Regulatory framework

On June 26, 2019, was published in the Official Journal of the European Union, the directive (EU) 2019/1023 of the European Parliament and of the Council, (hereinafter, the “Directive”) concerning preventive restructuring frameworks, debts, disqualifications and measures aimed at increasing the efficiency of the restructuring, insolvency and debts procedures and with which the directive (EU) 2017/1132 was amended in terms of restructuring and insolvency.

The Objective of the Directive

The objective of this Directive is to remove obstacles to the exercise of fundamental freedoms which result from differences between national laws and procedures concerning preventive restructuring, insolvency, discharge of debt and disqualifications.

Differences between Member States in relation to this matter translate into additional costs for investoris when assessing the risk of debtors getting into financial difficulties in one or more Member States, or of investing in business in financial difficulties.

The availability of effective preventive restructuring frameworks would ensure that action is taken before enterprises default on their loans, thereby helping to reduce the risk of loans becoming non-performing in cyclical downturns and mitigating, the adverse impact on the financial sector.

The scope of the Directive

The Directive consists of three main parts, concerning:

• preventive restructuring framework and early warning tools with a view to preventing insolvency and ensuring their viability for debtors;
• procedures aimed to discharge of debt for entrepreneurs who are insolvent but honest; and
• measures to increase the efficiency of procedures concerning restructuring insolvency and discharge of debt.