Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU
Date: 2016-11-22
Institutions: Directorate-General for Justice and Consumers, European Commission
Subjects: EU Member State, aid for restructuring, aid to undertakings, approximation of laws, company in difficulties, company law, financial solvency, liquidation

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   EUROPEAN COMMISSION  Strasbourg, 22.11.2016  COM(2016) 723 final 2016/0359 (COD)   Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU (Text with EEA relevance) {SWD(2016) 357 final} {SWD(2016) 358 final}  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Insolvency  rules  cover  a  wide  range  of  measures  from  early  intervention  before  a  company 
gets  into  serious  difficulties,  timely  restructuring  to  ensure  that  viable  business  parts  are 
preserved, liquidation of assets where companies cannot be otherwise saved and finally giving 
a second chance to honest entrepreneurs via discharge of debt.  

A well-functioning insolvency framework covering all these measures is an essential part of a 
good  business  environment  as  it  supports  trade  and  investment1,  helps  create  and  preserve 
jobs, and helps economies absorb more easily economic shocks that cause high levels of non-
performing  loans  and  unemployment.  These  are  all  key  priorities  of  the  European 
Commission. 

Insolvency  matters  have  a  strong  Union  dimension.  An  increasingly  interconnected  single 
market  with  an  ever  stronger  digital  dimension  means  that  very  few  companies  are  purely 
national when aspects such as their client base, supply chain, scope of activities, investor and 
capital  base  (to  mention  a  few)  are  considered.  Importantly,  insolvency  matters  are  also  a 
deterrent  for  cross-border  expansion  and  investments.  Many  investors  mention  uncertainty 
over  insolvency  rules  or  the  risk  of  lengthy  or  complex  insolvency  procedures  in  another 
country as a main reason for not investing or not entering into a business relationship outside 
their own country. A higher degree of harmonisation in insolvency law is thus essential for a 
well-functioning  single  market  and  for  a  true  Capital  Markets  Union.  This  is  why  the  issue 
has long attracted considerable interest at EU level. 

Increased  convergence  of  insolvency  and  restructuring  procedures  would  facilitate  greater 
legal  certainty  for  cross-border  investors  and  encourage  the  timely  restructuring  of  viable 
companies in financial distress. Inefficient and divergent insolvency laws make it harder for 
investors  to  assess  credit  risk,  particularly  where  they  consider  making  cross-border 
investments.  More  cross-border  risk-sharing,  stronger  and  more  liquid  capital  markets  and 
diversified sources of funding for EU businesses will deepen financial integration, lower costs 
of obtaining credit and increase the EU's competitiveness.  

Restructuring and insolvency 
Today  in  Europe  half  of  all  businesses  survive  less  than  5  years2.  The  number  of  corporate 
insolvencies  has  risen  since  the  peak  of  the  economic  crisis  in  2009  and  remains  high, 
although the trend seems now to be reversing. In several Member States there is a tendency to 
steer viable enterprises in financial trouble towards liquidation rather than early restructuring. 
It is estimated that in the EU, 200 000 firms go bankrupt each year (or 600 a day), resulting in 
1.7 million direct job losses every year. One in four of these are cross-border insolvencies, i.e.  
they  involve  creditors  and  debtors  in  more  than  one  EU  Member  State3.  A  significant 
percentage  of  firms  and  related  jobs  could  be  saved  if  preventive  procedures  existed  in  all 

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The  Commission's  Annual  Growth  Survey  2016  (COM(2015)  690  final,  26.11.2015)  explicitly 
recognised  the  importance  of  "well-functioning  insolvency  frameworks"  as  crucial  for  investment 
decisions  
According to Flash Eurobarometer 354 (2012), which also showed that 43% of Europeans would not 
start a business because of the fear of failure (p. 72). 
accompanying  Commission 
Commission  Staff  Working  Document, 
Recommendation  on  a  New  Approach  to  Business  Failure  and  Insolvency,  SWD(2014)  61  final, 
12.3.2014, p. 2. 

Impact  Assessment 

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Member  States  where  they  have  establishments,  assets  or  creditors.  In  addition,  the 
availability  of  timely  preventive  restructuring  procedures  would  ensure  that  action  is  taken 
before companies default on their loans. This would contribute to reducing the risk that loans 
become  non-performing  loans  in  cyclical  downturns,  thus  reducing  the  related  negative 
impact  on  the  financial  sector.  But  the  cross-border  dimension  and  costs  of  divergent 
insolvency frameworks are much broader. Firstly, although creditors might have suppliers in 
their  supply  chain  that  are  purely  domestic  businesses,  a  supplier  that  experiences  financial 
difficulties and cannot be saved may nonetheless have negative impacts which may trigger the 
insolvency of the cross-border company. The impact of these cross-border insolvencies may 
be  extremely  high  as  they  are  more  likely  to  concern  larger  businesses.  Secondly,  some 
companies' cross-border creditors (especially SMEs) may prefer to drop cross-border claims 
simply  because  it  is  too  costly  to  pursue  them,  for  example  if  local  legal  advice  is  needed. 
Finally,  future  developments  in  the  single  market  are  expected  to  lead  to  more  companies 
having  cross-border  dealings,  and  therefore  more  insolvencies  with  cross-border  impact. 
Innovative  companies  in  particular  need  a  larger  market  to  be  able  to  thrive  and  avoid 
insolvency in the first 5 years. 

The  quality  of  Member  States'  restructuring  and  insolvency  frameworks  directly  affects 
creditors'  recovery  rates.  World  Bank  indicators  suggest  that  in  the  EU  recovery  rates  vary 
between 30 % in Croatia and Romania, and 90 %4 in Belgium and Finland. Recovery rates are 
higher  in  economies  where  restructuring  is  the  most  common  insolvency  proceeding.  On 
average,  in  such  economies  creditors  can  expect  to  recover  83%  of  their  claims,  against  an 
average  of  57  %  in  liquidation  procedures5.  While  these  outcomes  also  reflect  economic 
factors  such  as  the  overall  health  of  the  economy,  they  underline  the  importance  of  a 
comprehensive insolvency framework, anchored in a strong institutional and cultural setting, 
in delivering better outcomes for society. 

The  elements  of  preventive  restructuring  procedures  affecting  their  effectiveness  and 
consequently  the  number  of  businesses  rescued  and  their  long-term  viability  diverge 
significantly  between  Member  States.  For  example,  an  effective  framework  should  require 
that  a  business  in  difficulty  has  access  as  early  as  possible  to  preventive  restructuring. 
However,  in  several  Member  States  debtors  cannot  restructure  debts  with  their  creditors 
before  they  are  actually  insolvent  or  if  they  do,  they  face  very  strict  or  expensive  access 
conditions.  

The conditions for a stay of individual enforcement to support restructuring negotiations are 
also very different: in some countries such a stay is not possible, while the others have a wide 
variety of durations and exemptions. When plans are adopted by creditors, rules in Member 
States tend to vary greatly on class formation, the possibility of restructuring only with certain 
creditors  while  leaving  the  rights  of  non-involved  creditors  un-affected,  the  majorities 
required,  and  the  conditions  for  a  judicial  or  administrative  authority's  confirmation  of  the 
restructuring  plan.  The  protection  of  new  financing  and  interim  financing  (essential  in 
ensuring  restructuring  plans'  success)  also  varies  among  Member  States,  ranging  from 
minimum  protection  from  avoidance  actions  to  a  form  of  priority  over  existing  debt  in 
subsequent  insolvency  procedures.  Finally,  the  involvement  of  judicial  or  administrative 
authorities  and  practitioners  appointed  by  the  judicial  or  administrative  authorities  ranges 
from minimal to full involvement. 

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World Bank Doing Business Index 2016. 
World Bank Doing Business Index 2016. 

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Such divergences make it virtually impossible to have a restructuring plan for a cross-border 
group of companies with subsidiaries in more than two Member States6.  

Second chance 

In many Member States it takes more than 3 years for bankrupt, but honest entrepreneurs to 
discharge their debts and make a fresh start. Inefficient second chance frameworks result in 
entrepreneurs  being  locked  into  debt-traps  or  driven  to  the  black  economy,  or  having  to 
relocate  to  other  jurisdictions  to  access  friendlier  regimes.  Relocation  is  expensive  for 
creditors, who need to factor in the additional risk that an entrepreneur could obtain a shorter 
discharge in a different jurisdiction. Relocation also has high economic and human costs for 
entrepreneurs  since  under  Regulation  (EU)  No  2015/848  on  insolvency  proceedings7  they 
may  need  to  be  established  in  a  Member  State  for  a  certain  period  of  time  before  being 
allowed  to  file  for  discharge  in  that  jurisdiction.  Furthermore,  evidence  shows  that  shorter 
discharge periods have a positive impact on both consumers and investors, as they are quicker 
to re-enter the cycles of consumption and investment. This in turn boosts entrepreneurship.  

A  discharge  of  debt  alone  may  in  some  Member  States  not  be  enough  to  allow  an 
entrepreneur  to  start  a  new  business  activity,  e.g.  where  bankruptcy  is  accompanied  by  a 
disqualification order which lasts for a longer period of time and which may be issued without 
consideration  to  whether  the  entrepreneur  was  acting  in  good  faith.  To  give  honest 
entrepreneurs an effective second chance, disqualifications linked to over-indebtedness should 
also be time-limited so that they expire at the latest when the discharge period ends. Personal 
data used in connection with the debtor's over-indebtedness should be adequate, relevant and 
limited to what is necessary in relation to the purposes for which they are processed and kept 
in a form which permits identification of data subjects for no longer than is necessary for the 
purposes for which the personal data are processed. The General Data Protection Regulation8 
which will replace Directive 95/46/EC and will apply as of 25 May 2018 further clarifies the 
legal framework and the requirements when processing personal data. 

Over-indebtedness  of  natural  persons  is  a  major  economic  and  social  problem.  11.4%  of 
European  citizens  are  permanently  in  arrears  with  payments,  often  for  utility  bills9.  This  is 
mostly  due  to  unfavourable  macroeconomic  conditions  in  the  context  of  the  financial  and 
economic  crisis  (e.g.  unemployment)  combined  with  personal  circumstances  (e.g.  divorce, 
illness).  

Entrepreneurs  are  not  the  only  ones  affected.  Although  consumers  have  largely  the  same 
treatment  under  national  insolvency  laws,  this  is  not  the  case  in  all  Member  States.  This 
results  in  increased  costs  for  Member  States'  social  security  schemes  and  economic 
consequences  such  as  reduced  consumption, 
labour  activity  and  foregone  growth 
opportunities. 

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Robert van Galen, Stephan Madaus, Corporate Rescue, 2013, p. 52. 
Regulation  (EU)  No  2015/848  of  the  European  Parliament  and  of  the  Council  of  20  May  2015  on 
insolvency proceedings, OJ L 141/19, 5.6.2015. 
Regulation (EU) 2016/679 of the European Parliament and of the Council on the protection of natural 
persons  with  regard  to  the  processing  of  personal  data  and  on  the  free  movement  of  such  data,  and 
repealing Directive 95/46/EC, OJ L 119/1, 4.5.2016. 
http://ec.europa.eu/consumers/financial_services/reference_studies_documents/docs/part_1_synthesis_ 
of_findings_en.pdf. 

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General effectiveness of restructuring, insolvency and second chance  

The  excessive  length  of  restructuring,  insolvency  and  discharge  procedures  in  several 
Member  States  is  an  important  factor  triggering  low  recovery  rates  and  deterring  investors 
from  doing  business  in  jurisdictions  where  procedures  risk  taking  too  long.  In  half  of  the 
Member States insolvency is resolved in 2 to 4 years10. Apart from three Member States, the 
length  of  procedures  has  not  improved  in  the  past  4  years,  and  in  two  Member  States  the 
length of procedures rose in the same time span. Specific aspects that play an important role 
in the length of procedures are the level of specialisation of judges and therefore their ability 
to  take  quick  decisions,  the  professionalism  of  practitioners  in  the  field  of  restructuring, 
insolvency  and  second  chance,  and  the  take-up  of  digital  means  of  communication  in  such 
procedures.  Specialised  insolvency  practitioners  and  judges,  and  the  availability  of  digital 
tools can greatly help reduce the length of procedures, lower costs and improve the quality of 
assistance or supervision.  

Despite  an  improvement  in  cyclical  conditions,  the  level  of  non-performing  loans,  which 
increased rapidly in most Member States following the economic crisis, remains high.  High 
levels  of  non-performing  loans  have  a  direct  consequence  on  banks'  capacity  to  support 
growth11. In some Member States, targeted reforms have had a positive impact. However, the 
resilience of non-performing loans in the European Union shows that further action needs to 
be taken to ensure that the negative feedback loop between poor asset quality, lagging credit 
developments  and  low  growth  does  not  become  prevalent.  Measures  to  increase  the 
effectiveness of restructuring, insolvency and second chance frameworks would contribute to 
efficient  management  of  defaulting  loans  and  reduce  accumulation  of  non-performing  loans 
on bank balance sheets12. They would also contribute to improving the residual value which 
can be expected by creditors by allowing an earlier and swifter restructuring or resolution for 
debtors  facing  financial  difficulties.  Finally,  they  can  also  serve  to  avoid  future  build-up  of 
non-performing  loans  since  loans  on  which  performance  ceases  could  be  enforced  more 
efficiently. Improving legal settings of enforcement regimes will not fully resolve the issue of 
existing non-performing loans where enforcement proceedings have already started. However, 
reinforcement of the judiciary setting could help to speed up the proceedings' remaining steps. 
In this way, reforms of insolvency laws can complement other ongoing reforms at EU level in 
the banking sector and as regards capital markets. 

Objective of the proposal 

The  proposal's  key  objective  is  to  reduce  the  most  significant  barriers  to  the  free  flow  of 
capital  stemming  from  differences  in  Member  States'  restructuring  and  insolvency 
frameworks.  The  aim  is  for  all  Member  States  to  have  in  place  key  principles  on  effective 
preventive  restructuring  and  second  chance  frameworks,  and  measures  to  make  all  types  of 
insolvency  procedures  more  efficient  by  reducing  their  length  and  associated  costs  and 
improving their quality. More specifically, such frameworks aim to help increase investment 
and  job  opportunities  in  the  single  market,  reduce  unnecessary  liquidations  of  viable 
companies,  avoid  unnecessary  job  losses,  prevent  the  build-up  of  non-performing  loans, 

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EU Justice Scoreboard 2016. 
According to the IMF Article IV review of the Euro area, “high levels of NPLs and debt have held back 
bank lending and investment, limiting the pass through of easier financial conditions;   IMF: Euro Area 
Policies  –  Selected  Issues,  IMF  Country  Report  No.  15/205,  July  2015,  Euro  Area  Policies,  IMF 
Country Report No. 15/2014, July 2015, p. 61. 
‘Towards  the  completion  of  the  Banking  Union’,  European  Commission,  COM  (2015)  587  final,  24 
November 2015. 

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facilitate  cross-border  restructurings,  and  reduce  costs  and  increase  opportunities  for  honest 
entrepreneurs to be given a fresh start. 

Along  with  key  principles,  more  targeted  rules  are  necessary  to  make  restructuring 
frameworks  more  efficient.  Rules  on  company  managers'  duty  of  care  when  nearing 
insolvency also play an important role in  developing  a culture of business rescue instead of 
liquidation,  as  they  encourage  early  restructuring,  prevent  misconduct  and  avoidable  losses 
for creditors. Equally important are rules on early warning tools.  

The proposal does not harmonise core aspects of insolvency such as rules on conditions for 
opening  insolvency  proceedings,  a  common  definition  of  insolvency,  ranking  of  claims  and 
avoidance actions broadly  speaking. Although  such rules would  be useful for achieving  full 
cross-border legal certainty, as confirmed by many stakeholders in the public consultation13, 
the current diversity in Member States' legal systems over insolvency proceedings seems too 
large  to  bridge  given  the  numerous  links  between  insolvency  law  and  connected  areas  of 
national  law,  such  as  tax,  employment  and  social  security  law.  Prescriptive  harmonisation 
could require far-reaching changes to commercial law, civil law and company law, whereas 
flexible  provisions risk not  bringing  about  desired  changes.  Furthermore,  the  rules on  filing 
and verification of claims mentioned in the Commission Communication of December 201214 
are of rather low relevance given the improvements brought by the Insolvency Regulation15.  

Instead, the focus of this proposal is on addressing the most important problems that could be 
feasibly  addressed  by  harmonisation.  Insolvency  procedures  need  to  be  adapted  to  enable 
debtors in financial difficulties to restructure early. Rules which would contribute to this need 
include  lifting  the  obligation  to  file  for  insolvency  while  the  debtor  is  still  in  a  formal 
restructuring process as otherwise such filing might prevent the restructuring  from  attaining 
its  goals;  and  an  avoidance  actions  regime  in  insolvency  procedures  to  protect  transactions 
concluded in good faith with a view to a debtor's preventive restructuring. The proposal also 
covers  insolvency-related  measures  with  direct  impact  on  the  length  of  procedures,  such  as 
judges' specialisation and the professionalism of practitioners, and those with a close link to 
the  preventive  restructuring  framework,  such  as  protecting  new  financing  from  avoidance 
actions.  

To  encourage  entrepreneurial  activity,  entrepreneurs  and  company  managers  should  not  be 
stigmatised  when  their  honest  business  endeavours  fail.  Individuals  should  not  be  deterred 
from entrepreneurial activity or denied the opportunity of a second chance. It is estimated that 
offering  a  true  second  chance  to  honest  entrepreneurs  to  restart  business  activities  would 
create 3 million jobs across Europe.16 

In  designing  the  proposal,  the  Commission  sought  to  strike  an  appropriate  balance  between 
the  interests  of  debtors  and  creditors,  providing  for  safeguards  wherever  the  proposed 
measures would have a potentially negative impact on the parties' rights.  

Above all, the proposal aims to enhance the rescue culture in the EU. The rules on business 
restructuring  and  rights  of  shareholders  will  predominantly  contribute  to  "prevention",  the 
rules on avoidance, insolvency practitioners and judicial or administrative authorities to 'value 
recovery'  and  the  rules  on  second  chance  to  'debt  discharge'.  Besides  economic  gains,  there 
will also be positive social impacts.  

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http://ec.europa.eu/justice/newsroom/civil/opinion/160321_en.htm 
European Commission: Communication "A new European approach to business failure and insolvency" 
COM(2012) 742. 
OJ L 141/19. 
Annual Report of European SMEs 2015/2016, p. 54. 

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The proposal sets common objectives, in the form of principles or, where necessary, targeted 
detailed rules. While aiming to achieve the needed coherence of frameworks across the EU, 
the  proposal  gives  Member  States  the  flexibility  to  achieve  the  objectives  by  applying  the 
principles  and  targeted  rules  in  a  way  that  is  suitable  in  their  national  contexts.  This  is 
particularly important since some Member States already  have elements of well-functioning 
frameworks in place. The objective is not to interfere with what works well, but to establish a 
common  EU-wide  framework  to  ensure  effective  restructuring,  second  chance  and  efficient 
procedures both at national and cross-border level.  

Boosting  jobs  and  growth  in  Europe  requires  a  stronger  rescue  culture  which  helps  viable 
businesses to restructure and continue operating while channelling enterprises with no chance 
of  survival  towards  swift  liquidation,  and  gives  honest  entrepreneurs  in  distress  a  second 
chance. This proposal is an important step towards such a change of culture. 

