To date, EU-wide insolvency legislation has focused on resolving conflicts of laws issues between Member States. Now that the Preventive Restructuring Framework Directive (the "Directive")1 has successfully navigated its way through the Council and European Parliament (albeit with some significant amendments to the original text), all of that is set to change. It is the first piece of EU legislation that seeks to harmonise substantive insolvency law in EU Member States. Indeed, in many jurisdictions certain restructuring concepts will be introduced into law for the first time, although some of these concepts will be familiar to restructuring professionals from corporate rescue proceedings in the US and UK.
The legislation will take the form of a directive and will be implemented into local law by each Member State separately (unlike an EU regulation,2 which is directly effective in Member States without need for domestic legislation). This will afford Member States a significant degree of latitude to shape the law for domestic use, and we expect traditional pro-debtor or creditor biases to continue.
In this note, we have focused our attention on the Directive's stated objective of providing for a restructuring framework to enable a corporate debtor to restructure with a view to preventing insolvency and ensuring its viability because of the sweeping changes it will introduce in many Member States.3 We also outline a number of questions and concerns, some of which have not been addressed in the Directive or its pre-amble.
Should the UK leave the EU as currently anticipated, it will be under no obligation to implement the Directive, although we note that the current proposals for reforming English insolvency law will align closely with many of the changes proposed by the Directive. Of course, the issues with recognition as between Member States (discussed further below) will be even more complicated for the UK.