Debt restructuring through better insolvency standards

SUMMARY

The event discussed current insolvency standards in Europe, while particularly focusing on debt restructuring of enterprises. At the heart of the discussion was the newly proposed Directive for insolvency proceedings by the European Commission.

The panel pointed out several key characteristics of the current insolvency standards:

• Most EU Member States implemented a number of changes and improvements to the national insolvency standards over the past few years.
• Liquidation is still the more likely outcome compared to debt restructuring, even if an enterprise can be saved. This not only results in job losses, but also threatens the existence of other enterprises.
• The so-called “liquidation culture” originated from jurisdictional obstacles, discouraging investors and making cross-border insolvency proceedings very difficult.
• In Europe, schemes of arrangement that were developed in the UK are the most common way of resolving insolvency proceedings. As pointed out by Philip Hertz, Global Head of Restructuring at Clifford Chance, the schemes will be unaffected by the BREXIT.
• Current insolvency standards are most suitable for larger corporation and less so for SMEs. In particular, an evaluation issues of SMEs assets was noted to exists.

The framework proposed by the European Commission was welcomed by the panel members as a step towards harmonizing and restructuring the national insolvency standards across European countries. Andreas Stein, head of Unit in DG Justice, emphasized the aim of the proposal to lower jurisdictional obstacles to SMEs, while leaving enough room for Member States to adjust the framework to fit their needs, as one size will not fit all. Making insolvency proceedings simpler, faster and more transparent should achieve a more uniform environment for banking and investment across the emerging EU-wide capital market.

Video and Audio recording