Vol 16 (2019) - Issue 3

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EU Directive on Insolvency, Restructuring and Second Chance

Synopsis

On 28 March 2019 the European Parliament adopted a Directive on insolvency, restructuring and second chance (the Directive). This project has had a long tail, following a Commission Recommendation issued in 2014 and, after that had no impact, a draft Directive in November 2016. This Directive is now about come to fruition. It has three main aims to ensure that:
1. Member States have a preventive restructuring framework – which includes a restructuring plan;
2. entrepreneurs have a second chance through an effective debt discharge mechanism; and
3. to ensure that Member States put in place measures to raise the efficiency of restructuring, insolvency and discharge of debt procedures more widely.

The Directive’s objectives are to contribute to the proper functioning of the internal market and to remove obstacles to the exercise of fundamental freedoms. It aims to ensure that viable enterprises and entrepreneurs in financial difficulties have access to effective national preventive restructuring frameworks which enable them to continue operating.
The Directive goes further than the EU Regulation on Insolvency Proceedings (Council Regulation 2015/848) (the 'EIR') which in the main provides for a framework to choose the correct forum and governing law for insolvency proceedings. The EIR does not tackle disparities between national laws. The Directive however aims to establish minimum, but substantive, standards thereby going further than the EIR.
In this article we will mainly focus on the preventive restructuring framework, touching on the Directive’s other aims.