Institutional background 
In  2011,  the  European  Parliament  adopted  a  Resolution  on  insolvency  proceedings17  which 
contained  recommendations  for  harmonising  specific  aspects  of  substantive  insolvency  law, 
including  restructurings,  and  company  law.  That  same  year,  the  Council  called  on  Member 
States  to  reduce  the  discharge  period  and  debt  settlement  for  honest  entrepreneurs  after 
bankruptcy to maximum 3 years by 201318.  

frameworks, 

the  European  Commission 

Against  this  background  and  recognising  the  significant  differences  between  national 
in  December  2012  a 
insolvency 
Communication19 which highlighted a need for a step-by-step approach in certain areas where 
differences  between  domestic  insolvency  laws  could  hamper  the  functioning  of  an  efficient 
single  market20.  The  first  action  under  this  approach  was  to  amend  Regulation  (EC)  No 
1346/200021.  This  was  done  by  the  adoption  of  Regulation  (EU)  2015/848  on  insolvency 
proceedings22.  That  Regulation  focuses  on  resolving  conflicts  of  jurisdiction  and  laws  in 
cross-border insolvency proceedings, and ensures recognition of insolvency-related judgments 
across the EU. It does not harmonise Member States' substantive insolvency laws.  

issued 

As  a  next  step,  the  Commission  adopted  in  2014  the  Recommendation  on  restructuring  and 
second chance23. The Recommendation focused on restructuring and second chance, since it 
was  considered  that  in  these  two  fields  action  at  EU  level  would  bring  most  added-value24. 
The  Recommendation  invited  Member  States  to  put  in  place  (i)  effective  pre-insolvency 
procedures  to  help  viable  debtors  to  restructure  and  thus  avoid  insolvency,  and  (ii)  second 

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available 

Report  with  recommendations  to  the  Commission  on  insolvency  proceedings  in  the  context  of  EU 
company law, 2011/2006(INI), 17 October 2011. 
Council Conclusions on the review of the 'Small Business Act', for Europe, adopted on 30 May 2011, 
10975/2011, 
at 
http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%2010975%202011%20INIT. 
European  Commission:  "A  new  European  approach  to  business  failure  and  insolvency"  COM(2012) 
742, 12 December 2012. 
Second  chance  for  entrepreneurs,  discharge  periods,  opening  of  insolvency  and  restructuring 
proceedings, filing of claims and their verification, promotion of restructuring plans. 
OJ L 160, 30.6.2000, p. 1. 
OJ L 141, 5.6.2015, p. 19. 
C(2014) 1500 final, 12 March 2014. 
Impact Assessment accompanying the Commission Recommendation on a New Approach to Business 
Failure and Insolvency, SWD(2014) 61 final, 12 March 2014. 

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chance  provisions  for  entrepreneurs  enabling  them  to  have  a  discharge  in  no  more  than  3 
years after insolvency.  

Following  adoption,  two  evaluations  of  its  implementation  were  conducted  in  2015  and 
201625.  These  reviews  revealed  that  while  the  Recommendation  provided  useful  focus  for 
Member  States  undertaking  reforms  in  the  area  of  insolvency,  it  has  not  led  to  the  desired 
impact  in  terms  of  consistent  changes  across  all  Member  States  that  would  facilitate  the 
rescue  of  businesses  in  financial  difficulty  and  give  a  second  chance  to  entrepreneurs.  This 
was  due  to  its  only  partial  implementation  in  a  significant  number  of  Member  States, 
including those which had launched reforms.  

There  are  still  several  Member  States  where  a  business  cannot  be  restructured  before  it  is 
insolvent.  While  some  other  Member  States  introduced  new  preventive  restructuring 
procedures,  those  rules  differ  in  several  aspects  from  the  Recommendation.  On  second 
chance, since the Recommendation's adoption, several Member States have introduced for the 
first  time  a  debt  discharge  regime  for  natural  persons.  However,  important  discrepancies 
remain  over  the  discharge  period's  duration.  Such  differences  in  Member  States'  legal 
frameworks mean continuing legal uncertainty, additional costs for investors in assessing their 
risks,  less  developed  capital  markets  and  persisting  barriers  to  the  efficient  restructuring  of 
viable companies in the EU, including cross-border enterprise groups.  

The  'Five  Presidents'  report'  of  22  June  2015  on  'Completing  Europe's  Economic  and 
Monetary Union' listed insolvency law among the most important bottlenecks preventing the 
integration of capital markets in the euro area and beyond26.  

In  this  context,  the  2015  Capital  Markets  Union  Action  Plan27  announced  a  legislative 
initiative  on  business  insolvency,  including  early  restructuring  and  second  chance.  This 
initiative  is  intended  to  address  the  main  barriers  to  the  free  flow  of  capital  and  build  on 
national regimes that work well. The Single Market Strategy also stated that the Commission 
would  support  honest  entrepreneurs  and  propose  legislation  to  ensure  that  Member  States 
provide  a  regulatory  environment  that  is  able  to  accommodate  failure  without  dissuading 
entrepreneurs from trying new ideas again28.  

The  Council  Conclusions  of  July  2016  on  a  roadmap  to  complete  the  Banking  Union 
underlined  the  importance  of  Commission's  work  on  a  legislative  proposal  for  minimum 
harmonisation  over  insolvency  law  in  the  context  of  the  Capital  Markets  Union  (CMU), 
noting that this may also support efforts to reduce future levels of non-performing loans.29 

More  recently,  in  its  Communication  on  'Capital  Markets  Union  -  Accelerating  Reform'  the 
Commission reiterated that inefficiencies and differences in national insolvency frameworks 

25 

26 

27 
28 

29 

and 

failure 

business 

30.9.2015, 

insolvency, 

Evaluation of the implementation of the Commission Recommendation of 12.3.2014 on a new approach 
to 
at: 
http://ec.europa.eu/justice/civil/commercial/insolvency/index_en.htm) 
‘Completing  Europe’s  Economic  and  Monetary  Union’,  Report  by  Jean-Claude  Juncker  in  close 
cooperation with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi and Martin Schulz (so-called Five 
Presidents’), 22 June 2015, p. 10. 
Action Plan on Building a Capital Markets Union, COM(2015) 468 final, p. 25.  
Upgrading  the  Single  Market:  more  opportunities  for  people  and  business  ,  European  Commission, 
COM (2015) 550 final, p. 6. 
Council  Conclusions 
pdf/2016/6/47244642837_en.pdf  

http://www.consilium.europa.eu/press-releases-

(available 

2016 

June 

17 

of 

EN 

8 

   EN 

                                                 
generate  legal  uncertainty,  obstacles  to  recovery  of  value  by  creditors,  and  barriers  to  the 
efficient restructuring of viable companies in the EU, including for cross-border groups.30 

• 

Consistency with existing policy provisions in the policy area 

Regulation on cross-border insolvency proceedings 
From  26  June  2017,  Regulation  (EU)  2015/84831  will  replace  Council  Regulation  (EC) 
1346/2000. Regulation 2015/848 deals with issues of jurisdiction, applicable law, recognition 
and enforcement of insolvency decisions, as well as coordination of cross-border insolvency 
proceedings. It designates the applicable law, i.e. restructuring and insolvency procedures that 
exist already in the Member States, and ensures that they are recognised throughout the EU. It 
also  covers  many  types  of  insolvency  procedures,  including  preventive/pre-insolvency 
procedures  and  certain  personal  insolvency  procedures  provided  that  they  fulfil  certain 
conditions  (e.g.  pre-insolvency  procedures  must  be  available  at  the  earliest  where  there  is  a 
likelihood  of  insolvency,  procedures  must  include  all  or  a  significant  part  of  a  debtor's 
creditors and must be public).  

However, Regulation 2015/848 does not oblige Member States to introduce specific types of 
procedures  or  to  ensure  that  their  procedures  are  effective  in  promoting  preventive 
restructurings and second chance. 

The proposal would therefore complement Regulation 2015/848 by requiring Member States 
to ensure that their national preventive restructuring procedures comply with certain minimum 
principles of effectiveness. 

Recommendation on a new approach to business failure and insolvency 

The  Recommendation,  addressed  to  the  Member  States,  aimed  at  establishing  minimum 
standards for: (i) preventive restructuring procedures enabling debtors in financial difficulty to 
restructure  at  an  early  stage  so  as  to  avoid  insolvency,  and  (ii)  debt  discharge,  within 
prescribed  periods,  for  honest  bankrupt  entrepreneurs  as  one  of  the  steps  necessary  to  give 
them a second chance. The proposal reinforces the 2014 Recommendation and goes beyond 
its  scope  by  also  establishing  targeted  rules  on  increasing  the  efficiency  of  all  types  of 
procedures, including liquidation procedures. 

Legal framework on financial services 

Special arrangements apply to insurance and re-insurance undertakings as defined in points 1 
and  4  of  Article  13  of  Directive  2009/138/EC32,  credit  institutions  as  defined  in  point  1  of 
Article  4(1)  of  Regulation  (EC)  No  575/201333,  investment  firms  and  collective  investment 
undertakings  as  defined  in  points  2  and  7  of  Article  4(1)  of  Regulation  (EC)  No  575/2013, 
central  counterparties  as  defined  in  point  1  of  Article  2  of  Regulation  (EU)  No  648/201234, 

30 

31 

32 

33 

34 

final 
COM(2016) 
accelerating-reform_en.pdf  

601 

http://ec.europa.eu/finance/capital-markets-union/docs/20160913-cmu-

Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency 
proceedings, OJ L 141, 5.6.2015, p. 19–72.  

Directive  2009/138/EC  of  the  European  Parliament  and  of  the  Council  of  25  November  2009  on  the 
taking-up  and  pursuit  of  the  business  of  Insurance  and  Reinsurance  (Solvency  II)  (OJ  L  335, 
17.12.2009, p. 1). 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 
648/2012 (OJ L 176 27.6.2013, p. 1). 
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 
derivatives, central counterparties and trade repositories (OJ L 201 27.7.2012, p. 1). 

EN 

9 

   EN 

 
 
                                                 
central securities depositories as defined in point 1 of Article 2 of Regulation (EU) 909/201435 
and other financial institutions and entities listed in the first subparagraph of Article 1(1) of 
Directive  2014/59/EU36.  For  these,  the  national  supervisory  authorities  have  wide-ranging 
powers  of  intervention  so  it  is  appropriate  to  exclude  such  debtors  from  the  preventive 
restructuring procedures envisaged in this proposal. 

The  proposal  is  also  without  prejudice  to  Directives  98/26/EC  on  settlement  finality  in 
payment  and  securities  settlement  systems37,  Directive  2002/47/EC  on  financial  collateral 
arrangements38 and Regulation (EU) No 648/2012 on OTC derivatives, central counterparties 
and  trade  repositories39.  This  is  important  in  order  to  avoid  overlaps  between  these 
instruments  and  the  current  proposal  which  would  impact  on  secured  creditors'  ability  to 
enforce  their  financial  collateral  security  provided  by  a  corporate  entity,  including  margins 
provided  to  central  counterparties  (CCPs)  or  to  central  banks/the  ECB  or  of  financial 
collateral  arrangements  concluded  by  a  non-financial  corporate  with  a  financial  institution. 
Without a carve-out of such transactions from the stay provisions, financial market's stability 
may be harmed. 

Directives on workers' protection  

Adequate  and  timely  information  and  consultation  of  workers  enhances  the  effectiveness  of 
restructuring  processes.  A  number  of  Directives  guarantee  the  right  to  information  and 
consultation  before  restructuring  and/or  collective  redundancies.  This  proposal  leaves  the 
rights  guaranteed  by  Directives  98/59/EC40,  2001/23/EC41,  2002/14EC42,  2008/94/EC43  and 
2009/38/EC44,  intact  and,  in  addition,  grants  affected  workers  the  right  to  vote  on 
restructuring plans.   

35 

36 

37 

38 

39 

40 

41 

42 

43 

44 

Regulation  (EU)  No  909/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on 
improving  securities  settlement  in  the  European  Union  and  on  central  securities  depositories  and 
amending  Directives  98/26/EC  and  2014/65/EU  and  Regulation  (EU)  No  236/2012  (OJ  L  257 
28.8.2014, p. 1). 
Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending 
Council  Directive  82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC, 
2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) 
No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190). 
Directives  98/26/EC  of  the  European  Parliament  and  of  the  Council  of  19  May  1998  on  settlement 
finality in payment and securities settlement systems, OJ L 166, 11.6.1998, p. 45.  
Directive  2002/47/EC  of  the  European  Parliament  and  of  the  Council  of  6  June  2012  on  financial 
collateral arrangements, OJ L 168, 27.6.2002, p. 43. 
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 
derivatives, central counterparties and trade repositories, OJ L 201, 27.7.2012, p. 1. 
Council  Directive  98/59/EC  of  20  July  1998  on  the  approximation  of  the  laws  of  the  Member  States 
relating to collective redundancies, OJ L 225, 12.8.1998, p. 16. 

Council  Directive  2001/23/EC  of  12  March  2001  on  the  approximation  of  the  laws  of  the  Member  
States  relating  to  the  safeguarding  of  employees'  rights  in  the  event  of  transfers  of  undertakings, 
businesses or parts of undertakings or businesses, OJ L 82, 22.03.2001, p. 16. 

Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a 
general  framework  for  informing  and  consulting  employees  in  the  European  Community,  OJ  L  80, 
23.3.2002, p. 29. 

Directive  2008/94/EC  of  the  European  Parliament  and  of  the  Council  of  22  October  2008  on  the 
protection of employees in the event of the insolvency of their employer, OJ L 283, 28.10.2008, p. 36. 

Directive  2009/38/EC  of  the  European  Parliament  and  of  the  Council  of  6  May  2009  on  the 
establishment  of  a  European  Works  council  or  a  procedure  in  Community-scale  undertakings  and 
community-scale groups of undertakings for the purpose of informing and consulting employees, OJ L 
122, 16.5.2009, p.28. 

EN 

10 

   EN 

                                                 
Directive 2008/94 requires Member States to put in place guarantee institutions to guarantee 
the  payment  of  workers'  outstanding  claims  resulting  from  contracts  of  employment  or 
employment  relationships  in  the  event  of  the  employer's  formal  insolvency  proceedings. 
Member States can extend the coverage of such guarantee institutions also to other types of 
procedures and the current proposal may incentivize, but does not oblige, Member States to 
extend coverage to restructuring procedures where this is not yet foreseen. The proposal aims 
at  putting  in  place  in  each  Member  State  preventive  procedures  to  help  debtors  avoid 
insolvency.  However,  if  restructuring  efforts  fail  and  the  debtor  becomes  insolvent  under 
national law, Directive 2008/94 will apply accordingly.  

Under  the  proposal,  workers'  outstanding  claims  as  defined  in  Directive 2008/94/EC  should 
be in principle exempted from a stay of enforcement actions, which would lead to a temporary 
suspension of workers' ability to enforce such claims, irrespective of whether they have arisen 
before or after the stay is granted. A stay in relation to such claims should be permissible only 
for the amounts and for the period that Member States guarantee the payment of such claims 
by other means.  

Directive  2001/23/EC  aims  at  safeguarding  workers'  rights  in  the  case  of  transfers  of 
undertakings.  Under  the  proposal  restructuring  may  entail  the  transfer  of  part  of  an 
undertaking or business. In such cases, Directive 2001/23/EC and the level of protection for 
workers  it  guarantees  will  fully  apply  and  will  not  be  affected  by  this  proposal.  Where  a 
restructuring entails a transfer of part of an undertaking or business, workers' rights should be 
safeguarded  in  accordance  with  Directive  2001/23/EC,  without  prejudice  to  the  possibilities 
allowed by Article 5(2) of that Directive. Article 5(2) of Directive 2001/23/EC provides that, 
where  proceedings are  under the  supervision  of a  competent  public  authority,  the  transferee 
can be relieved of previous liabilities if workers receive a compensation at least equivalent to 
the one they would receive from the existing guarantee fund for workers. In addition, working 
conditions can be altered in agreement with workers. 

Directive 2002/14/EC establishes a right to constant information and consultation of workers' 
representatives in the company, including on 'decisions likely to lead to substantial changes in 
work organisation or in contractual relations'. Such consultation shall take place with a view 
to reaching an agreement on such decisions. The proposal will not affect the rights guaranteed 
by Directive 2002/14/EC. Moreover, in addition and without prejudice to the workers' rights 
to  consultation  and  information  under  Directive  2002/14,  the  proposal  will  give  affected 
workers the right to vote on a restructuring plan. For the purposes of voting on a restructuring 
plan,  Member  States  may  decide  to  place  workers  in  a  class  separate  from  other  classes  of 
creditors.  

Directive 2012/30/EU on company law 
Articles 19 (1), 29, 34, 35, 40(1)(b), 41(1) and 42 of Directive 2012/30/EU45 provide for the 
necessity  of  convening  a  shareholders'  general  meeting.  If  capital  is  increased  by 
consideration  in  cash,  Article  33  of  the  Directive  establishes  a  pre-emptive  right  of 
shareholders to the new shares. Both the requirements for a shareholders' general meeting and 
the pre-emption rights could jeopardise the effectiveness of the restructuring plan's adoption 
and  implementation.  The  proposal  requires  Member  States  to  derogate  from  those  company 

45 

Directive  2012/30/EU  of  the  European  Parliament  and  of  the  Council  of  25  October  2012  on 
coordination of safeguards which, for the protection of the interests of members and others, are required 
by Member States of companies within the meaning of the second paragraph of Article 54 of the Treaty 
on  the  Functioning  of  the  European  Union,  in  respect  of  the  formation  of  public  limited  liability 
companies and the maintenance and alteration of their capital, with a view to making such safeguards 
equivalent, OJ L 315/74, 14.11.2012. 

EN 

11 

   EN 

                                                 
law provisions  to  the extent  and for the period necessary to ensure that shareholders do not 
frustrate restructuring efforts by abusing  their rights  under Directive  2012/30/EU. However, 
Member States  do not have  to  derogate from company law rules if they can  ensure that the 
above-mentioned  company  law  requirements  cannot  jeopardise  the  effectiveness  of  the 
restructuring  process  or  if  Member  States  have  other,  equally  effective  tools  ensuring  that 
shareholders  do  not  unreasonably  prevent  the  adoption  or  implementation  of  a  restructuring 
plan which would restore the viability of the business. 

State aid rules 

The proposal will not affect state aid rules. State creditors do not give away their claims and 
therefore  cannot  be  considered  as  giving  incompatible  state  aid  to  debtors  by  merely 
participating  in  a  restructuring  plan  provided  that  the  restructuring  measures  affect  state 
creditors in the same way as private creditors, and that they behave like private operators in a 
market  economy  placed  in  the  most  comparable  situation.  This  proposal  is  also  without 
prejudice to the rules on full recovery of unlawful state aid, as affirmed in Case C-454/09 New 
Interline (paragraph 36) and Case C-610/10 Magefesa (paragraph 104). 

Consistency with other Union policies 

• 
One of the measures announced in the Capital Markets Union Action Plan46 of 30 September 
2015  was  that  the  Commission  will  produce  a  legislative  initiative  on  business  insolvency, 
including  early  restructuring  and  second  chance,  drawing  on  the  experience  of  the  2014 
Recommendation. The initiative would build on national systems that work well. 
Also the Single Market Strategy47 announced that the Commission would support  bona fide 
entrepreneurs  and  propose  legislation  to  ensure  that  Member  States  provide  a  regulatory 
environment that can accommodate failure without dissuading entrepreneurs from trying new 
ideas.  

