EU Directive harmonising restructuring and insolvency finalised

EU Directive harmonising restructuring and insolvency finalised

We look at the new Directive of the European Parliament and of the Council on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures (the Restructuring and Second Chance Directive) and how it will harmonise restructuring, insolvency and discharge procedures across all Member States, including its potential effect on the UK.

 Original news

LNB News 06/06/2019 70

The European Commission is introducing rules on business insolvency designed to increase opportunities for companies in financial difficulties to restructure early to prevent bankruptcy and avoid dismissing staff. They are further designed to ensure entrepreneurs have the opportunity to do business post-bankruptcy.

 

When must Member States comply with the new EU Directive?

On 6 June 2019, the European Council adopted a Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU (COM)(2016) 72 (the Restructuring and Second Chance Directive).

The Restructuring and Second Chance Directive will enter into force 20 days after being published in the Official Journal (OJ) and Member States must implement provisions to comply with most provisions within two years from when it enters force (ie depending on OJ publication date—June/July 2021—see art 34, Restructuring and Second Chance Directive)(although the requirements of Title IV of the Restructuring and Second Chance Directive: training of judges and IPs, supervision and remuneration of practitioners and electronic communications, must be complied with within three years). 

Does Brexit mean that the UK is exempt?

This will depend on the timing of the UK's exit following a triggering of art 50 TEU. Note that under the terms of the last draft withdrawal agreement (Nov 2018), the transitional period would end on 31 December 2020, or such other date as extended under art 132. Accordingly, if the withdrawal agreement is approved in this format without any extension to the transition period, the UK would not need to comply with this Restructuring and Second Chance Directive.

However,

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.