum
- 249–273 Title III: Discharge of Debt and Disqualifications 249–273
- 249–252 Article 20. Access to discharge (Paulus) 249–252
- 249–250 A. Purpose 249–250
- 250–251 B. Access to full discharge, par. 1 250–251
- 251–252 C. Proportionality, par. 2 251–252
- 252–252 D. Fresh start, par. 3 252–252
- 253–255 Article 21. Discharge period (Paulus) 253–255
- 253–253 A. Purpose 253–253
- 253–254 B. Start of discharge period, par. 1 253–254
- 254–255 C. End of discharge period, par. 2 254–255
- 255–255 D. Permissible side effect, par. 3 255–255
- 255–259 Article 22. Disqualification period (Rammeskow) 255–259
- 255–256 A. Purpose of the norm 255–256
- 256–257 B. Article 22 concerns entrepreneurs 256–257
- 257–258 C. Which kinds of disqualifications must cease according to Article 22 257–258
- 258–258 D. Disqualifications concerning specially supervised activities 258–258
- 258–259 E. When must a disqualification cease 258–259
- 259–259 F. No requirement for additional procedures to cease a disqualification 259–259
- 261–269 Article 23. Derogations (Rammeskow) 261–269
- 261–261 A. Purpose of the norm 261–261
- 261–262 B. Entrepreneurs that have acted dishonestly or in bad faith 261–262
- 262–264 C. Derogations in other well-defined circumstances 262–264
- I. Violation of obligations under the repayment plan etc
- II. Failure to comply with information or cooperation duties
- III. Abusive applications for discharge
- IV. Limitation of further applications for discharge
- V. The cost of the procedure leading to the discharge of debt is not covered
- VI. Safeguarding the balance between the rights of the debtor and the rights of one or more creditors
- 264–266 D. Longer discharge period 264–266
- I. Longer discharge period in order to preserve the entrepreneur’s business
- II. Longer discharge period where the entrepreneur’s main residence is not realised
- 266–267 E. Exclusion of certain categories of debt from the discharge 266–267
- 267–268 F. Longer disqualification periods for certain professions 267–268
- I. Professions with specific rules on ethics, reputation or expertise
- II. Professions dealing with the management of the property of others
- III. Par. 5 apply despite a discharge
- IV. Par. 5 merely concerns the disqualification period
- 268–269 G. Disqualifications ordered by other authorities 268–269
- 270–273 Article 24. Consolidation of proceedings regarding professional and personal debts (Richter) 270–273
- 270–271 A. General comments 270–271
- 271–273 B. Specific rules related to consolidation of proceedings 271–273
- I. Inseparable debts (Article 24 par. 1)
- II. Separable debts (Article 24 par. 2)
- 273–287 Title IV: Measures to increase the efficiency of the procedures concerning restructuring, insolvency and discharge of debt 273–287
- 273–278 Article 25. Judicial and administrative authorities (Corno) 273–278
- 273–274 A. Purpose of Title IV 273–274
- 274–277 B. Scope of Article 25 274–277
- I. Content and reasons of its text
- II. Measures regarding judicial and administrative authorities, when dealing with procedures concerning restructuring, insolvency and discharge of debt (Article 25 par. 1, lit. a)
- III. Measures regarding procedures concerning restructuring, insolvency and discharge of debt (Article 25 par. 1, lit. b)
- 277–277 C. Limits to the application of measures set by Article 25 277–277
- 277–278 D. Ambit of application of the measures set by Article 25 277–278
- I. Measures set by Article 25, par. 1, lit. a
- II. Measures set by Article 25, par. 1, lit. b
- 279–283 Article 26. Practitioners in procedures concerning restructuring, insolvency and discharge of debt (Veder) 279–283
- 279–280 A. Purpose of the norm 279–280
- 280–281 B. Training and expertise 280–281
- 281–281 C. Eligibility 281–281
- 281–282 D. Appointment, removal and resignation 281–282
- 282–282 E. Objections 282–282
- 282–283 F. Best Practices 282–283
- 283–285 Article 27. Supervision and remuneration of practitioners (Veder) 283–285
- 283–283 A. Purpose of the norm 283–283
- 283–284 B. Supervision 283–284
- 284–285 C. Codes of conduct 284–285
- 285–285 D. Remuneration 285–285
- 285–287 Article 28. Use of electronic means of communication (Paulus) 285–287
- 288–293 Title V: Monitoring of Procedures Concerning Restructuring, Insolvency and Discharge of Debt 288–293
- 288–291 Article 29. Data collection (Richter) 288–291
- 288–289 A. General comments 288–289
- 289–291 B. The data to be collected 289–291
- I. A dataset of restructurings and insolvencies (Article 29 par. 1)
- II. Repeat filers (Article 29 par. 2)
- III. Further data to be collected voluntarily (Article 29 par. 3)
- IV. Breakdowns of the data collected (Article 29 par. 4)
- V. Working with samples (Article 29 par. 5)
- VI. Reporting periods, the communication form and presentation of the national data (Article 29 par. 6 to 8)
- 291–293 Article 30. Committee procedure (Paulus) 291–293
- 293–298 Title VI: Final Provisions 293–298
- 293–294 Article 31. Relationship with other acts and international instruments (Paulus) 293–294
- 294–294 Article 32. Amendment of Directive (EU) 2017/1132 (Paulus) 294–294
- 294–295 Article 33. Review clause (Paulus) 294–295
- 295–296 Article 34. Transposition (Paulus) 295–296
- 296–297 Article 35. Entry into force 296–297
- 297–298 Article 36 297–298
- Selected Bibliography
- Borg/van Zwieten (eds.) Commentary on the European Insolvency Regulation, 2016.
- Brinkmann (ed.), The European Insolvency Regulation, 2019.
- Lynch Fannon I and Murphy G, Corporate Insolvency and Rescue, 2nd edn. Bloomsbury 2012.
- Morgen C, Präventive Restrukturierung – Kommentar und Handbuch zur Richtlinie über präventive Restrukturierungsrahmen, 2019.
- Richter T and Thery A, Claims, Classes, Voting, Confirmation and the Cross-Class Cram-Down, INSOL Europe Guidance Note on the Implementation of Preventive Restructuring Frameworks under EU Directive 2019/1023, INSOL Europe 2020; available at: https://www.insol-europe.org/publications/guidance-notes (cited: Richter/Thery).
- Rotaru, The Restructuring Directive: A Functional Law and Economics Analysis from a French Law Perspective, Droit et Croissance, 2019.
- Stanghellini/Mokal/Paulus/Tirado, Best Practices in European Restructuring – Contractualised Distress Resolution in the Shadow of the Law, Wolters Kluwer – CEDAM, 2018 (cited: Stanghellini/Mokal/Paulus/Tirado, European Best Practices).
- Tollenaar N, Pre-insolvency Proceedings, A Normative Foundation and Framework, Oxford University Press 2019 (cited: Tollenaar, Pre-insolvency Proceedings).