The economic significance of well-functioning insolvency frameworks is particularly relevant 
in  the  financial  sector  when  dealing  with  high  levels  of  private  debt  and  non-performing 
loans,  which  is  the  case  in  some  Member  States.  The  European  Central  Bank’s  2015 
comprehensive  assessment  identified  EUR  980  billion  in  non-performing  exposures  in  the 
banking system48. Such loans weigh heavily on banks’ capacity to finance the real economy in 
several Member States. Banks are the principal source of credit to businesses and households 
and  therefore  particularly  sensitive  to  inefficiencies  in  insolvency  frameworks.  Good 
insolvency frameworks could help to address the problems, but cannot in themselves address 
all the challenges banks face in managing impaired balance sheets. Dealing with the problems 
of  debt  overhang  and  non-performing  loans  requires  additional  policies  and  general 
conditions.  Good  insolvency  frameworks  on  paper  do  not  deliver  satisfactory  outcomes 
without  also  having  adequate  judicial  infrastructure  or  appropriate  tax  policies  to  ensure 
financial  stability.  Moreover,  specific  policies  may  be  needed  to  reduce  debt-overhang.  For 
creditors, such measures relate in particular to the valuation of assets, the resolution targets set 
by  the  supervisor  and  the  tax  treatment  of  write-offs.  For  debtors,  the  availability  of  social 
safety  nets  would  reduce  the  impact  of  more  decisive  resolution  and  recovery  strategies 
considered necessary by creditors. 

46 
47 
48 

EN 

Action Plan on Building a Capital Markets Union, COM(2015) 468 final, 30.9.2015. 
COM (2015) 550 final, 28.10.2015 

European 
Bank, 
https://www.bankingsupervision.europa.eu/banking/statistics/html/index.en.html 

Statistics, 

Central 

23 

June 

2016, 

12 

   EN 

 
                                                 
The  proposal  will  help  prevent  accumulation  of  non-performing 
loans.  Crucial 
complementary  elements  in  this  context  are  firstly  to  allow  companies  to  restructure  more 
easily and thus get back to financial viability faster and honour their debts and, secondly, to 
make sure that banks can recover assets where debtors have no prospect of return to viability.  

A  successful  restructuring  plan  will  turn  non-performing  loans  into  loans  a  company  can 
actually  pay  back.  In  liquidation,  secured  creditors  have  to  consider  the  possibility  of 
substantial  reduction  in  the  value  of  their  claims.  In  restructuring,  on  the  other  hand, 
insolvency  is  avoided,  contract  debts  are  in  general  paid,  and  negotiations  concern  in  most 
cases only the financial debt. Data  shows that the highest recovery rates for creditors are in 
economies where restructuring is the most common insolvency proceeding49 and that 45 % of 
OECD economies use restructuring as the most common way to save viable firms. They also 
have  an  average  recovery  rate  of  83  cents  on  the  dollar,  versus  57  cents  on  the  dollar  in 
countries where liquidation is the prevalent outcome50. Another important factor to improve 
the overall recovery rates, and thus the residual value of potential non-performing loans, is the 
swift handling of restructuring and insolvency cases51. 

The discharge of entrepreneurial, and possibly private, debt will also help to remove the loans 
that  cannot  be  paid  anyhow  from  credit  institutions'  balance  sheets.  The  number  of  cases 
referred  can  also  be  reduced  by  developing  successful  arrangements  for  restructuring  debt 
between  debtors  and  creditors  with  limited  or  no  intercession  of  judicial  or  administrative 
authorities or judicial procedures. 

However,  this  proposal  is  not  designed  to  and  will  not  fully  solve  banks'  loan  enforcement 
problems,  especially  the  effectiveness  of  enforcement,  which  constrains  banks'  financing  of 
the real economy. As stated in the Commission Communication ‘Towards the Completion of 
the  Banking  Union’  of  24  November  201552,  the  efficiency  of  both  restructuring  and 
insolvency  proceedings  needs  to  improve.  The  Commission  also  examined  national 
insolvency  frameworks  as  part  of  the  European  Semester  –  the  EU’s  economic  governance 
framework.  Lengthy,  inefficient  and  costly  insolvency  proceedings  in  some  Member  States 
were  found  to  be  a  contributing  factor  to  insufficient  post-crisis  debt  deleveraging  in  the 
private sector and exacerbating debt overhang. Efficient and transparent public administration 
and  effective  justice  systems  are  necessary  to  support  economic  growth  and  deliver  high 
quality  services  for  firms  and  citizens,  including  as  regards  insolvency  frameworks.  In  this 
view  the  Commission  will  continue  to  work  with  Member  States  in  the  context  of  the 
European Semester towards enhancing their judicial systems. 

Due  to  the  absence  of  commonly  agreed  data  collection  practices  and  low  cross-country 
comparability  of  data  itself  it  is  not  possible  to  have  a  complete  picture  of  the  situation  in 
Member  States  especially  as  regards  the  impact  on  financial  institutions.  Therefore,  as 
announced  in  its  Communication  on  'Capital  Markets  Union  –  Accelerating  Reform',  the 
Commission  is  conducting  a  benchmarking  review  of  loan  enforcement  (including 
insolvency) regimes to establish a detailed and reliable picture of the banks' outcomes when 
faced  with  defaulting  loans  in  terms  of  delays,  costs  and  value-recovery.  The  review  will 
assist  Member  States  seeking  to  make  their  regimes  more  efficient  and  transparent.  The 
Commission will therefore continue to look into issues not directly dealt with in this proposal.  

49 

50 

51  
52 

EN 

Insolvency, 

Resolving 
 http://www.doingbusiness.org/reports/globalreports/~/media/GIAWB/Doing%20Business/Documents/
Annual-Reports/English/DB14-Chapters/DB14-Resolving-insolvency.pdf 
Doing  Business  Project  Encourages  Economies  to  Reform  Insolvency  Frameworks,  World  Bank, 
January 2013. 
Resolving Insolvency, World Bank. 
COM(2015) 587 final, 24.11.2015. 

World 

Bank, 

13 

   EN 

                                                 
Strengthening  and  convergence  in  the  functioning  of  national  frameworks  for  debt-
restructuring,  loan  enforcement,  insolvency  and  debt  discharge  will  also  contribute  to  the 
functioning  of  the  single  market,  and  in  particular  Capital  Markets  Union.  Convergence  in 
principles  and  confidence  in  the  effective  implementation  of  those  principles  in  Member 
States will be crucial in creating the conditions for creditors to make loans to debtors in other 
Member  States.  Creditors  will  refrain  from  cross-border  lending  if  they  lack  confidence  in 
their  ability  to  protect  themselves  in  the  event  of  non-payment  and  to  recover  value  or 
collateral  as  necessary. By  establishing  common  principles  to  support alignment  of  national 
restructuring  and  insolvency  frameworks,  this  proposal  makes  a  further  contribution  to  debt 
restructuring. 

Individual entrepreneurs' personal and business debts are often intertwined: entrepreneurs take 
personal  loans  to  start  and  run  their  business,  for  example  because  they  guarantee  their 
business  loan  with  their  personal  assets  such  as  a  car,  while  natural  persons  use  consumer 
credits to buy assets for their professional activity. Under the proposal, both types of debt can 
be  consolidated,  where  applicable,  where  incurred  by  individuals  in  their  entrepreneurial 
activity. 

At  the  same  time,  the  proposal  invites  Member  States  to  extend  the  application  of  the 
discharge principles also to natural persons who are not entrepreneurs, i.e. consumers. Many 
Member  States  in  recent  years  have  adopted  or  reformed  national  laws  on  consumer 
insolvency recognising the importance of enabling consumers to discharge of their debts and 
obtain  a  second  chance.  However,  not  all  Member  States  have  such  laws  and  the  discharge 
periods  for  over-indebted  consumers  remain  very  long.  Helping  consumers  back  into  the 
economic spending cycle is an important part of good functioning markets and retail financial 
services. The Commission will continue to look into how Member States have reformed their 
national frameworks and monitor how they implement this specific second chance provision 
in the proposal, so as to review the situation of consumer over-indebtedness.   

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The  proposal  is  based  on  Articles  53  and  114  of  the  Treaty  on  the  Functioning  of  the 
European Union (TFEU).  

The proposal sets out a comprehensive set of principles and, where necessary, targeted rules 
for  an  effective  preventive  restructuring  framework  and  second  chance.  It  also  provides 
measures  to  make  procedures  more  efficient,  including  formal  insolvency  (liquidation 
procedures),  with  the  aim  of  reducing  their  length.  An  effective  second  chance  would  also 
imply  limiting  the  length  of  disqualification  orders  issued  for  honest  over-indebted 
entrepreneurs  to  enable  them  to  take  up  and  pursue  an  entrepreneurial  activity  after  a 
reasonable period of time.  

This proposal's objective is to remove obstacles to the exercise of fundamental freedoms, such 
as the free movement of capital and freedom of establishment, which result from differences 
between  national  laws  and  procedures  on  preventive  restructuring,  insolvency  and  second 
chance.  In  particular,  the  proposal  will  remove  additional  ex  ante  costs  for  investors  when 
assessing the risks of debtors entering financial difficulties in one or more Member States and 
the  ex  post  costs  of  restructuring  companies  that  have  establishments,  creditors  or  assets  in 
other  Member  States,  typically  when  restructuring  international  groups  of  companies.  The 
proposal will also remove the additional risk-assessment and cross-border enforcement costs 

EN 

14 

   EN 

for creditors of over-indebted entrepreneurs who relocate to another Member State in order to 
obtain  a  second  chance  in  a  much  shorter  period  of  time.  It  would  also  remove  additional 
costs  for  entrepreneurs  themselves  who  relocate  to  another  Member  State  to  obtain  second 
chance.  

The  single  market  problems  are  not  limited  to  purely  cross-border  situations.  Even  purely 
national  insolvencies  may  have  a  domino  effect  on  the  functioning  of  the  single  market. 
Companies  operating  cross-border  have  in  their  supply  chain  some  suppliers  that  may  be 
purely domestic businesses. Where a supplier experiences financial difficulties and cannot be 
saved, this may have negative impacts, triggering the insolvency of the cross-border company.  

An  instrument  limited  to  cross-border  insolvencies  only  would  not  solve  the  single  market 
problems, nor would it be feasible for investors to determine in advance the cross-border or 
domestic  nature  of  debtor's  future  potential  financial  difficulties.  The  proposal  goes  beyond 
matters  of  judicial  cooperation  and  establishes  substantive  minimum  standards.  For  these 
reasons, it would not be appropriate to use Article 81 as a legal basis. 

Several Members States took or have taken action independently and have recently enacted or 
started  preparatory  work  to  adopt  new  rules  to  improve  the  preventive  restructuring  and 
second  chance  framework.  However,  these  national  rules  differ  widely  in  content  and,  as  a 
result, provide an uneven level of transparency and protection for investors. Investors may be 
obstructed  from  investing  cross-border  because  the  costs  of  doing  so  are  much  higher  than 
they  need  to  be.  If  the  EU  does  not  act,  it  is  to  be  expected  that  other  Member  States 
reforming  existing  restructuring  and  second  chance  frameworks  or  introducing  such 
frameworks for the first time will follow this divergent trend. This proposal is also designed 
to prevent such divergent legislative developments and consequent obstacles in the future.  

• 

Subsidiarity  

Given  the  substantial  divergences  between  national  restructuring  and  second  chance 
frameworks  in  the  EU  and  the  absence  of  convergent  trends  in  the  more  recent  legislative 
changes at national level, it is highly unlikely that Member States individually would be able 
to  ensure  the  overall  coherence  of  their  legislation  with  other  Member  States'  insolvency 
legislations.  

On  second  chance,  to  assess  the  question  of  subsidiarity  a  distinction  needs  to  be  made 
between  natural  persons  who  are  entrepreneurs  and  those  who  are  consumers.  Unlike 
entrepreneurs,  who  constantly  search  for  any  sources  of  investment  (often  cross-border), 
consumers tend to receive, at this stage, local financing (loans from local banks)53. Hence, the 
problem of consumers' over-indebtedness should be tackled first at national level. However, 
most  recently  in  the  replies  to  the  Green  Paper  on  retail  financial  services54,  industry 
respondents  often  indicated  diverging  national  consumer  insolvency  laws  as  a  barrier  to 
selling retail financial products cross-border. Member States may therefore consider applying 
the same principles on discharge to all natural persons including consumers. 

A  well-functioning  EU  single  market  requires  a  coherent  restructuring  and  second  chance 
framework capable of addressing the cross-border dimension of firms, as interaction between 
companies located in different Member States has become increasingly common. EU action 
will therefore add value by facilitating cross-border investing in the EU, ensuring that viable 

53 
54 

Cross-border lending to households, which is now approximatively 5% of total household lending. 
http://ec.europa.eu/finance/consultations/2015/retail-financial-services/docs/green-paper_en.pdf 

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businesses in financial difficulty, wherever they are located in the single market, will be able 
to benefit from a wider range of accessible tools to prevent their insolvency. At the same time, 
entrepreneurs  will  benefit  from  being  able  to  use  reasonable  discharge  periods  in  their 
Member States. This could not realistically be achieved by the Member States acting alone. In 
addition,  ensuring  that  cross-border  creditors  and  investors  involved  in  such  a  restructuring 
process have at their disposal appropriate safeguards will have positive economic effects. The 
proposed rules will create legal certainty for creditors and investors who want to lend in other 
Member  States;  the  necessary  information  will  be  available  so  that  they  can  take  informed 
decisions.  

In  conclusion,  the  proposal  respects  the  principle  of  subsidiarity  by  proposing  action  only 
where and to the extent that the Member States cannot achieve the objectives by themselves. 

• 

Proportionality 

The proposal is designed to respect the principle of proportionality. The means it uses will be 
tailored to achieve the objective of ensuring the proper functioning of the single market. The 
future EU instrument should set common objectives and general rules, while leaving freedom 
to Member States to determine how to achieve those objectives.  

• 

Choice of the instrument and degree of harmonisation 

A binding instrument in the form of a Directive setting up a minimum harmonised framework 
appears  necessary  to  achieve  the  policy  objectives  on  restructuring,  insolvency  and  second 
chance.  The  2014  Commission  Recommendation  did  not  succeed  in  ensuring  that  Member 
States  have  a  coherent  and  robust  response  to  the  problems  it  identified.  Moreover, 
shortcomings  in  the  functioning  of  the  EU's  single  market  due  to  lack  of  convergence  of 
insolvency  frameworks  were  further  highlighted  by  the  Commission  in  the  Capital  Markets 
Union Action Plan and the Single Market Strategy. A Directive would allow Member States 
to  retain  flexibility  as  to  the  most  appropriate  means  to  implement  in  their  national  context 
principles  such  as  the  availability  of  early  warning  tools  or  the  duties  of  directors  in  the 
vicinity of insolvency. They could also set  more detailed targeted  rules needed to  attain  the 
proposal's objectives, such as maximum periods of stay of enforcement actions or majorities 
for adopting restructuring plans.  

Restructuring,  insolvency  and  second  chance  are  highly  regulated  at  national  level  and  are 
linked to other areas of law such as company law, employment law, tax law and state aid law. 
Furthermore,  restructuring,  insolvency  and  second  chance  are  treated  differently  in  the 
Member States not only due to different historical and economic developments, but also due 
to  different  approaches  to  protecting  social  values,  such  as  workers'  rights  or  the  right  to 
property. Minimum standards are therefore the most appropriate means to ensure a coherent 
framework  in  all  Member  States  while  also  enabling  Member  States  to  go  beyond  the 
Directive's provisions. For example, Member States may further encourage new and interim 
financing  in  restructuring  procedures  by  giving  it  priority  ranking  above  pre-restructuring 
claims in subsequent liquidation procedures. Member States may also enhance second chance 
frameworks by extending its personal scope to cover all natural persons, including consumers. 
Member States may also improve the treatment of workers when at the stage of adoption of 
restructuring plans, by requiring that workers are placed in a class of their own, separate from 
other creditors. 

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3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

The proposal builds on the 2014 Recommendation on a new approach to business failure and 
insolvency55.  A  Commission  evaluation  concluded  that  the  Recommendation  has  been  only 
partially  taken  up  by  some  Member  States,  including  those  that  received  insolvency-related 
recommendations  under  the  European  Semester.  Even  the  Member  States  that  implemented 
the Recommendation have done so in a selective manner, so significant differences remain.56 
Consequently,  the  Recommendation  by  itself  was  not  sufficient  to  achieve  the  objectives  of 
convergence and the reduction of inefficiencies for rules enabling early debt restructuring and 
a second chance. 

• 

Stakeholder consultations 

The  Commission  conducted  extensive  consultation  of  stakeholders.  An  online  public 
consultation from 23 March 2016 to 14 June 2016 received more than 260 contributions from 
27  Member  States  (particularly  Germany,  followed  by  the  United  Kingdom,  Belgium  and 
Lithuania).  Dedicated  meetings  were  held  with  Member  States  governmental  experts.  An 
informal  group  composed  of  selected  stakeholders  with  particular  interest  in  issues  of  debt 
restructuring,  insolvency  and  second  chance  was  created  and  met  three  times  in  2016.57 
Finally,  a  Conference  on  the  convergence  of  insolvency  frameworks  within  the  European 
Union was organised under the Slovak Presidency on 11 July 2016.  

Most Member States supported the objectives of the Commission to improve early restructuring 
and second chance frameworks, but insisted that harmonisation should remain mainly on the level 
of  principles  due  to  complex  links  with  other  areas  of  law  such  as  company  law.  As  to  the 
stakeholders,  business  organisations,  professionals'  associations,  financial  institutions, 
consumer organisations, Trade Unions and academics were in general supportive of minimum 
harmonised rules on early restructuring and a second chance approach and welcomed the idea 
of  an  efficient  and  (cost)-effective  EU  insolvency  framework  for  saving  viable  businesses. 
They also stressed that a balanced approach should be envisaged, safeguarding the interests of 
all stakeholders and preventing moral hazard. The banking sector and some other stakeholders 
were of the view that EU rules on consumer discharge, if considered, should be covered in a 
separate  instrument.  The  European  Parliament  supported  harmonisation  of  certain  aspects  of 
restructuring and put emphasis on ensuring a second chance to all natural persons.  

• 

Collection and use of expertise 

The expert group on restructuring and insolvency law held six expert group meetings between 
January and July 2016. A comprehensive comparative legal study on substantive insolvency 
laws in all Member States was carried out to identify all areas where differences in national 

55 
56 

57 

C(2014) 1500 final, 12.3.2014. 
For more details please see the evaluation of the implementation of the Commission Recommendation 
on a new approach to business failure and insolvency, 30 September 2015:  
http://ec.europa.eu/justice/civil/files/evaluation_recommendation_final.pdf.   
The main participants were BusinessEurope, AFME, EBF, ACCA, UEAPME, ESBA, Independent Retail Europe, 
EuroChambers,  ETUC,  EFIN,  FEE,  INSOL  Europe,  FDC,  The  Council  of  Bars  and  Law  Societies  of  Europe, 
European Law Institute.  

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laws  might  raise  obstacles  to  the  single  market58.  An  economic  study  on  the  impact  of 
minimum standards in restructuring, insolvency and second chance was also carried out59. 

