Giving entrepreneurs a second chance: new rules on business insolvency adopted
The EU is giving reputable bankrupt entrepreneurs a second chance, and making it easier for viable enterprises in financial difficulties to access preventive restructuring frameworks at an early stage to prevent insolvency.
The Council formally yesterday adopted the directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures. This decision marks the end of the legislative procedure.
The overall objective of the directive is to reduce the most significant barriers to the free flow of capital stemming from differences in member states' restructuring and insolvency frameworks, and to enhance the rescue culture in the EU based on the principle of second chance. The new rules also aim to reduce the amount of non-performing loans (NPLs) on banks' balance sheets and to prevent the accumulation of such NPLs in the future. In doing so, the proposal aims to strike an appropriate balance between the interests of the debtors and the creditors.
The key elements of the new rules include:
- Early warning and access to information to help debtors detect circumstances that could give rise to a likelihood of insolvency and signal to them the need to act quickly.
- Preventive restructuring frameworks: debtors will have access to a preventive restructuring framework that enables them to restructure, with a view to preventing insolvency and ensuring their viability, thereby protecting jobs and business activity. Those frameworks may be available also at the request of creditors and employees' representatives.
- Facilitating negotiations on preventive restructuring plans with the appointment, in certain cases, of a practitioner in the field of restructuring to help in drafting the plan.
- Restructuring plans: the new rules foresee a number of elements that must be part of a plan, including a description of the economic situation, the affected parties and their classes, the terms of the plans, etc.
- Stay of individual enforcement actions: debtors may benefit from a stay of individual enforcement actions to support the negotiations of a restructuring plan in a preventive restructuring framework. The initial duration of a stay of individual enforcement actions shall be limited to a maximum period of no more than four months.
- Discharge of debt: over-indebted entrepreneurs will have access to at least one procedure that can lead to a full discharge of their debt after a maximum period of 3 years, under the conditions set out in the directive.
This formal vote marks the end of the legislative process. The directive will now be formally signed and then published in the official journal. Member states will have two years (from the publication in the OJ) to implement the new provisions. However, in duly justified cases, they can ask the Commission for an additional year for implementation.
The proposal was presented by the Commission on 22 November 2016. The new rules complement the 2015 Insolvency Regulation which focuses on resolving the conflicts of jurisdiction and laws in cross-border insolvency proceedings, and ensures the recognition of insolvency-related judgments across the EU.
The European Parliament formally voted on the directive on 28 March 2019.
- Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures for entrepreneurs, 15 May 2019
- EU agree new rules on business insolvency (press release, 19/12/2018)
+32 2 281 89 14
+32 473 86 54 37
Latest News from
Eurojust crackdown on counterfeit olive oil trade24/06/2019 12:20:00
With the active support of Eurojust, the Italian Public Prosecution Office (PPO) of Foggia, in close cooperation with the German national authorities, dismantled an organised crime group trading adulterated olive oil in Germany and Italy, leading to the arrest of 24 persons.
European Council conclusions 20 June 201921/06/2019 16:37:00
The European Council welcomed the work done under the Romanian Presidency and took note of the various elements of the MFF package. It called on Finland's Presidency to pursue the work and to develop the Negotiating Box.
A new strategic agenda 2019-202421/06/2019 15:25:00
Over the next five years, the EU can and will strengthen its role in a changing environment. Together, we will be determined and focused, building on our values and the strengths of our model.
Setting up of judicial counter-terrorism register at Eurojust21/06/2019 13:25:00
Eurojust’s proposal to the EU Member States on the implementation & functioning of the European judicial counter-terrorism register on the basis of Council Decision 2005/671/JHA was presented to the national correspondents for terrorism at the annual Eurojust meeting on counter-terrorism.
Member States agree to EC proposal to support Irish beef producers impacted by market uncertainty21/06/2019 12:37:00
EU Member States have agreed to a proposal from the EC to make €50m available to Irish beef farmers, which can be matched by national funds to reach a maximum of €100m.
Illegal annexation of Crimea and Sevastopol: EU extends sanctions by one year21/06/2019 10:43:00
On 20 June 2019, the Council prolonged the restrictive measures introduced in response to the illegal annexation of Crimea and Sevastopol by Russia until 23 June 2020. The measures apply to EU persons and EU based companies. They are limited to the territory of Crimea and Sevastopol.
State aid: EC approves €431m public support for cleaner transport in German cities20/06/2019 13:25:00
The EC has found German plans to support the retrofitting of municipal and commercial diesel vehicles to be in line with EU State aid rules. The measure should contribute to reducing nitrogen oxides emissions by 1,450 tonnes per year, while limiting distortions of competition.
EC calls on Member States to step up ambition in plans to implement Paris agreement19/06/2019 16:37:00
The EC has published its assessment of Member States' draft plans to implement the EU's Energy Union objectives, and in particular the agreed EU 2030 energy and climate targets.
EC publishes guidelines to improve how firms report climate-related information19/06/2019 15:25:00
The EC has published new guidelines on corporate climate-related information reporting, as part of its Sustainable Finance Action Plan. These guidelines will provide companies with practical recommendations on how to better report the impact that their activities are having on the climate as well as the impact of climate change on their business.