Business Crisis: from the EU a second chance for debtors
Published in the Official Journal of the European Union the Directive (EU) 2019/1023 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt. The overall objective of the Directive is to reduce the differences between Member States' restructuring and insolvency frameworks and to improve restructuring processes throughout the EU, hereby allowing debtors a second chance. What does the directive provide?
Following the final adoption by European Council, on 26 June 2019, the Directive (EU) 2019/1023 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency), was published in the Official Journal of the European Union, thus concluding the legislative path of the proposal presented by the Commission in November 2016.
The overall objective of the Directive is to reduce the differences between Member States' restructuring and insolvency frameworks and to improve restructuring processes throughout the EU, hereby allowing debtors a second chance.
The distinctive elements of the new rules include:
-early warning and access to information - a system that allows the debtor to identify situations that could lead to the probability of insolvency and which highlights the need to act quickly;
preventive restructuring frameworks - the debtor will have access to a framework of preventive restructuring allowing her to take on a restructuring path, in order to prevent insolvency and to ensure economic sustainability so as to protect jobs and entrepreneurial activity. These frameworks are also available at the request of creditors and employee representatives;
- management's duties - the proposal introduces specific provisions regarding company managers' duties in insolvency proceedings. These provisions impose, for example, to take due account of the interests of creditors, other interested parties, stakeholders and bondholders, as well as to take on measures to prevent insolvency and avoid intentional or serious negligence;
- professional's appointment for preventive restructuring plans - in some cases (for example: if a transversal debts restructuring is necessary to adopt the restructuring plan; if this appointment is requested by the debtor or by the majority of the creditors; or if it is decided by the courts in the event of a general suspension of individual enforcement actions) the appointment of a professional in the field of restructuring assisting debtor in drawing up the plan is mandatory. In the other cases, the directive states that the appointment of a professional in the field of restructuring must be decided on a case-by-case basis by assessing the specific circumstances, except in cases where Member States can request such mandatory appointment;
- restructuring plans - the new rules provide for a series of mandatory elements of the plan, including the description of the debtor's economic situation, the parties involved and the respective classes, the terms of the plan;
- check-lists for restructuring plans - Member States, in order to help debtors restructure at low cost, must develop at national level comprehensive check-lists for restructuring plans, adapted to the needs and specificities of SMEs, making them available online. In addition, early warning tools should be put in place to warn debtors of the urgent need to act, taking into account the limited resources of SMEs for hiring experts;
- suspension of individual enforcement actions - the debtor can benefit from the suspension of individual enforcement actions to better negotiate a suitable restructuring plan in the context of a preventive restructuring framework. The initial suspension of individual enforcement actions could last for a maximum of four months.
Member States are required to adopt the provisions necessary to comply with this Directive by 17 July 2021, with the exception of certain provisions for which a longer deadline is foreseen (Article 34 of the Directive).
It should also be noted that some of the principles and provisions referred to in this directive already appears to be transposed in the "Code of Business Crisis and Insolvency" pursuant to Legislative Decree 12 January 2019 n. 14 which, for example, introduces the alerting procedures for assisted composition of the crisis, complying with the objectives set by the European legislator.