• 

Impact assessment 

The following high level options were considered: 

Option 1: Maintaining the status quo (baseline scenario) 

Option 2: Setting up a fully harmonised preventive restructuring procedure and a second chance 
framework 

Option 3: Introducing an alternative, optional EU restructuring and second chance regime  

Option  4:  Setting  up  a  harmonised  minimum  legal  framework  in  the  area  of  restructuring  and 
second chance for entrepreneurs  

The selected option under the impact assessment was to set up a harmonised minimum legal 
framework  for  restructuring  and  second  chance  for  entrepreneurs,  with  a  non-binding 
provision  on  second  chance  for  consumers,  and  to  make  procedures  more  efficient.  The 
preferred option offers the following benefits:  

(i) efficient possibilities for early restructuring;  

(ii) improving chances of negotiation by allowing  the debtor  ‘breathing space’  via a  stay of 
enforcement actions (moratorium);  

(iii) facilitating continuation of a debtor’s business while restructuring;  

(iv)  preventing  dissenting  minority  creditors  and  shareholders  from  jeopardising  the 
restructuring effort, while safeguarding their interests;  

(v) increasing restructuring plans’ chances of success;  

(vi) reducing costs and length of restructuring procedures;  

(vii) enabling discharge for over-indebted entrepreneurs in a reasonable time (3 years);  

(viii) increasing the effectiveness of restructuring, insolvency and second chance. 

The preferred option will help reduce barriers to cross-border investment. It would result in 
more viable business being rescued than at present since minority creditors will not be able to 
destabilise the negotiation process in the hope of extracting some commercial advantage, e.g. 
by forcing an early recovery of their debt.  Efficient preventive procedures can contribute to 
limiting the occurrence of non-performing loans in cyclical downturns while ensuring a high 
recovery rate on loans whose value is impaired. The preferred option should lead to increases 
in  recovery  rates  which,  in  turn,  lead  to  lower  borrowing  costs.  The  preferred  option  will 
reduce the costs of and increase the opportunities for natural persons (entrepreneurs) to have a 
fresh  start.  The  cost  of  assessing  investment  risks  ex  ante  will  fall  and  recovery  rates  in 
insolvency proceedings will improve. The greater the alignment of restructuring regimes, the 
lower  the  cost  of  legal  advice  currently  used  to  avoid  application  of  multiple  national 
restructuring and insolvency frameworks. 

The  preferred  option  will  also  increase  self-employment,  since  reducing  discharge  periods 
increases the rate of self-employment. The preferred option will also favour consumption and 
growth. 

58 

59 

EN 

Tender 
http://ec.europa.eu/justice/civil/files/insolvency/insolvency_study_2016_final_en.pdf. 
Tender No. JUST /2015/JCOO/FWCIVI0103, forthcoming. 

JUST/2014/JCOO/PR/CIVI/0075, 

No. 

available 

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The  preferred  option  will  mean  that  some  Member  States  incur  costs  when  amending  their 
restructuring and second chance frameworks. Some Member States will need to put in place a 
preventive procedure or adapt a procedure already notified under Annex A of the Insolvency 
Regulation.  Some  changes  to  company  law  may  be  needed  to  implement  the  provisions  on 
shareholders' position in restructuring.  

• 

Regulatory fitness and simplification 

The preferred option will reduce barriers for providing cross-border credit to SMEs: efficient 
restructuring  would  enable  SMEs  who  are  creditors  to  recover  more  than  they  would  if  the 
debtor  entered  insolvency.  This  is  because  creditors’  recovery  rates  are  generally  higher 
where the insolvency and restructuring framework allows for early and efficient restructuring 
of viable firms and quick resolution of non-viable firms. As debtors, SMEs will have access to 
early  warning  tools  which  should  lead  to  more  restructurings  being  filed  early.  SMEs  in 
particular will also benefit from model restructuring plans developed nationally as they would 
make  it  easier  for  debtors  to  draft  restructuring  plans  with  the  appropriate  disclosures.  By 
promoting a more flexible restructuring framework and better conditions for fresh start upon 
failure, the death rate of companies can be reduced, as well as the negative knock-on effects 
of related insolvencies in the supply chain. Easier discharge conditions for entrepreneurs also 
contribute to higher birth rates for companies. 

Raising the efficiency of restructuring, insolvency and discharge procedures and in particular 
the  digitisation  of  all  insolvency  procedures  will  help  reduce  the  length  of  procedures  and 
increase  their  efficiency,  which  would  translate  to  lower  costs  of  restructuring  and  higher 
recovery rates for creditors.  

• 

Fundamental rights 

Freedom to conduct a business and the right to engage in gainful employment (Articles 16 and 
15  of  the  Charter  of  Fundamental  Rights):  these  rights  are  guaranteed.  Debtors  in  financial 
difficulties can continue operating during restructuring negotiations and have full or at least 
partial control of their assets and affairs. Over-indebted entrepreneurs would be able to have a 
second start after a full discharge of debt. 

Right to property and the right to an effective remedy and to a fair trial (Articles 17 and 47 of 
the  Charter):  although  certain  parts  of  the  procedure  may  affect  these  rights,  they  are 
necessary and proportionate in order to facilitate speedy implementation of restructuring plans 
capable of restoring debtors to viability. Appropriate safeguards have been included in each 
case to ensure that the parties’ legitimate interests are protected against abuse. 

Workers’  right  to  information  and  consultation  (Article  27  of  the  Charter):  these  will  be 
affected  positively  by  the  proposed  measures  since  the  proposal  is  without  prejudice  to 
existing Union legislation in this area and provides, in addition, a right for affected workers to 
vote on restructuring plans. 

Right of collective bargaining and action (Article 28 of the Charter): the proposal is without 
prejudice  to  the  rights  of  workers  and  employers,  or  their  respective  organisations,  to 
negotiate  and  conclude  collective  agreements  at  the  appropriate  levels  and,  in  cases  of 
conflicts of interest, to take collective action to defend their interests, including strike action 
in accordance with Union law and national laws and practices. 

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4. 

BUDGETARY IMPLICATIONS 

The  proposal  will  not  have  implications  for  the  EU  budget.  The  costs  of  implementing  and 
transposing  the  Directive  will  be  fully  covered  by  the  Justice  Programme's  voted  budget 
allocation. The cost of preparing an implementation report 5 years after the date of application 
of the Directive and every 7 years thereafter will be covered by the budget allocation of the 
instruments in the Justice and Consumers policy area for the years in question.  

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The Commission will facilitate the Directive's implementation in the Member States by:  

 

 

 

 

providing transposition assistance;  

organising two transposition workshops and interim stock-taking exercises;  

organising bilateral meetings including on demand by Member States;  

providing  Member  States  with  templates  for  communicating  national  transposition 
measures.  

Member  States  will  also  be  invited  to  take  certain  implementation  measures,  such  as 
indicating a dedicated contact point, notifying all national transposition measures and raising 
awareness. 

To  ensure  monitoring  and  implementation  of  the  rules,  the  proposal  would  require  Member 
States to collect data based on a standard methodology, on indicators such as the number of 
filings for each type of procedure (restructuring, insolvency, second chance), length, outcome 
of  procedures,  administrative  costs  of  procedures,  recovery  rates,  and  success  of  such 
procedures. Data will be broken down by size and type of debtors so that the effectiveness of 
Member  States'  procedures  can  be  objectively  assessed.  Member  States  are  required  to 
transmit data to the Commission annually. 

The  Directive's  operation  will  be  first  reviewed  5  years  after  its  entry  into  application  and 
every 7 years thereafter. 

• 

Detailed explanation of the specific provisions of the proposal 

The Directive has three distinct main parts: preventive restructuring frameworks (Title II) and 
second  chance  for  entrepreneurs  (Title  III)  and  measures  to  raise  the  efficiency  of 
restructuring, insolvency and second chance (Title IV). Titles I, IV, V and VI are horizontal in 
scope. 

Title  I  General  provisions:  contains  provisions  on  the  scope  of  application,  both  rationae 
materiae and rationae personae, several definitions and a provision on the availability of early 
warning  tools  for  debtors,  be  they  legal  persons  or  natural  persons  engaged  in  a  trade, 
business or professional activity (entrepreneurs). 

Although the provisions in Title III are restricted to entrepreneurs, it is explicitly stated that 
Member  States  may  extend  those  provisions  to  all  natural  persons  to  ensure  consistent 
treatment  of  personal  debt.  Indeed,  several  Member  States  do  not  distinguish  between 
personal debts incurred following a business activity and those incurred outside such activity. 
Nothing  in  this  Directive  suggests  that  such  a  distinction  should  be  made  or  is  appropriate. 

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20 

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The  Directive  invites  Member  States  to  apply  the  same  principles  on  second  chance  to  all 
natural persons. 

Title  II  Preventive  restructuring  frameworks:  this  puts  in  place  common,  core  elements  for 
preventive  restructuring  frameworks  to  give  debtors  in  financial  difficulty,  be  they  legal  or 
natural  persons,  effective  access  to  procedures  facilitating  restructuring  plans'  early 
negotiation,  adoption  by  creditors  and  possible  confirmation  by  a  judicial  or  administrative 
authority. 

Article  4:  preventive  restructuring  frameworks  can  consist  of  one  or  more  procedures  or 
measures  provided  that  a  debtor  can  combine  all  the  elements  listed  in  them  in  order  to 
effectively negotiate and adopt a restructuring plan.  

Article  5:  the  debtor  should  be  left  in  possession  of  its  assets  and  affairs.  Mediators  or 
supervisors (practitioners in the field of restructuring) may have a role, but such practitioners 
should not be appointed by a judicial or administrative authority in every case. 

Article 6 and 7: allow negotiations to take place and to fend off hold-out creditors, the debtor 
should have access to a stay of individual enforcement actions. Concerns that creditors might 
be negatively affected by the stay are addressed by provisions on the duration of the stay, the 
conditions for its renewal and the conditions for lifting the stay. Workers' outstanding claims 
are  exempted  from  the  stay  to  the  extent  Member  States  do  not  provide  for  an  appropriate 
protection by other means. The debtor should also not be under obligation or under threat of 
opening of other types of insolvency procedures, in particular liquidation procedures, for the 
period of the stay, so it can continue operating its business. It should also be able to count on 
the  continued  performance  of  contracts  with  suppliers  and  other  creditors  provided  that  it 
fulfils his obligations under such contracts. 

Article 8: provides for minimum mandatory information to be included in restructuring plans. 
Member  States  may  require  additional  mandatory  information,  provided  this  does  not  put  a 
disproportionate burden on debtors. Member States should develop on-line restructuring plan 
models and practical information on how a plan proposer can use such models. 

Article  9:  provides  for  adoption  of  restructuring  plans  by  affected  creditors  or  classes  of 
creditors. Where creditors with different interests are involved, they should also be treated in 
separate classes. As a minimum, secured creditors should always be treated separately from 
unsecured  creditors.  Member  States  may  also  provide  that  workers  are  treated  in  a  class 
separate from other creditors. 

Article  10:  lists  cases  where  a  restructuring  plan  need  confirmation  from  a  judicial  or 
administrative authority to make it binding and specifies the conditions for such confirmation. 

Article  11:  sets  out  the  conditions  to  be  fulfilled  to  ensure  that  a  restructuring  plan  not 
supported by all classes of creditors is nevertheless confirmed by a judicial or administrative 
authority.  

Article 12: lays down the principle that shareholders and other equity holders should not be 
allowed to obstruct the adoption of restructuring plans of a viable business, provided that their 
legitimate interests are protected. 

Article 13: provides rules on valuation, on when and how it must be determined in order to 
ensure fair protection for dissenting parties. 

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Article 14: spells out the effects of restructuring plans on affected and non-affected parties. 

Article  15:  lays  down  minimum  rules  on  appeals  as  safeguards  for  protecting  the  parties' 
legitimate  interests,  while  also  ensuring  that  such  safeguards  do  not  delay  confirmation  or 
implementation of restructuring plans. 

Article 16 and 17: provide minimum protection for new financing necessary to implement a 
restructuring  plan,  for  interim  financing  incurred  to  ensure  a  business's  continuity  during 
restructuring  negotiations,  and  for  other  transactions  concluded  in  close  connection  with  a 
restructuring plan. 

Article 18: contains an obligation for the Member States to impose specific duties on directors 
in the vicinity of insolvency which would incentivise them to pursue early restructuring when 
the business is viable. 

Title III Second chance for entrepreneurs: puts in place minimum provisions on discharge of 
debt  for  over-indebted  entrepreneurs  as  the  basic  conditions  for  ensuring  entrepreneurs  a 
second  chance.  Member  States  can  go  beyond  this  minimum  protection,  by  allowing  even 
more friendly treatment of entrepreneurs, e.g. through  rules on access to finance  for second 
starters.  

Article  19:  lays  down  the  principle  that  over-indebted  entrepreneurs  should  have  effective 
access to full discharge without a minimum repayment amount or percentage of the debt.  

Article 20: entrepreneurs should have the benefit of a full discharge of debts after maximum 3 
years, without the need to reapply to a judicial or administrative authority. The starting point 
of  the  three-year  period  differs,  depending  on  whether  the  entrepreneur  makes  payments  to 
creditors  under  a  repayment  plan  or  the  procedure  consists  only  in  a  realisation  of  assets. 
Limitations to a short discharge period are included in Article 22. 

Article  21:  entrepreneurs  disqualified  on  grounds  linked  to  their  over-indebtedness  should 
also have the benefit of short disqualification orders to offer them an effective second chance. 
The limitations in Article 22 should apply. 

Article 22: gives Member States a large margin of discretion when setting limitations to the 
provisions on access to discharge and on discharge periods, provided that such limitations are 
clearly specified and are necessary to protect a general interest. 

Article  23:  as  personal  debts  of  a  professional  and  non-professional  nature  are  often 
intertwined,  Member  States  should  try  to  consolidate,  where  applicable,  the  separate 
procedures to achieve effective access to second chance for entrepreneurs. 

Title  IV  Measures  to  increase  the  efficiency  of  restructuring,  insolvency  and  discharge 
procedures: applies not only to preventive restructuring and discharge procedures, but also to 
insolvency procedures. 

Article  24:  requires  Member  States  to  ensure  that  members  of  the  judiciary  and  of  other 
competent  authorities  are  properly  trained  and  specialised  in  restructuring,  insolvency  and 
second chance matters. 

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Article 25: requires Member States to encourage the initial and further training as well as the 
establishment of codes of conduct for practitioners dealing with restructuring, insolvency and 
second chance matters.  

Article  26:  contains  minimum  standards  for  appointing,  supervising  and  remunerating 
practitioners in the field of restructuring, insolvency and second chance. 

Article  27:  provides  for  the  use  of  electronic  means  of  communication  in  the  context  of 
restructuring, insolvency and second chance. 

Title V Monitoring of restructuring, insolvency and second chance: contains minimum rules 
on  data  collection  by  the  Member  States  and  on  communication  of  such  data  to  the 
Commission using a standardised data communication template;  

Title  VI  Final  provisions:  rules  on  the  Directive's  relationship  of  the  with  other  Union 
instruments,  on  reviewing  the  Directive's  application,  on  adopting  standard  forms,  on  entry 
into force and entry into application.  

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2016/0359 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on preventive restructuring frameworks, second chance and measures to increase the 
efficiency of restructuring, insolvency and discharge procedures and amending Directive 
2012/30/EU 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 53 and 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee60,  
Having regard to the opinion of the Committee of the Regions61,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

The objective of this Directive is to remove obstacles to the exercise of fundamental 
freedoms, such as the free movement of capital and freedom of establishment, which 
result  from  differences  between  national  laws  and  procedures  on  preventive 
restructuring,  insolvency  and  second  chance.  This  Directive  aims  at  removing  such 
obstacles  by  ensuring  that  viable  enterprises  in  financial  difficulties  have  access  to 
effective national preventive restructuring frameworks which enable them to continue 
operating;  that  honest  over  indebted  entrepreneurs  have  a  second  chance  after  a  full 
discharge  of  debt  after  a  reasonable  period  of  time;  and  that  the  effectiveness  of 
restructuring,  insolvency  and  discharge  procedures  is  improved,  in  particular  with  a 
view to shortening their length. 

Restructuring should enable enterprises in financial difficulties to continue business in 
whole  or  in  part,  by  changing  the  composition,  conditions  or  structure  of  assets  and 
liabilities  or  of  their  capital  structure,  including  by  sales  of  assets  or  parts  of  the 
business. Preventive restructuring frameworks should above all enable the enterprises 
to restructure at an early stage and to avoid their insolvency. Those frameworks should 
maximise the total value to creditors, owners and the economy as a whole and should 
prevent unnecessary job losses and losses of knowledge and skills. They should also 
prevent the build-up of non-performing loans. In the restructuring process the rights of 
all parties involved should be protected. At the same time, non-viable businesses with 
no prospect of survival should be liquidated as quickly as possible.  

60 
61 

OJ C , , p. . 
OJ C , , p. . 

EN 

24 

   EN 

                                                 
(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

There  are  differences  between  the  Member  States  as  regards  the  range  of  the 
procedures  available  to  debtors  in  financial  difficulties  in  order  to  restructure  their 
business.  Some  Member  States  have  a  limited  range  of  procedures  meaning  that 
businesses  are  only  able  to  restructure  at  a  relatively  late  stage,  in  the  context  of 
insolvency procedures. In other Member States, restructuring is possible at an earlier 
stage  but  the  procedures  available  are  not  as  effective  as  they  could  be  or  are  very 
formal,  in  particular  limiting  the  use  of  out-of-court  processes.  Similarly,  national 
rules  giving  entrepreneurs  a second chance,  in  particular  by granting  them  discharge 
from  the  debts  they  have  incurred  in  the  course  of  their  business,  vary  between 
Member States in respect of the length of the discharge period and the conditions for 
granting such a discharge.  

In  many  Member  States  it  takes  more  than  three  years  for  bankrupt,  but  honest 
entrepreneurs to discharge their debts and make a fresh start. Inefficient second chance 
frameworks result in entrepreneurs having to relocate in other jurisdictions in order to 
benefit  from  a  fresh  start  in  a  reasonable  period  of  time,  at  considerable  additional 
costs to  both their creditors and the debtors themselves.  Long disqualification orders 
which  often  accompany  a  procedure  leading  to  discharge  create  obstacles  to  the 
freedom to take up and pursue a self-employed, entrepreneurial activity. 

Excessive  length  of  restructuring,  insolvency  and  discharge  procedures  in  several 
Member  States  is  an  important  factor  triggering  low  recovery  rates  and  deterring 
investors from making business in jurisdictions where procedures risk taking too long.  

All  these  differences  translate  into  additional  costs  for  investors  when  assessing  the 
risks of debtors entering financial difficulties in one or more Member States and the 
costs  of  restructuring  companies  having  establishments,  creditors  or  assets  in  other 
Member States, such as is most clearly the case of restructuring international groups of 
companies. Many investors mention uncertainty about insolvency rules or the risk of 
lengthy or complex insolvency procedures in another country as a main reason for not 
investing or not  entering into a business relationship with a counterpart outside their 
own country.  

Those  differences  lead  to  uneven  conditions  for  access  to  credit  and  to  uneven 
recovery rates in the Member States. A higher degree of harmonisation in the field of 
restructuring,  insolvency  and  second  chance  is  thus  indispensable  for  a  well-
functioning  single  market  in  general  and  for  a  working  Capital  Markets  Union  in 
particular. 

The  additional  risk-assessment  and  cross-border  enforcement  costs  for  creditors  of 
over-indebted entrepreneurs who relocate to another Member State in order to obtain a 
second  chance  in  a  much  shorter  period  of  time  should  also  be  removed.  The 
additional  costs  for  entrepreneurs  stemming  from  the  need  to  relocate  to  another 
Member  State  in  order  to  benefit  from  a  second  chance  should  also  be  reduced. 
Furthermore,  the  obstacles  stemming  from  long  disqualification  orders  linked  to  an 
entrepreneur' over-indebtedness suppresses entrepreneurship. 

The obstacles to the exercise of fundamental freedoms are not limited to purely cross-
border  situations.  An  increasingly  interconnected  single  market  -  where  goods, 
services, capital and workers circulate freely – with an ever stronger digital dimension 
means  that  very  few  companies  are  purely  national  if  all  relevant  elements  are 
considered,  such  as  their  client  base,  supply  chain,  scope  of  activities,  investor  and 
capital base. Even purely national insolvencies may have an impact on the functioning 

EN 

25 

   EN 

of the single market through the so-called domino effect of insolvencies, whereby an 
enterprise's insolvency may trigger further insolvencies in the supply chain.  

(10)  Regulation (EU) 2015/848 of the European Parliament and of the Council62 deals with 
issues of jurisdiction, recognition and enforcement, applicable law and cooperation in 
cross-border insolvency proceedings as well as with the interconnection of insolvency 
registers.  Its  scope  covers  preventive  procedures  which  promote  the  rescue  of  an 
economically  viable  debtor  as  well  as  procedures  which  give  a  second  chance  to 
entrepreneurs. However, Regulation (EU) 2015/848 does not tackle the discrepancies 
between those procedures in national law. Furthermore, an instrument limited to cross-
border insolvencies only would not remove all obstacles to free movement, nor would 
it be feasible for investors to determine in advance the cross-border or domestic nature 
of the future potential financial difficulties of the debtor. There is a need therefore to 
go  beyond  matters  of  judicial  cooperation  and  to  establish  substantive  minimum 
standards. 

(11) 

It  is  necessary  to  lower  the  costs  of  restructuring  for  both  debtors  and  creditors. 
Therefore the differences which hamper the early restructuring of viable enterprises in 
financial  difficulties  and  the  possibility  of  a  second  chance  for  honest  entrepreneurs 
should  be  reduced.  That  should  bring  greater  transparency,  legal  certainty  and 
predictability  in  the  Union.  Also,  it  should  maximise  the  returns  to  all  types  of 
creditors  and  investors  and  encourage  cross-border  investment.  Greater  coherence 
should  also  facilitate  the  restructuring  of  groups  of  companies  irrespective  of  where 
the members of the group are located in the Union. 

(12)  Removing  the  barriers  to  effective  restructuring  of  viable  enterprises  in  financial 
difficulties  contributes  to  minimising  job  losses,  losses  for  creditors  in  the  supply 
chain,  preserves  know-how  and  skills  and  hence  benefits  the  wider  economy. 
Facilitating a second chance for entrepreneurs avoids their exclusion from  the labour 
market  and  enables  them  to  restart  entrepreneurial  activities,  drawing  lessons  from 
past experience. Finally, reducing the length of restructuring procedures would result 
in higher recovery rates for creditors as the passing of time would normally only result 
in a further loss of value for the enterprise. Moreover, efficient insolvency frameworks 
would  enable  a  better  assessment  of  the  risks  involved  in  lending  and  borrowing 
decisions  and  smooth  the  adjustment  for  over-indebted  enterprises,  minimizing  the 
economic and social costs involved in their deleveraging process. 

(13) 

In particular small and medium sized enterprises should benefit from a more coherent 
approach at Union level, since they do not have the necessary resources to cope with 
high  restructuring  costs  and  to  take  advantage  of  the  more  efficient  restructuring 
procedures  in  some  Member  States.  Small  and  medium  enterprises,  especially  when 
facing  financial  difficulties,  often  do  not  have  the  resources  to  hire  professional 
advice,  therefore  early  warning  tools  should  be  put  in  place  to  alert  debtors  to  the 
urgency  to  act.  In  order  to  help  such  enterprises  restructure  at  low  cost,  model 
restructuring  plans  should  also  be  developed  nationally  and  made  available  online. 
Debtors  should  be  able  to  use  and  adapt  them  to  their  own  needs  and  to  the 
specificities of their business.  

(14) 

It  is  appropriate  to  exclude  form  the  scope  of  this  Directive  debtors  which  are 
insurance and re-insurance undertakings as defined in points 1 and 4 of Article 13 of 

62 

Regulation  (EU)  2015/848  of  the  European  Parliament  and  of  the  Council  of  20  May  2015  on 
insolvency proceedings (OJ L 141, 5.6.2015, p. 19). 

EN 

26 

   EN 

                                                 
Directive  2009/138/EC  of  the  European  Parliament  and  of  the  Council63,  credit 
institutions  as  defined  in  point  1  of  Article  4(1)  of  Regulation  (EC)  No  575/2013  of 
the  European  Parliament  and  of  the  Council64,  investment  firms  and  collective 
investment  undertakings  as  defined  in  points  2  and  7  of  Article  4(1)  of  Regulation 
(EC)  No  575/2013,  central  counterparties  as  defined  in  point  1  of  Article  2  of 
Regulation  (EU)  No  648/2012  of  the  European  Parliament  and  of  the  Council65, 
central  securities  depositories  as  defined  in  point  1  of  Article  2  of  Regulation  (EU) 
909/2014  of  the  European  Parliament  and  of  the  Council66  and  other  financial 
institutions  and  entities  listed  in  the  first  subparagraph  of  Article  1(1)  of  Directive 
2014/59/EU  of  the  European  Parliament  and  of  the  Council67.  These  are  subject  to 
special  arrangements  and  the  national  supervisory  authorities  have  wide-ranging 
powers of intervention.  

(15)  Consumer over-indebtedness is a matter of great economic and social concern and is 
closely related to the reduction of debt overhang. Furthermore, it is often not possible 
to  draw  a  clear  distinction  between  the  consumer  and  business  debts  of  an 
entrepreneur. A second chance regime for entrepreneurs would not be effective if the 
entrepreneur  had  to  go  through  separate  procedures,  with  different  access  conditions 
and  discharge  periods, to  discharge  his  business  personal  debts  and  his  non-business 
personal  debts.  For  these  reasons,  although  this  Directive  does  not  include  binding 
rules on consumer over-indebtedness, Member States should be able to also apply the 
discharge provisions to consumers.  

(16)  The  earlier  the  debtor  can  detect  its  financial  difficulties  and  can  take  appropriate 
action, the higher the probability of avoiding an impending insolvency or, in case of a 
business  whose  viability  is  permanently  impaired,  the  more  orderly  and  efficient  the 
winding-up  process.  Clear  information  on  the  available  preventive  restructuring 
procedures  as  well  as  early  warning  tools  should  therefore  be  put  in  place  to 
incentivise  debtors  who  start  to  experience  financial  problems  to  take  early  action. 
Possible early warning mechanisms should include accounting and monitoring duties 
for  the  debtor  or  the  debtor's  management  as  well  as  reporting  duties  under  loan 
agreements.  In  addition,  third  parties  with  relevant  information  such  as  accountants, 
tax and social security authorities could be incentivised or obliged under national law 
to flag a negative development.  

(17)  A  restructuring  framework  should  be  available  to  debtors  to  enable  them  to  address 
their financial difficulties at an early stage, when it appears likely that their insolvency 

63 

64 

65 

66 

67 

Directive  2009/138/EC  of  the  European  Parliament  and  of  the  Council  of  25  November  2009  on  the 
taking-up  and  pursuit  of  the  business  of  Insurance  and  Reinsurance  (Solvency  II)  (OJ  L  335, 
17.12.2009, p. 1). 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 
648/2012 (OJ L 176 27.6.2013, p. 1). 
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 
derivatives, central counterparties and trade repositories (OJ L 201 27.7.2012, p. 1). 
Regulation  (EU)  No  909/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on 
improving  securities  settlement  in  the  European  Union  and  on  central  securities  depositories  and 
amending  Directives  98/26/EC  and  2014/65/EU  and  Regulation  (EU)  No  236/2012  (OJ  L  257 
28.8.2014, p. 1). 
Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending 
Council  Directive  82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC, 
2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) 
No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190). 

EN 

27 

   EN 

                                                 
may  be  prevented  and  the  continuation  of  their  business  assured.  A  restructuring 
framework  should  be  available  before  a  debtor  becomes  insolvent  according  to 
national  law,  i.e.  before  the  debtor  fulfils  the  conditions  for  entering  collective 
insolvency  procedure  which  entail  normally  a  total  divestment  of  the  debtor  and  the 
appointment  of  a  liquidator.  A  test  of  viability  should  not  therefore  be  made  a  pre-
condition  for  entering  negotiations  and  for  granting  a  stay  of  enforcement  actions. 
Rather, the viability of an enterprise should most often be an assessment to be made by 
affected  creditors  who  in  their  majority  agree  to  some  adjustments  of  their  claims. 
However, in order to avoid the procedures being misused, the financial difficulties of 
the debtor should reflect a likelihood of insolvency and the restructuring plan should 
be capable of preventing the insolvency of the debtor and ensuring the viability of the 
business.  

(18)  To promote efficiency and reduce delays  and costs,  national preventive restructuring 
frameworks should include flexible procedures limiting the involvement of judicial or 
administrative  authorities  to  where  it  is  necessary  and  proportionate  in  order  to 
safeguard the interests of creditors and other interested parties likely to be affected. To 
avoid unnecessary costs and reflect the early nature of the procedure, debtors should in 
principle  be  left  in  control  of  their  assets  and  the  day-to-day  operation  of  their 
business.  The  appointment  of  a  restructuring  practitioner,  whether  a  mediator 
supporting  the  negotiations  of  a  restructuring  plan  or  an  insolvency  practitioner 
supervising the actions of the debtor, should not be mandatory in every case, but made 
on a case-by-case basis depending on the circumstances of the case or on the debtor's 
specific  needs.  Furthermore,  there  should  not  necessarily  be  a  court  order  for  the 
opening  of  the  restructuring  process  which  may  be  informal  as  long  as  the  rights  of 
third parties are not affected. Nevertheless, a degree of supervision should be ensured 
when this is necessary to safeguard the legitimate interests of one or more creditors or 
another  interested  party.  This  may  be  the  case,  in  particular,  when  a  general  stay  of 
individual enforcement actions is granted by the judicial or administrative authority or 
where  it  appears  necessary  to  impose  a  restructuring  plan  on  dissenting  classes  of 
creditors.  

(19)  A  debtor  should  be  able  to  request  the  judicial  or  administrative  authority  for  a 
temporary  stay  of  individual  enforcement  actions  which  should  also  suspend  the 
obligation  to  file  for  opening  of  insolvency  procedures  where  such  actions  may 
adversely  affect  negotiations  and  hamper  the  prospects  of  a  restructuring  of  the 
debtor's business. The stay of enforcement could be general, that is to say affecting all 
creditors, or targeted towards individual creditors. In order to provide for a fair balance 
between  the  rights  of  the  debtor  and  of  creditors,  the  stay  should  be  granted  for  a 
period  of  no  more  than  four  months.  Complex  restructurings  may,  however,  require 
more  time.  Member  States  may  decide  that  in  such  cases,  extensions  of  this  period 
may be granted by the judicial or administrative authority, providing there is evidence 
that  negotiations  on  the  restructuring  plan  are  progressing  and  that  creditors  are  not 
unfairly  prejudiced.  If  further  extensions  are  granted,  the  judicial  or  administrative 
authority should be satisfied that there is a strong likelihood that a restructuring plan 
will  be  adopted.  Member  States  should  ensure  that  any  request  to  extend  the  initial 
duration of the stay is made within a reasonable deadline so as to allow the judiciary or 
administrative  authorities  to  deliver  a  decision  within  due  time.  Where  a  judicial  or 
administrative  authority  does  not  take  a  decision  on  the  extension  of  a  stay  of 
enforcement before it lapses, the stay should cease to have effects on the day the stay 
period expires. In the interest of legal certainty, the total period of the stay should be 
limited to twelve months.  

EN 

28 

   EN 

(20)  To ensure that the creditors do not suffer detriment, the stay should not be granted or, 
if  granted,  should  not  be  prolonged  or  should  be  lifted  when  creditors  are  unfairly 
prejudiced by the stay of enforcement. In establishing whether there is unfair prejudice 
to  creditors,  judicial  or  administrative  authorities  may  take  into  account  whether  the 
stay would preserve the overall value of the estate, whether the debtor acts in bad faith 
or  with  the  intention  of  causing  prejudice  or  generally  acts  against  the  legitimate 
expectations of the general body of creditors. A single creditor or a class of creditors 
would  be  unfairly  prejudiced  by  the  stay  if  for  example  their  claims  would  be  made 
substantially worse-off as a result of the stay than if the stay was not granted, or if the 
creditor is put more at a disadvantage than other creditors in a similar position.  

(21)  Creditors  to  which  the  stay  applies  should  also  not  be  allowed  to  withhold 
performance,  terminate,  accelerate  or  in  any  other  way  modify  executory  contracts 
during  the  stay  period,  provided  the  debtor  continues  to  comply  with  its  existing 
obligations under such contracts. Early termination would endanger the ability of the 
business  to  continue  operating  during  restructuring  negotiations,  especially  when  it 
concerns contracts for essential supplies such as gas,  electricity, water, telecoms and 
card  payment  services.  However,  in  order  to  protect  the  legitimate  interests  of 
creditors and to ensure the least disruption to the operation of creditors in the supply 
chain, the stay should only apply in respect of the claims which arose before the stay 
was  granted.  In  order  to  achieve  a  successful  restructuring,  the  debtor  should  pay  in 
the ordinary course of business claims of and owed to creditors unaffected by the stay 
and the claims of creditors affected by the stay that arise after the stay is granted.  

(22)  When a debtor enters an insolvency procedure, some suppliers may have contractual 
rights  entitling  them  to  terminate  the  supply  contract  solely  on  account  of  the 
insolvency (known as ipso facto clauses). The same may be true when a debtor applies 
for  preventive  restructuring  measures.  Where  such  clauses  are  invoked  when  the 
debtor is merely negotiating a restructuring plan or requesting a stay of enforcement or 
in  connection  with  any  event  connected  with  the  stay,  early  termination  may  have  a 
negative  impact  on  the  debtor's  business  and  the  successful  rescue  of  the  business. 
Therefore,  when  the  stay  is  granted  by  a  judicial  or  administrative  authority,  it  is 
necessary that creditors to which the stay applies are not allowed to invoke ipso facto 
clauses which make reference to negotiations on a restructuring plan or a stay or any 
similar event connected to the stay.  

(23)  Creditors  should  have  the  right  to  challenge  the  stay  once  it  has  been  granted  by  a 
judicial or administrative authority. When the stay is no longer necessary with a view 
to facilitating the adoption of a restructuring plan, for example because it is clear that 
there is a lack of support for the restructuring from a majority of creditors as required 
by national law, creditors should also be able to ask that stay be lifted.  

(24)  Any  creditors  affected  by  the  restructuring  plan  and,  where  allowed  under  national 
law, equity-holders should have a right to vote on the adoption of a restructuring plan. 
Parties unaffected by the restructuring plan should have no voting rights in relation to 
the plan, nor should their support be required for the approval of any plan. The vote 
can take the form of a formal voting process or of a consultation and agreement with 
the required majority of affected parties. However, where the vote takes the form of a 
consultation  and  agreement,  affected  parties  whose  agreement  was  not  necessary 
should nevertheless be offered the possibility to join the restructuring plan. 

(25)  To  ensure  that  rights  which  are  substantially  similar  are  treated  equitably  and  that 
restructuring plans can be adopted without unfairly prejudicing the rights of affected 

EN 

29 

   EN 

parties,  affected  parties  should  be  treated  in  separate  classes  which  reflect  the  class 
formation criteria under national law. As a minimum, secured and unsecured creditors 
should  always  be  treated  in  separate  classes.  National  law  may  provide  that  secured 
claims  may  be  divided  into  secured  and  unsecured  claims  based  on  collateral 
valuation.  National  law  may  also  stipulate  specific  rules  supporting  class  formation 
where non-diversified or otherwise especially vulnerable creditors, such as workers or 
small suppliers, would benefit from such class formation. National laws should in any 
case  ensure  that  adequate  treatment  is  given  to  matters  of  particular  importance  for 
class  formation  purposes,  such  as  claims  from  connected  parties,  and  should  contain 
rules  that  deal  with  contingent  claims  and  contested  claims.  The  judicial  or 
administrative authority should examine class formation when a restructuring plan is 
submitted  for  confirmation,  but  Member  States  could  stipulate  that  such  authorities 
may also examine class formation at an earlier stage should the proposer of the plan 
seek validation or guidance in advance. 

(26)  Requisite majorities should be established by national law to ensure that a minority of 
affected parties in each class cannot obstruct the adoption of restructuring plan which 
does  not  unfairly  reduce  their  rights  and  interests.  Without  a  majority  rule  binding 
dissenting secured creditors, early restructuring would not be possible in many cases, 
for  example  where  a  financial  restructuring  is  needed  but  the  business  is  otherwise 
viable.  To  ensure  that  parties  have  a  say  on  the  adoption  of  restructuring  plans 
proportionate to the stakes they have in the business, the required majority should be 
based on the amount of the creditors' claims or equity holders' interests in any given 
class.  

(27)  The  'best  interest  of  creditors'  test  makes  it  possible  to  ensure  that  no  dissenting 
creditor  is  worse  off  under  the  restructuring  plan  than  they  would  be  in  the  case  of 
liquidation,  whether  that  means  piecemeal  liquidation  or  sale  of  the  business  as  a 
going  concern.  That  test  should  be  applied  in  any  case  where  a  plan  needs  to  be 
confirmed  in  order  to  be  binding  over  dissenting  creditors  or,  as  the  case  may  be, 
dissenting classes of creditors. 

(28)  While a restructuring plan should always be deemed adopted if the required majority 
in each affected class supports the plan, a restructuring plan which is not supported by 
the  required  majority  in  each  affected  class  may  still  be  confirmed  by  a  judicial  or 
administrative authority provided that it is supported by at least one affected class of 
creditors  and  that  dissenting  classes  are  not  unfairly  prejudiced  under  the  proposed 
plan (the cross-class cram-down  mechanism).  In  particular, the plan should  abide by 
the absolute priority rule which ensures that a dissenting class of creditors is paid in 
full before a more junior class can receive any distribution or keep any interest under 
the restructuring plan. The absolute priority rule serves as a basis for the value to be 
allocated among the creditors in restructuring.  As a corollary to the absolute priority 
rule,  no class  of creditors can  receive  or  keep  under the restructuring  plan economic 
values  or  benefits  exceeding  the  full  amount  of  the  claims  or  interests  of  such  class. 
The  absolute  priority  rule  makes  it  possible  to  determine,  when  compared  to  the 
capital structure of the enterprise under restructuring, the value allocation that parties 
are to receive under the restructuring plan on the basis of the value of the enterprise as 
a going concern.  

(29)  While  shareholders'  or  other  equity  holders'  legitimate  interests  should  be  protected, 
Member  States  should  ensure  that  shareholders  cannot  unreasonably  block  the 
adoption  of  restructuring  plans  which  would  bring  the  debtor  back  to  viability.  For 
example,  the  adoption  of  a  restructuring  plan  should  not  be  conditional  on  the 

EN 

30 

   EN 

agreement of the out-of-the-money equity holders, namely equity holders who, upon a 
valuation  of  the  enterprise,  would  not  receive  any  payment  or  other  consideration  if 
the  normal  ranking  of  liquidation  priorities  were  applied.  Member  States  can  deploy 
different means to achieve this goal, for example by not giving equity holders the right 
to vote on a restructuring plan. However, where equity holders have the right to vote 
on a restructuring plan, a judicial or administrative authority should be able to confirm 
the plan notwithstanding the dissent of one or more classes of equity holders, through 
a  cross-class  cram  down  mechanism.  More  classes  of  equity  holders  may  be  needed 
where different classes of shareholdings with different rights exist. Equity holders of 
small  and  medium  enterprises  who  are  not  mere  investors  but  are  the  owners  of  the 
firm  and  contribute  to  the  firm  in  other  ways  such  as  managerial  expertise  may  not 
have an incentive to restructure under such conditions. For this reason, the cross-class 
cram-down mechanism should remain optional for the plan proposer.  

(30)  Confirmation  of  a  restructuring  plan  by  a  judicial  or  administrative  authority  is 
necessary to ensure  that the reduction of the rights  of creditors or  interests of equity 
holders is proportionate to the benefits of the restructuring and that they have access to 
an effective remedy. The judicial or administrative authority should therefore reject a 
plan where it has been established that the attempted restructuring reduces the rights of 
dissenting  creditors  or  equity  holders  below  what  they  could  reasonably  expect  to 
receive  in  the  event  of  the  liquidation  of  the  debtor's  business,  either  by  piecemeal 
liquidation or by a sale as a going concern, depending on the particular circumstances 
of  each  debtor.  However,  where  the  plan  is  confirmed  through  a  cross-class  cram-
down  mechanism,  the  absolute  priority  rule  should  be  applied  by  reference  to  the 
enterprise  valuation  which,  as  opposed  to  the  going-concern  liquidation  valuation  of 
the  enterprise,  looks  at  the  value  of  the  debtor's  business  in  the  longer  term.  The 
enterprise  valuation  is,  as  a  rule,  higher  than  the  going-concern  liquidation  value 
because it captures the fact that the business continues its activity and contracts with 
the  minimum  disruption,  has  the  confidence  of  financial  creditors,  shareholders  and 
clients, continues to generate revenues and limits the impact on workers. 

(31)  The  success  of  a  restructuring  plan may  often  depend  on  whether  there  are  financial 
resources  in  place  to  support  first  the  operation  of  the  business  during  restructuring 
negotiations  and  second  the  implementation  of  the  restructuring  plan  after  its 
confirmation.  New  financing  or  interim  financing  should  therefore  be  exempt  from 
to  declare  such  financing  void,  voidable  or 
avoidance  actions  which  seek 
unenforceable as an act detrimental to the general body of creditors in the context of 
subsequent insolvency procedures. National insolvency laws providing for avoidance 
actions  if  and  when  the  debtor  becomes  eventually  insolvent  or  stipulating  that  new 
lenders  may  incur  civil,  administrative  or  criminal  sanctions  for  extending  credit  to 
debtors in financial difficulties are jeopardising the availability of financing necessary 
for the successful negotiation and implementation of a restructuring plan. As opposed 
to new financing which should be confirmed by a judicial or administrative authority 
as part of a restructuring plan, when  interim financing is extended the parties do not 
know whether the plan will be eventually confirmed or not. Limiting the protection of 
interim  finance  to  cases  where  the  plan  is  adopted  by  creditors  or  confirmed  by  a 
judicial or administrative authority would discourage the provision of interim finance. 
To  avoid  potential  abuses,  only  financing  that  is  reasonably  and  immediately 
necessary  for  the  continued  operation  or  survival  of  the  debtor's  business  or  the 
preservation or enhancement of the value of that business pending the confirmation of 
that plan should be protected. Protection from avoidance actions and protection from 
personal  liability  are  minimum  guarantees  granted  to  interim  financing  and  new 

EN 

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   EN 

(32) 

(33) 

financing. However, encouraging new lenders to take the enhanced risk of investing in 
a  viable  debtor  in  financial  difficulties  may  require  further  incentives  such  as  for 
example  giving  such  financing  priority  at  least  over  unsecured  claims  in  subsequent 
insolvency procedures.  

Interested  affected  parties  should  have  the  possibility  to  appeal  a  decision  on  the 
confirmation of a restructuring plan. However, in order to ensure the effectiveness of 
the  plan,  to  reduce  uncertainty  and  to  avoid  unjustifiable  delays,  appeals  should  not 
have  suspensive  effects  on  the  implementation  of  a  restructuring  plan.  Where  it  is 
established  that  minority  creditors  have  suffered  unjustifiable  detriment  under  the 
plan,  Member  States  should  consider,  as  an  alternative  to  setting  aside  the  plan,  the 
provision of monetary compensation to the respective dissenting creditors payable by 
the debtor or the creditors who voted in favour of the plan.  

In order to promote a culture of early resort to preventive restructurings, it is desirable 
that transactions undertaken in good faith and closely connected with the adoption or 
implementation  of  a  restructuring  plan  are  also  given  protection  from  avoidance 
actions  in  subsequent  insolvency  procedures.  Transactions  in  contemplation  and 
closely connected with negotiations for a restructuring plan could be, for example, the 
selling of a subsidiary to obtain cash that the enterprise in financial difficulties needs 
to  continue  operating  the  business  during  restructuring  negotiations.  Transactions  in 
furtherance of or closely connected with the terms of the restructuring plan could take 
place when the debtor pledges the shares in a subsidiary to secure a new loan included 
in the plan or when he carries out a debt for equity swap envisaged in the plan. Such 
protection  should  enhance  certainty  with  respect  to  transactions  with  businesses  that 
are known to be in difficulties and remove the fear of creditors and investors that all 
such transactions could be declared void in case the restructuring fails.  

(34)  Throughout the preventive restructuring procedures, workers should enjoy full labour 
law  protection.  In  particular,  this  Directive  is  without  prejudice  to  workers'  rights 
guaranteed  by  Council  Directive  98/59/EC68,  Council  Directive  2001/23/EC69, 
Directive  2002/14EC  of  the  European  Parliament  and  of  the  Council70,  Directive 
2008/94/EC  of  the  European  Parliament  and  of  the  Council71  and  Directive 
2009/38/EC  of  the  European  Parliament  and  of  the  Council72.  The  obligations 
concerning  the  information  and  consultation  of  workers  under  national  law 
implementing  the  above-mentioned  Directives  remain  fully  intact.  This  includes 

68 

69 

70 

71 

72 

Council  Directive  98/59/EC  of  20  July  1998  on  the  approximation  of  the  laws  of  the  Member  States 
relating to collective redundancies, OJ L 225, 12.08.1998, p. 16. 

Council  Directive  2001/23/EC  of  12  March  2001  on  the  approximation  of  the  laws  of  the  Member 
States  relating  to  the  safeguarding  of  employees'  rights  in  the  event  of  transfers  of  undertakings, 
businesses or parts of undertakings or businesses, OJ L 82, 22.03.2001, p. 16. 

Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a 
general  framework  for  informing  and  consulting  employees  in  the  European  Community,  OJ  L  80, 
23.3.2002, p. 29. 

Directive  2008/94/EC  of  the  European  Parliament  and  of  the  Council  of  22  October  2008  on  the 
protection of employees in the event of the insolvency of their employer, OJ L 283, 28.10.2008, p. 36. 

Directive  2009/38/EC  of  the  European  Parliament  and  of  the  Council  of  6  May  2009  on  the 
establishment  of  a  European  Works  council  or  a  procedure  in  Community-scale  undertakings  and 
community-scale groups of undertakings for the purpose of informing and consulting employees, OJ L 
122, 16.5.2009, p.28. 

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obligations  to  inform  and  consult  workers'  representatives  on  the  decision  to  have 
recourse  to  a  preventive  restructuring  framework  in  accordance  with  Directive 
2002/14/EC. Given the need  to  ensure an  appropriate level of protection of workers, 
Member States should in principle exempt workers' outstanding claims, as defined in 
Directive  2008/94/EC,  from  any  stay  of  enforcement  irrespective  of  the  question 
whether  these  claims  arise  before  or  after  the  stay  is  granted.  Such  a  stay  should  be 
permissible only for the amounts and for the period that the payment of such claims is 
effectively  guaranteed  by  other  means  under  national  law.  Where  Member  States 
extend  the  cover  of  the  guarantee  of  payment  of  workers'  outstanding  claims 
established by Directive 2008/94/EC to preventive restructuring procedures set up by 
this  Directive,  the  exemption  of  workers'  claims  from  the  stay  of  enforcement  is  no 
longer  justified  to  the  extent  covered  by  that  guarantee.  Where  under  national  law 
there  are  limitations  to  the  liability  of  guarantee  institutions,  either  in  terms  of  the 
length  of  the  guarantee  or  the  amount  paid  to  workers,  workers  should  be  able  to 
enforce  their  claims  for  any  shortfall  against  the  employer  even  during  the  stay  of 
enforcement period. 

(35)  Where  a  restructuring  plan  entails  a  transfer  of  part  of  undertaking  or  business, 
workers'  rights  arising  from  a  contract  of  employment  or  from  an  employment 
relationship,  notably  including  the  right  to  wages,  should  be  safeguarded  in 
accordance  with  Articles  3  and  4  of  Directive  2001/23/EC,  without  prejudice  to  the 
specific rules applying in the event of insolvency proceedings under Article 5 of that 
Directive and in particular  the possibilities allowed by Article 5(2) of that Directive. 
Furthermore,  in  addition  and  without  prejudice  to  the  rights  to  information  and 
consultation,  including  on  decisions  likely  to  lead  to  substantial  changes  in  work 
organisation or in contractual relations with a view to reaching an agreement on such 
decisions,  which  are  guaranteed  by  Directive  2002/14/EC,  under  this  Directive 
workers who are affected by the restructuring plan should have the right to vote on the 
plan. For the purposes of voting on the restructuring plan, Member States may decide 
to place workers in a class separate from other classes of creditors. 

(36)  To  further  promote  preventive  restructurings,  it  is  important  to  ensure  that  directors 
are not dissuaded from exercising reasonable business judgment or taking reasonable 
commercial  risks,  particularly  where  to  do  so  would  improve  the  chances  for  the 
restructuring  of  potentially  viable  businesses.  Where  the  enterprise  experiences 
financial difficulties, directors should take such steps as seeking professional advice, 
including on restructuring and insolvency, for instance by making use of early warning 
tools where applicable; protecting the assets of the company so as to maximize value 
and avoid loss of key assets; considering the structure and functions of the business to 
examine viability and reduce expenditure; not committing the company to the types of 
transaction that might be subject to avoidance unless there is an appropriate business 
justification;  continuing to  trade  in  circumstances  where  it  is  appropriate  to  do  so  to 
maximize  going  concern  value;  holding  negotiations  with  creditors  and  entering 
preventive restructuring procedures. Where the debtor is in the vicinity of insolvency, 
it  is  also  important  to  protect  the  legitimate  interests  of  creditors  from  management 
decisions  that  may  have  an  impact  on  the  constitution  of  the  debtor’s  estate,  in 
particular where those decisions may have the effect of further diminishing the value 
of  the  estate  available  for  restructuring  efforts  or  for  distribution  to  creditors.  It  is 
therefore necessary that in such circumstances directors avoid any deliberate or grossly 
negligent actions that result in personal gain at the expense of stakeholders, agreeing 
to transactions at under value, or taking actions leading to unfair preference of one or 

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33 

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more stakeholders over others. Directors for the purposes of this Directive should be 
persons responsible for taking decisions concerning the management of the company. 

(37)  The different second chance possibilities in the Member States may incentivise over-
indebted  entrepreneurs  to  relocate  to  Member  States  in  order  to  benefit  from  shorter 
discharge  periods  or  more  attractive  conditions  for  discharge,  leading  to  additional 
legal  uncertainty  and  costs  for  the  creditors  when  recovering  their  claims. 
Furthermore,  the  effects  of  bankruptcy,  in  particular  the  social  stigma,  legal 
consequences  such  as  disqualifying  entrepreneurs  from  taking  up  and  pursuing 
entrepreneurial activity and the on-going inability to pay off debts constitute important 
disincentives for entrepreneurs seeking to set up a business or have a second chance, 
even if evidence shows that entrepreneurs who have gone bankrupt have more chance 
to  be  successful  the  second  time.  Steps  should  therefore  be  taken  to  reduce  the 
negative  effects  of  over-indebtedness  and  bankruptcy  on  entrepreneurs,  in  particular 
by allowing for a full discharge of debts after a certain period of time and by limiting 
the  length  of  disqualification  orders  issued  in  connection  with  the  debtor's  over-
indebtedness. 

(38)  A  full  discharge  or  the  end  of  disqualification  after  a  short  period  of  time  are  not 
appropriate in all circumstances, for instance in cases where the debtor is dishonest or 
has  acted  in  bad  faith.  Member  States  should  provide  clear  guidance  to  judicial  or 
administrative  authorities  on  how  to  assess  the  honesty  of  the  entrepreneur.  For 
example, in  establishing whether the debtor was dishonest, judicial  or administrative 
authorities may  take  into  account  circumstances  such  as  the  nature and  extent  of the 
debts, the  time  when these  were incurred, the efforts of the debtor to meet the debts 
and comply with legal obligations including public licensing requirements and proper 
bookkeeping,  and  actions  on  his  or  her  part  to  frustrate  recourse  by  creditors. 
Disqualification  orders  may  last  longer  or  indefinitely  in  situations  where  the 
entrepreneur  exercises  certain  professions  which  are  considered  sensitive  in  the 
Member States or where he or she was convicted for criminal activities. In such cases 
it would be possible for entrepreneurs to benefit from a discharge of debt, but still be 
disqualified  for  a  longer  period  of  time  or  indefinitely  from  exercising  a  particular 
profession. 

(39) 

It  is  necessary  to  maintain  and  enhance  the  transparency  and  predictability  of  the 
procedures  in  delivering  outcomes  that  are  favourable  for  the  preservation  of 
businesses  and  for  giving  entrepreneurs  a  second  chance  or  that  permit  the  efficient 
liquidation of non-viable enterprises. It is also necessary to reduce the excessive length 
of  insolvency  procedures  in  many  Member  States,  which  results  in  legal  uncertainty 
for  creditors  and  investors  and  low  recovery  rates.  Finally,  given  the  enhanced 
cooperation mechanisms between courts and practitioners in cross-border cases set up 
by Regulation (EU) 2015/848, the professionalism of all actors involved needs to be 
brought  to  comparable  high  levels  across  the  Union.  To  achieve  these  objectives, 
Member States should ensure that members of the judicial and administrative bodies 
are  properly  trained  and  have  specialised  knowledge  and  experience  in  insolvency 
matters.  Such  specialisation  of  members  of  the  judiciary  should  allow  making 
decisions  with  potentially  significant  economic  and  social  impacts  within  a  short 
period  of  time  and  should  not  mean  that  members  of  the  judiciary  have  to  deal 
exclusively  with  restructuring,  insolvency  and  second  chance  matters.  For  example, 
the  creation  of  specialised  courts  or  chambers  in  accordance  with  national  law 
governing  the  organisation  of  the  judicial  system  could  be  an  efficient  way  of 
achieving these objectives. 

EN 

34 

   EN 

(40)  Member  States  should  also  ensure  that  the  practitioners  in  the  field  of  restructuring, 
insolvency  and  second  chance  which  are  appointed  by  judicial  or  administrative 
authorities are properly trained and supervised in the carrying out of their tasks, that 
they  are  appointed  in  a  transparent  manner  with  due  regard  to  the  need  to  ensure 
efficient  procedures  and  that  they  perform  their  tasks  with  integrity.  Practitioners 
should  also  adhere  to  voluntary  codes  of  conduct  aiming  at  ensuring  an  appropriate 
level of qualification and training, transparency of the duties of such practitioners and 
the rules for determining their remuneration, the taking up of professional indemnity 
insurance cover and the establishment of oversight and regulatory mechanisms which 
should  include  an  appropriate  and  effective  regime  for  sanctioning  those  who  have 
failed in their duties. Such standards may be attained without the need in principle to 
create new professions or qualifications. 

(41)  To  further  reduce  the  length  of  procedures  and  at  the  same  time  ensure  a  better 
participation of creditors in restructuring, insolvency and discharge procedures and to 
ensure  similar  conditions  for  creditors  irrespective  of  where  they  are  located  in  the 
Union, Member States should put in place distance means of communication in court 
procedures. Therefore, it should be possible that procedural steps such as the filing of 
claims by creditors, the notifications sent by the debtor or by practitioners in the field 
of  restructuring,  insolvency  and  second  chance,  voting  on  a  restructuring  plan  or 
lodging  appeals  take  place  electronically.  The  cross-border  recognition  of  such 
communications  should comply  with  Regulation (EU) No  910/2014  of  the European 
Parliament and of the Council73. 

(42) 

It is important to gather reliable data on the performance of restructuring, insolvency 
and  discharge  procedures  in  order  to  monitor  the  implementation  and  application  of 
this  Directive.  Therefore  Member  States  should  collect  and  aggregate  data  that  is 
sufficiently granular to enable an accurate assessment of how the Directive works in 
practice. 

(43)  The stability of financial markets relies heavily on financial collateral arrangements, in 
particular,  when  security  collateral  is  provided  in  connection  with  participation  in 
designated  systems  or  in  central  bank  operations  and  when  margins  are  provided  to 
central counterparties (CCPs). As the value of financial instruments given as security 
may be very volatile, it is crucial to realize their value quickly before its goes down. 
Therefore,  this  Directive  should  be  without  prejudice  to  Directive  98/26/EC  of  the 
European Parliament and of the Council of 19 May 199874, Directive 2002/47/EC of 
the European Parliament and of the Council75 and Regulation (EU) No 648/201276. 

(44)  The effectiveness of the process of adoption and implementation of the restructuring 
plan  should  not  be  jeopardised  by  company  law  rules.  Therefore,  Member  States 
should  derogate  from  the  requirements  laid  down  in  Directive  2012/30/EU  of  the 
European Parliament and of the Council77 which concern the obligations to convene a 

73 

74 

75 

76 

77 

Regulation  (EU)  No  910/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on 
electronic  identification  and  trust  services  for  electronic  transactions  in  the  internal  market  and 
repealing Directive 1999/93/EC (OJ L 257, 28.8.2014, p. 73). 
Directive  98/26/EC  of  the  European  Parliament  and  of  the  Council  of  19  May  1998  on  settlement 
finality in payment and securities settlement systems (OJ L 166/45, 11.6.1998). 
Directive  2002/47/EC  of  the  European  Parliament  and  of  the  Council  of  6  June  2012  on  financial 
collateral arrangements (OJ L 168/43, 27.6.2002). 
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 
derivatives, central counterparties and trade repositories, (OJ L 201/1, 27.7.2012, p.1). 
Directive  2012/30/EU  of  the  European  Parliament  and  of  the  Council  of  25  October  2012  on 
coordination of safeguards which, for the protection of the interests of members and others, are required 

EN 

35 

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general meeting and to offer on a pre-emptive basis the shares to existing shareholders, 
to the extent and for the period necessary to ensure that shareholders do not frustrate 
restructuring  efforts  by  abusing  their  rights  under  Directive  2012/30/EU.  Member 
States should not be obliged to derogate from company law rules, completely or for a 
limited period of time,  provided that they ensure that company law requirements are 
not able to jeopardise the effectiveness of the restructuring process or Member States 
have  other,  equally  effective  tools  ensuring  that  shareholders  do  not  unreasonably 
prevent the adoption or implementation of a restructuring plan which would restore the 
viability  of  the  business.  In  this  context,  Member  States  should  attach  particular 
importance  to  the  effectiveness  of  provisions  related  to  stay  of  enforcement  actions 
and confirmation of the restructuring plan which should not be impaired  by the calls 
for  or  the  results  of  the  general  meetings  of  shareholders.  Directive  2012/30/EU 
should therefore be amended accordingly. 

(45) 

In  accordance  with  the Joint  Political  Declaration  of  28  September  2011  of  Member 
States  and  the  Commission  on  explanatory  documents78,  Member  States  have 
undertaken  to  accompany,  in  justified  cases,  the  notification  of  their  transposition 
measures  with  one  or  more  documents  explaining  the  relationship  between  the 
components  of  a  directive  and  the  corresponding  parts  of  national  transposition 
instruments. With regard to this Directive, the legislator considers the transmission of 
such documents to be justified. 

(46) 

In  respect  of  the  establishment  and  subsequent  changes  to  the  data  communication 
form,  implementing  powers  should  be  conferred  on  the  Commission.  Those  powers 
should be exercised in accordance with Regulation (EU) No 182/2011 of the European 
Parliament and of the Council79.  

(47)  Since the objectives of this Directive cannot be sufficiently achieved by the Member 
States acting alone because differences between national restructuring and insolvency 
frameworks would continue to raise obstacles to the free movement of capital and the 
freedom of establishment, but can rather be better achieved at Union level, the Union 
may  adopt  measures,  in  accordance  with  the  principle  of  subsidiarity  as  set  out  in 
Article  5  of  the  Treaty  on  European  Union.  In  accordance  with  the  principle  of 
proportionality,  as  set  out  in  that  Article,  this  Directive  does  not  go  beyond  what  is 
necessary in order to achieve those objectives, 

by Member States of companies within the meaning of the second paragraph of Article 54 of the Treaty 
on  the  Functioning  of  the  European  Union,  in  respect  of  the  formation  of  public  limited  liability 
companies and the maintenance and alteration of their capital, with a view to making such safeguards 
equivalent (OJ L 315, 14.11.2012, p.74). 
OJ C 369, 17.12.2011, p. 14. 
Regulation  (EU)  No  182/2011  of  the  European  Parliament  and  of  the  Council  of  16  February  2011 
laying down the rules and general principles concerning mechanisms for control by the Member States 
of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13). 

78 
79 

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HAVE ADOPTED THIS DIRECTIVE: 

TITLE I 

General provisions 

Article 1 

Subject matter and scope 

1. 

This Directive lays down rules on: 

(a)  preventive restructuring procedures available for debtors in financial difficulty 

when there is a likelihood of insolvency;  

(b)  procedures  leading  to  a  discharge  of  debts  incurred  by  over-indebted 

entrepreneurs and allowing them to take up a new activity;  

(c)  measures  to  increase  the  efficiency  of  the  procedures  referred  to  in  point  (a) 

and (b) as well as of insolvency procedures. 

2. 

This Directive shall not apply to procedures referred to in paragraph 1 of this Article 
that concern debtors who are:  

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

insurance undertakings and reinsurance undertakings as defined in points 1 and 
4 of Article 13 of Directive 2009/138/EC;  

credit  institutions  as  defined  in  point  1  of  Article  4  of  Regulation  (EC)  No 
575/2013;  

investment firms and collective investment undertakings as defined in points 2 
and 7 of Article 4(1) of Regulation (EC) No 575/2013;  

central counter parties as defined in point 1 of Article 2 of Regulation (EU) No 
648/2012;  

central securities depositories as defined in point 1 of Article 2 of Regulation 
(EU) 909/2014;  

other financial institutions and entities listed in the first subparagraph of Article 
1(1) of Directive 2014/59/EU;  

(g)  natural persons who are not entrepreneurs. 

3. 

Member States may extend the application of the procedures referred to in point (b) 
of paragraph 1 to over indebted natural persons who are not entrepreneurs. 

Article 2 

Definitions 

For the purposes of this Directive, the following definitions shall apply: 

(1) 

'insolvency procedure' means a collective insolvency procedure which entails a 
partial or total divestment of the debtor and the appointment of a liquidator;  

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37 

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(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

'restructuring'  means  changing  the  composition,  conditions,  or  structure  of  a 
debtor's assets and liabilities or any other part of the debtor's capital structure, 
including share capital, or a combination of those elements, including sales of 
assets or parts of the business, with the objective of enabling the enterprise to 
continue in whole or in part; 

'affected parties' means creditors or classes of creditors and, where  applicable 
under national law, equity holders whose claims or interests are affected under 
a restructuring plan;  

'stay  of  individual  enforcement  actions'  means  a  temporary  suspension  of  the 
right to enforce a claim by a creditor against a debtor, ordered by a judicial or 
administrative authority; 

'executory  contracts'  means  contracts  between  the  debtor  and  one  or  more 
creditors  under  which  both  sides  still  have  obligations  to  perform  at  the 
moment the stay of individual enforcement actions is ordered; 

'class formation' means the grouping of affected creditors and equity holders in 
a restructuring plan in such a way as  to  reflect the rights  and seniority of the 
affected  claims  and  interests,  taking  into  account  possible  pre-existing 
entitlements,  liens  or  inter-creditor  agreements,  and  their  treatment  under  the 
restructuring plan;  

'cram-down  of  dissenting  creditors'  means  the  confirmation  by  a  judicial  or 
administrative  authority  of  a  restructuring  plan  that  has  the  support  of  a 
majority in value of creditors or a majority in value in each and every class of 
creditors over the dissent of a minority of creditors or the dissent of a minority 
of creditors within each class; 

judicial  or 
'a  cross-class  cram-down'  means 
administrative  authority  of  a  restructuring  plan  over  the  dissent  of  one  or 
several affected classes of creditors; 

the  confirmation  by  a 

'best interest of creditors test' means that no dissenting creditor would be worse 
off under the restructuring plan than they would be in the event of liquidation, 
whether piecemeal or sale as a going concern; 

(10)  'absolute  priority  rule'  means  that  a  dissenting  class  of  creditors  must  be 
satisfied in full before a more junior class may receive any distribution or keep 
any interest under the restructuring plan; 

(11)  'new  financing'  means  any  new  funds,  whether  provided  by  an  existing  or  a 
new  creditor,  that  are  necessary  to  implement  a  restructuring  plan  that  are 
agreed upon in that restructuring plan and confirmed subsequently by a judicial 
or administrative authority; 

(12)  'interim  financing'  means  any  funds,  whether  provided  by  an  existing  or  new 
creditor, that is reasonably and immediately necessary for the debtor's business 
to continue operating or to survive, or to preserve or enhance the value of that 
business pending the confirmation of a restructuring plan;  

(13)  'over-indebted  entrepreneur'  means  a  natural  person  exercising  a  trade, 
business, craft or profession, who is otherwise than temporarily unable to pay 
debts as they fall due;  

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   EN 

(14)  'full discharge of debt' means cancellation of outstanding debt subsequent to a 
procedure  comprising  a  realisation  of  assets  and/or  a  repayment/settlement 
plan; 

(15)  'practitioner in the field of restructuring' means any person or body appointed 
by  a  judicial  or  administrative  authority  to  carry  out  one  or  more  of  the 
following tasks: 

(a) 

(b) 

(c) 

to  assist  the  debtor  or  the  creditors  in  drafting  or  negotiating  a 
restructuring plan; 

to  supervise  the  activity  of  the  debtor  during  the  negotiations  on  a 
restructuring plan and report to a judicial or administrative authority;  

to  take  partial  control  over  the  assets  or  affairs  of  the  debtor  during 
negotiations. 

Article 3  

Early warning 

1. 

2. 

3. 

Member  States  shall  ensure  that  debtors  and  entrepreneurs  have  access  to  early 
warning  tools  which  can  detect  a  deteriorating  business  development  and  signal  to 
the debtor or the entrepreneur the need to act as a matter of urgency. 

Member  States  shall  ensure  that  debtors  and  entrepreneurs  have  access  to  relevant 
up-to-date, clear, concise and user-friendly information about the availability of early 
warning tools and any means available to them to restructure at an early stage or to 
obtain a discharge of personal debt. 

Member States may limit the access provided for in paragraphs 1 and 2 to small and 
medium sized enterprises or to entrepreneurs 

TITLE II 

Preventive restructuring frameworks 

Chapter 1 

Availability of preventive restructuring frameworks 

Article 4  

Availability of preventive restructuring frameworks 

1. 

Member States shall ensure that, where there is likelihood of insolvency, debtors in 
financial  difficulty  have  access  to  an  effective  preventive  restructuring  framework 
that  enables  them  to  restructure  their  debts  or  business,  restore  their  viability  and 
avoid insolvency.  

EN 

39 

   EN 

 
 
2. 

3. 

4. 

1. 

2. 

3. 

1. 

2. 

Preventive  restructuring  frameworks  may  consist  of  one  or  more  procedures  or 
measures. 

Member States shall put in place provisions limiting the involvement of a judicial or 
administrative  authority  to  where  it  is  necessary  and  proportionate  so  that  rights  of 
any affected parties are safeguarded. 

Preventive restructuring frameworks shall be available on the application by debtors, 
or by creditors with the agreement of debtors. 

Chapter 2 

Facilitating negotiations on preventive restructuring plans 

Article 5  

Debtor in possession 

Member  States  shall  ensure  that  debtors  accessing  preventive  restructuring 
procedures remain totally or at least partially in control of their assets and the day-to-
day operation of the business. 

The appointment by a judicial or administrative authority of a practitioner in the field 
of restructuring shall not be mandatory in every case. 

Member  States  may  require  the  appointment  of  a  practitioner  in  the  field  of 
restructuring in the following cases: 

(a)  where the debtor is granted a general stay of individual enforcement actions in 

accordance with Article 6;  

(b)  where  the  restructuring  plan  needs  to  be  confirmed  by  a  judicial  or 
administrative  authority  by  means  of  a  cross-class  cram-down,  in  accordance 
with Article 11. 

Article 6  

Stay of individual enforcement actions  

Member States shall ensure that debtors who are negotiating a restructuring plan with 
their creditors may benefit from a stay of individual enforcement actions if and to the 
extent such a stay is necessary to support the negotiations of a restructuring plan.  

Member  States  shall  ensure  that  a  stay  of  individual  enforcement  actions  may  be 
ordered  in  respect  of  all  types  of  creditors,  including  secured  and  preferential 
creditors. The stay may be general, covering all creditors, or limited, covering one or 
more individual creditors, in accordance with national law. 

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3. 

4. 

5. 

6. 

7. 

8. 

9. 

1. 

2. 

3. 

Paragraph 2 shall not apply to workers' outstanding claims except if and to the extent 
that  Member  States  ensure  by  other  means  that  the  payment  of  such  claims  is 
guaranteed at a level of protection at least equivalent to that provided for under the 
relevant national law transposing Directive 2008/94/EC. 

Member States shall limit the duration of the stay of individual enforcement actions 
to a maximum period of no more than four months.  

Member  States  may  nevertheless  enable  judicial  or  administrative  authorities  to 
extend the initial duration of the stay of individual enforcement actions or to grant a 
new  stay  of  individual  enforcement  actions,  upon  request  of  the  debtor  or  of 
creditors.  Such  extension  or  new  period  of  stay  of  individual  enforcement  actions 
shall be granted only if there is evidence that: 

(a) 

(b) 

relevant progress has been made in the negotiations on the restructuring plan; 
and  

the continuation of the stay of individual enforcement actions does not unfairly 
prejudice the rights or interests of any affected parties.  

Any further extensions shall be given only if the conditions referred to in points (a) 
and  (b)  of  paragraph  5  are  met  and  the  circumstances  of  the  case  show  a  strong 
likelihood that a restructuring plan will be adopted. 

The total duration of the stay of individual enforcement actions, including extensions 
and renewals, shall not exceed twelve months. 

Member  States  shall  ensure  that  judicial  or  administrative  authorities  may  lift  the 
stay of individual enforcement actions, in whole or in part: 

(a) 

if  it  becomes  apparent  that  a  proportion  of  creditors  who  under  national  law 
could  block  the  adoption  of  the  restructuring  plan  does  not  support  the 
continuation of the negotiations; or 

(b) 

at the request of the debtor or the practitioner in the field of restructuring.  

Member  States  shall  ensure  that,  where  an  individual  creditor  or  a  single  class  of 
creditors  is  or  would  be  unfairly  prejudiced  by  a  stay  of  individual  enforcement 
actions,  the  judicial  or  administrative  authority  may  decide  not  grant  the  stay  of 
individual enforcement  actions  or may  lift  a  stay  of  individual  enforcement  actions 
already granted in respect of that creditor or class of creditors, at the request of the 
creditors concerned. 

Article 7  

Consequences of the stay of individual enforcement actions 

Where  the  obligation  of  the  debtor  to  file  for  insolvency  under  national  law  arises 
during the period of the stay of individual enforcement actions, that obligation shall 
be suspended for the duration of the stay. 

A  general  stay  covering  all  creditors  shall  prevent  the  opening  of  insolvency 
procedures at the request of one or more creditors.  

Member  States  may  derogate  from  paragraph  1  where  the  debtor  becomes  illiquid 
and therefore unable to pay his debts as they fall due during the stay period. In that 
case, Member States shall ensure that restructuring procedures are not automatically 

EN 

41 

   EN 

terminated and that, upon examining the prospects for achieving an agreement on a 
successful restructuring plan within the period of the stay, a judicial or administrative 
authority may decide to defer the opening of insolvency procedure and keep in place 
the benefit of the stay of individual enforcement actions. 

Member States shall ensure that, during the stay period, creditors to which the stay 
applies may not  withhold performance  or terminate, accelerate or in  any other  way 
modify  executory  contracts  to  the  detriment  of  the  debtor  for  debts  that  came  into 
existence prior to the stay. Member States may limit the application of this provision 
to  essential  contracts  which  are  necessary  for  the  continuation  of  the  day-to-day 
operation of the business. 

Member  States  shall  ensure  that  creditors  may  not  withhold  performance  or 
terminate, accelerate or in any other way modify executory contracts to the detriment 
of the debtor by virtue of a contractual clause providing for such measures, solely by 
reason of the debtor's entry into restructuring negotiations, a requested for a stay of 
individual enforcement actions, the ordering of the stay as such or any similar event 
connected to the stay. 

Member  States  shall  ensure  that  nothing  prevents  the  debtor  from  paying  in  the 
ordinary course of business claims of or owed to unaffected creditors and the claims 
of  affected  creditors  that  arise  after  the  stay  is  granted  and which  continue  to  arise 
throughout the period of the stay. 

Member States shall not require debtors to file for insolvency procedures if the stay 
period expires without an agreement on a restructuring plan being reached, unless the 
other conditions for filing laid down by national law are fulfilled. 

4. 

5. 

6. 

7. 

Chapter 3 

Restructuring plans 

Article 8  

Content of restructuring plans 

1. 

Member  States  shall  require  restructuring  plans  submitted  for  confirmation  by  a 
judicial or administrative authority to contain at least the following information: 

(a) 

(b) 

(c) 

the  identity  of  the  debtor  or  the  debtor’s  business  for  which  the  restructuring 
plan is proposed; 

a valuation of the present value of the debtor or the debtor's business as well as 
a reasoned statement on the causes and the extent of the financial difficulties of 
the debtor; 

the identity of the affected parties, whether named individually or described by 
reference to one or more categories of debt, as well as their claims or interests 
covered by the restructuring plan; 

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(d) 

(e) 

the classes into which the affected parties have been grouped for the purposes 
of  adopting  the  plan,  together  with  a  rationale  for  doing  so  and  information 
about the respective values of creditors and members in each class;  

the  identity  of  non-affected  parties,  whether  named  individually  or  described 
by reference to one or more categories of debt,  together with a statement of the 
reasons why it is not proposed to affect them; 

(f) 

the terms of the plan, including, but not limited to:  

(i) 

its proposed duration; 

(ii) 

any proposal by which debts are rescheduled or waived or converted into 
other forms of obligation; 

(iii)  any new financing anticipated as part of the restructuring plan; 

(g) 

an opinion or  reasoned statement by the person responsible for proposing the 
restructuring  plan  which  explains  why 
is  viable,  how 
implementing  the  proposed  plan  is  likely  to  result  in  the  debtor  avoiding 
insolvency  and  restore  its  long-term  viability,  and  states  any  anticipated 
necessary pre-conditions for its success. 

the  business 

Member  States  shall  make  a  model  for  restructuring  plans  available  online.  That 
model  shall  contain  at  least  the  information  required  under  national  law  and  shall 
provide general but practical information on how the model is to be used. The model 
shall  be  made  available  in  the  official  language  or  languages  of  the  Member  State. 
Member  States  shall  endeavour  to  make  the  model  available  in  other  languages,  in 
particular in languages used in international business. It shall be designed in such a 
way that it can be adapted to the needs and circumstances of every case. 

2. 

3. 

The parties may choose whether or not to use the model restructuring plan. 

Article 9  

Adoption of restructuring plans 

1. 

2. 

3. 

4. 

Member  States  shall  ensure  that  any  affected  creditors  have  a  right  to  vote  on  the 
adoption of a restructuring plan. Member States may also grant such voting rights to 
affected equity holders, in accordance with Article 12(2). 

Member States shall ensure that affected parties are treated in separate classes which 
reflect the class formation criteria. Classes shall be formed in such a way that each 
class comprises claims or interests with rights that are sufficiently similar to justify 
considering  the  members  of  the  class  a  homogenous  group  with  commonality  of 
interest.  As  a  minimum,  secured  and  unsecured  claims  shall  be  treated  in  separate 
classes  for  the  purposes  of  adopting  a  restructuring  plan.  Member  States  may  also 
provide that workers are treated in a separate class of their own. 

Class formation shall be examined by the judicial or administrative authority when a 
request is filed for confirmation of the restructuring plan.  

A restructuring plan shall be deemed to be adopted by affected parties, provided that 
a  majority  in  the  amount  of  their  claims  or  interests  is  obtained  in  each  and  every 

EN 

43 

   EN 

 
 
5. 

6. 

1. 

2. 

3. 

4. 

class.  Member  States  shall  lay  down  the  required  majorities  for  the  adoption  of  a 
restructuring plan, which shall be in any case not higher than 75% in the amount of 
claims or interests in each class. 

Member States may stipulate that a vote on the adoption of a restructuring plan takes 
the form of a consultation and agreement of a requisite majority of affected parties in 
each class.  

Where the necessary majority is not reached in one or more dissenting voting classes, 
the  plan  may  still  be  confirmed  if  it  complies  with  the  cross-class  cram-down 
requirements set out in Article 11. 

Article 10  

Confirmation of restructuring plans 

Member  States  shall  ensure  that  the  following  restructuring  plans  can  become 
binding  on  the  parties  only  if  they  are  confirmed  by  a  judicial  or  administrative 
authority: 

(a) 

(b) 

restructuring plans which affect the interests of dissenting affected parties;  

restructuring plans which provide for new financing.  

Member States shall ensure that the conditions under which a restructuring plan can 
be  confirmed  by  a  judicial  or  administrative  authority  are  clearly  specified  and 
include at least the following: 

(a) 

(b) 

(c) 

the  restructuring  plan  has  been  adopted  in  accordance  with  Article  9  and  has 
been notified to all known creditors likely to be affected by it; 

the restructuring plan complies with the best interest of creditors test; 

any  new  financing  is  necessary  to  implement  the  restructuring  plan  and  does 
not unfairly prejudice the interests of creditors. 

Member States shall ensure that judicial or administrative authorities may refuse to 
confirm a restructuring plan where that plan does not have a reasonable prospect of 
preventing the insolvency of the debtor and ensuring the viability of the business. 

Member  States  shall  ensure  that  where  a  judicial  or  administrative  authority  is 
required to confirm a restructuring plan in order for it to become binding, a decision 
is taken without undue delay after the request for confirmation has been filed and in 
any case no later than 30 days after the request is filed.  

Article 11  

Cross-class cram-down  

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   EN 

 
 
 
 
1. 

Member States shall ensure that a restructuring plan which is not approved by each 
and every class of affected parties may be confirmed by a judicial or administrative 
authority upon the proposal of a debtor or of a creditor with the debtor's agreement 
and  become  binding  upon  one  or  more  dissenting  classes  where  the  restructuring 
plan:  

(a) 

fulfils the conditions in Article 10(2); 

(b)  has  been  approved  by  at  least  one  class  of  affected  creditors  other  than  an 
equity-holder  class  and  any  other  class  which,  upon  a  valuation  of  the 
enterprise, would not receive any payment or other consideration if the normal 
ranking of liquidation priorities were applied;  

(c) 

complies with the absolute priority rule. 

2. 

Member  States  may  vary  the  minimum  number  of  affected  classes  required  to 
approve the plan laid down in point (b) of paragraph (1). 

Article 12  

Equity holders 

1. 

2. 

1. 

2. 

Member  States  shall  ensure  that,  where  there  is  a  likelihood  of  insolvency, 
shareholders and other equity holders with interests in a debtor may not unreasonably 
prevent the adoption or implementation of a restructuring plan which would restore 
the viability of the business. 

To  achieve  the  objective  in  paragraph  1,  Member  States  may  provide  that  equity 
holders are to form one or more distinct classes by themselves and be given a right to 
vote  on  the  adoption  of  restructuring  plans.  In  this  case,  the  adoption  and 
confirmation  of  restructuring  plans  shall  be  subject  to  the  cross-class  cram-down 
mechanism provided for in Article 11.  

Article 13 

Valuation by the judicial or administrative authority 

A  liquidation  value  shall  be  determined  by  the  judicial  or  administrative  authority 
where a restructuring plan is challenged on the grounds of an alleged breach of the 
best interest of creditors test. 

An enterprise value shall be determined by the judicial or administrative authority on 
the basis of the value of the enterprise as a going concern in the following cases:  

(a)  where a cross-class cram-down application is necessary for the adoption of the 

restructuring plan;  

(b)  where a restructuring plan is challenged on the grounds of an alleged breach of 

the absolute priority rule. 

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45 

   EN 

 
 
 
3. 

4. 

1. 

2. 

1. 

2. 

3. 

4. 

Member States shall ensure that properly qualified experts are appointed to assist the 
judicial or administrative authority, when necessary and appropriate, for the purposes 
of the valuation, including where a creditor challenges the value of the collateral. 

Member States shall ensure that the challenges referred to in paragraphs 1, 2 and 3 
can be lodged with the judicial or administrative authority called upon to confirm the 
restructuring  plan  or  in  the  context  of  an  appeal  against  a  decision  on  the 
confirmation of a restructuring plan. 

Article 14 

Effects of restructuring plans 

Member States shall ensure that restructuring plans which are confirmed by a judicial 
or administrative authority are binding upon each party identified in the plan. 

Creditors  who  are  not  involved  in  the  adoption  of  a  restructuring  plan  shall  not  be 
affected by the plan. 

Article 15 

Appeals  

Member  States  shall  ensure  that  a  decision  on  the  confirmation  of  a  restructuring 
plan taken by a judicial authority may be appealed before a higher judicial authority 
and  that  a  decision  on  the  confirmation  of  a  restructuring  plan  taken  by  an 
administrative authority may be appealed before a judicial authority.  

Appeals shall be resolved in an expedited manner. 

An  appeal  against  a  decision  confirming  a  restructuring  plan  shall  have  no 
suspensive effects on the execution of that plan.  

Member States shall ensure that, where an appeal pursuant to paragraph 3 is upheld, 
the judicial authority may either: 

(a) 

(b) 

set aside the restructuring plan; or  

confirm the plan and grant monetary compensation to the dissenting creditors, 
payable by the debtor or by the creditors who voted in favour of the plan. 

EN 

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   EN 

 
 
 
 
 
 
CHAPTER 4 

Protection for new financing, interim financing and other restructuring related 
transactions 

Article 16 

Protection for new financing and interim financing  

1. 

2. 

3. 

1. 

Member States shall ensure that new financing and interim financing are adequately 
encouraged  and  protected.  In  particular,  new  and  interim  financing  shall  not  be 
declared void, voidable or unenforceable as an act detrimental to the general body of 
creditors  in  the  context  of  subsequent  insolvency  procedures,  unless  such 
transactions have been carried out fraudulently or in bad faith. 

Member States may afford grantors of new or interim financing the right to receive 
payment with priority in the context of subsequent liquidation procedures in relation 
to  other  creditors  that  would  otherwise  have  superior  or  equal  claims  to  money  or 
assets. In such cases, Member States shall rank new financing and interim financing 
at least senior to the claims of ordinary unsecured creditors. 

The grantors of new financing and interim financing in a restructuring process shall 
be  exempted  from  civil,  administrative  and  criminal  liability  in  the  context  of  the 
subsequent  insolvency  of  the  debtor,  unless  such  financing  has  been  granted 
fraudulently or in bad faith. 

Article 17 

Protection for other restructuring related transactions 

Member States shall ensure that transactions carried out to further the negotiation of 
a  restructuring  plan  confirmed  by  a  judicial  or  administrative  authority  or  closely 
connected with such negotiations are not declared void, voidable or unenforceable as 
acts  detrimental  to  the  general  body  of  creditors  in  the  context  of  subsequent 
insolvency procedures, unless such transactions have been carried out fraudulently or 
in bad faith. 

2. 

Transactions enjoying the protection referred to in paragraph 1 shall include: 

(a) 

(b) 

(c) 

(d) 

the payment of reasonable fees and costs of negotiating, adopting, confirming 
or implementing a restructuring plan; 

the  payment  of  reasonable  fees  and  costs  in  seeking  professional  advice  in 
connection with any aspect of a restructuring plan; 

the payment of worker wages for work already carried out; 

any  other  necessary  and  reasonable  payments  and  disbursements  made  in  the 
ordinary course of business; 

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47 

   EN 

 
  
 
3. 

4. 

(e) 

transactions such as new credit, financial contributions or partial asset transfers 
outside the ordinary course of business made in contemplation of and closely 
connected with negotiations for a restructuring plan. 

Member States may require the transactions referred to in point (e) of paragraph 2 to 
be  approved  by  a  practitioner  in  the  field  of  restructuring  or  by  a  judicial  or 
administrative  authority  in  order  to  benefit  from  the  protection  referred  to  in 
paragraph 1. 

Member  States  shall  ensure  that  any  transaction,  payment,  debt-equity  swap, 
guarantee or security carried out to further the implementation of a restructuring plan 
confirmed  by  a  judicial  or  administrative  authority  or  closely  connected  with  such 
implementation is not declared void, voidable or unenforceable as an act detrimental 
to the general body of creditors in the context of subsequent insolvency procedures, 
unless  such  transactions  have  been  carried  out  fraudulently  or  in  bad  faith, 
irrespective of whether such transactions were deemed to be in the ordinary course of 
business. 

CHAPTER 5 

Duties of directors in connection with negotiations on a preventive restructuring plan 

Article 18 

Duties of directors 

Member States shall lay down rules to ensure that, where there is a likelihood of insolvency, 
directors have the following obligations: 

(a) 

(b) 

(c) 

(d) 

to  take  immediate  steps  to  minimise  the  loss  for  creditors,  workers, 
shareholders and other stakeholders; 

to have due regard to the interests of creditors and other stakeholders;  

to take reasonable steps to avoid insolvency; 

to  avoid deliberate or  grossly negligent conduct that  threatens the viability  of 
the business. 

TITLE III 

SECOND CHANCE FOR ENTREPRENEURS 

Article 19 

Access to discharge  

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   EN 

 
 
 
 
 
1. 

2. 

Member States shall ensure that over-indebted entrepreneurs may be fully discharged 
of their debts in accordance with this Directive.  

Member States in which a full discharge of debt is conditional on a partial repayment 
of debt by the entrepreneur shall ensure that the related repayment obligation is based 
on the individual situation of the entrepreneur and is notably proportionate to his or 
her disposable income over the discharge period.  

Article 20 

Discharge period 

1. 

The period of time after which over-indebted entrepreneurs may be fully discharged 
from their debts shall be no longer than three years starting from: 

(a) 

 the  date  on  which  the  judicial  or  administrative  authority  decided  on  the 
application  to  open  such  a  procedure,  in  the  case  of  a  procedure  ending  with 
the liquidation of an over-indebted entrepreneur' s assets; or 

(b) 

the date on which implementation of the repayment plan started, in the case of 
a procedure which includes a repayment plan. 

2. 

Member  States  shall  ensure  that  on  expiry  of  the  discharge  period,  over-indebted 
entrepreneurs are discharged of their debts without the need to re-apply to a judicial 
or administrative authority. 

Article 21 

Disqualification period  

Member States shall ensure that, where an over-indebted entrepreneur obtains a discharge of 
debts  in  accordance  with  this  Directive,  any  disqualifications  from  taking  up  or  pursuing  a 
trade,  business,  craft  or  profession  which  is  connected  with  the  entrepreneur's  over-
indebtedness shall cease to have effect at the latest at the end of the discharge period, without 
the need to re-apply to a judicial or administrative authority. 

Article 22 

Limitations  

1. 

By way of derogation from Articles 19, 20 and 21, Member States may maintain or 
introduce provisions restricting access to discharge or laying down longer periods for 
obtaining  a  full  discharge  or  longer  disqualification  periods  in  certain  well-defined 
circumstances  and  where  such  limitations  are  justified  by  a  general  interest,  in 
particular where: 

(a) 

(b) 

the  over-indebted  entrepreneur  acted  dishonestly  or  in  bad  faith  towards  the 
creditors when becoming indebted or during the collection of the debts; 

the over-indebted entrepreneur does not adhere to a repayment plan or to any 
other legal obligation aimed at safeguarding the interests of creditors; 

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(c) 

(d) 

in case of abusive access to discharge procedures;  

in  case  of  repeated  access  to  discharge  procedures  within  a  certain  period  of 
time. 

Member  States  may  provide  for  longer  discharge  periods  in  cases  where  the  main 
residence  of  an  over-indebted  entrepreneur  is  exempt  from  the  possibility  of 
realisation  of  assets,  in  order  to  safeguard  the  livelihood  of  the  over-indebted 
entrepreneur and his or her family. 

Member  States  may  exclude  specific  categories  of  debt,  such  as  secured  debts  or 
debts  arising  out  of  criminal  penalties  or  tortious  liability,  from  discharge  or  lay 
down a longer discharge period where such exclusions or longer periods are justified 
by a general interest. 

By  way  of  derogation  from  Article  21,  Member  States  may  provide  for  longer  or 
indefinite disqualification periods where the over-indebted entrepreneur is a member 
of a profession to which specific ethical rules apply or where disqualifications were 
ordered by a court in criminal proceedings. 

Article 23  

Consolidation of proceedings regarding professional and personal debts 

Member  States  shall  ensure  that,  where  an  over-indebted  entrepreneur  has 
professional  debts  incurred  in  the  course  of  his  or  her  trade,  business,  craft  or 
profession  as  well  as  personal  debts  incurred  outside  those  activities,  all  debts  are 
treated in a single procedure for the purposes of obtaining a discharge.  

Member  States  may  derogate  from  paragraph  1  and  stipulate  that  professional  and 
personal  debts  are  to  be  treated  in  separate  procedures,  provided  that  these 
procedures  can  be  coordinated  for  the  purposes  of  obtaining  a  discharge  in 
accordance with this Directive.  

TITLE IV 

Measures to increase the efficiency of restructuring, insolvency 
and second chance  

Article 24 

Judicial and administrative authorities  

Member  States  shall  ensure  that  the  members  of  the  judiciary  and  administrative 
authorities dealing with restructuring, insolvency and second chance matters receive 
initial and further training to a level appropriate to their responsibilities.  

Without prejudice to judicial independence and differences in the organisation of the 
judiciary  across  the  Union,  where  restructuring,  insolvency  and  second  chance 

2. 

3. 

4. 

1. 

2. 

1. 

2. 

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matters are dealt with by judicial authorities, Member States shall ensure that these 
matters are dealt with in an efficient manner which ensures expeditious treatment of 
the  procedures  and  that  the  members  of  the  judiciary  in  charge  have  the  necessary 
expertise and specialisation. 

Article 25 

Practitioners in the field of restructuring, insolvency and second chance  

Member  States  shall  ensure  that  mediators,  insolvency  practitioners  and  other 
practitioners  appointed  in  restructuring,  insolvency  and  second  chance  matters 
receive the necessary initial and further training in order to ensure that their services 
are provided in an effective, impartial, independent and competent way in relation to 
the parties. 

Member States shall encourage, by any means which they consider appropriate, the 
development of, and adherence to, voluntary codes of conduct by practitioners in the 
field  of  restructuring,  insolvency  and  second  chance,  as  well  as  other  effective 
oversight mechanisms concerning the provisions of such services.  

Article 26 

Appointment of practitioners in the field of restructuring, insolvency and second chance 

Member  States  shall  ensure  that  the  process  for  the  appointment,  removal  and 
resignation  of  practitioners  in  the  field  of  restructuring,  insolvency  and  second 
chance is clear, predictable and fair and fulfils, in particular, the requirements set out 
in paragraphs 2, 3 and 4.  

Member States shall ensure that the conditions for eligibility and the grounds upon 
which  an  insolvency  practitioner  may  be  ineligible  for  appointment  are  clear  and 
transparent. 

Where  practitioners  in  the  field  of  restructuring,  insolvency  and  second  chance  are 
appointed by the judicial or administrative authority, Member States shall ensure that 
the  criteria  concerning  the  manner  in  which  the  judicial  or  administrative  authority 
selects such a practitioner are clear and transparent. In selecting a practitioner in the 
field  of  restructuring,  insolvency  and  second  chance  for  a  particular  case,  due 
consideration  shall  be  given  to  the  practitioner's  experience  and  expertise.  Where 
appropriate,  the  debtors  and  creditors  shall  be  consulted  in  the  selection  of  the 
practitioner. 

In  restructuring  and  insolvency  procedures  with  cross-border  elements,  due 
consideration  shall  be  given  to  the  practitioner's  ability  to  communicate  and 
cooperate  with  foreign  insolvency  practitioners  and  judicial  or  administrative 
authorities and to its human and administrative resources. 

1. 

2. 

1. 

2. 

3. 

4. 

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Article 27 

Supervision and remuneration of practitioners in the field of restructuring, insolvency and second 
chance 

1. 

2. 

Member  States  shall  put  in  place  appropriate  oversight  and  regulatory  structures  to 
ensure  that  the  work  of  practitioners  in  the  field  of  restructuring,  insolvency  and 
second  chance  is  appropriately  supervised.  This  oversight  and  regulation  shall  also 
include  an  appropriate  and  effective  regime  for  sanctioning  practitioners  who  have 
failed in their duties. 

Member  States  shall  ensure  that  the  fees  charged  by  practitioners  in  the  field  of 
restructuring, insolvency and second chance are governed by rules which incentivise 
a timely and efficient resolution of procedures with due regard to the complexity of 
the  case.  Member  States  shall  ensure  that  appropriate  procedures  with  built-in 
safeguards  are  available  to  ensure  that  any  disputes  over  remuneration  can  be 
resolved in a timely manner. 

Article 28  

Use of electronic means of communication 

1. 

Member  States  shall  ensure  that  the  following  actions  may  be  performed 
electronically, including in cross-border situations: 

(a) 

(b) 

filing of claims;  

filing  of  restructuring  or  repayment  plans  with  competent  judicial  or 
administrative authorities; 

(c)  notifications to creditors; 

(d)  voting on restructuring plans; 

(e) 

lodging of appeals. 

TITLE V 

 Monitoring of restructuring, insolvency and discharge 
procedures 

Article 29 

Data collection 

1. 

With a view to arriving at reliable annual statistics, Member States shall collect and 
aggregate at Member State level data on: 

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(a) 

the number of procedures which were initiated, pending and resolved, broken 
down by: 

(i) 

preventive restructuring procedures,  

(ii) 

insolvency procedures such as liquidation procedures,  

(iii)  procedures leading to a full discharge of debt for natural persons; 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

the  length  of  the  procedure  from  initiation  to  payout,  separate  by  types  of 
procedures 
insolvency  procedure, 
restructuring  procedure, 
discharge procedure); 

(preventive 

the  share  of  each  type  of  outcome  within  each  restructuring  or  insolvency 
procedure, including the number of procedures applied for but not commenced 
for lack of available funds in the debtor's estate. 

the average costs of each procedures awarded by the judicial or administrative 
authority, in euro; 

the recovery rates for secured and unsecured creditors separately, as well as the 
number of procedures with zero or no more than two percent total recovery rate 
in respect of each type of procedure referred to in point (a);  

the  number  of  debtors  subject  to  procedures  referred  to  in  point  (a)(i)  who 
within three years from the conclusion of such procedures are subject to either 
of the procedures referred to in points (a)(i) and (a)(ii); 

the number of debtors who, after having undergone a procedure referred to in 
point (a)(iii) of this paragraph, are subject to another such procedure or another 
procedure referred to in point (a) of this paragraph. 

For the purposes of point (e) of the first subparagraph, recovery rates shall be after 
costs  and  anonymised  data  fields  shall  show  both  recovery  rate  and  recovery  rate 
lined to time until recovery. 

2. 

Member States shall break down the statistics referred to in paragraph 1 by: 

(a) 

the size of the debtors involved, by number of workers; 

(b)  whether debtors are natural or legal persons;  

3. 

4. 

(c) 

in respect of discharge and where such distinction is made under national law, 
 whether the procedures concern only entrepreneurs or all natural persons. 

Member  States  shall  compile  statistics  from  the  aggregate  data  referred  to  in 
paragraphs  1  and  2  for  full  calendar  years  ending  on  31  December  of  each  year, 
starting with data collected for the first full calendar year following [the date of start 
of application of implementing measures]. These statistics shall be communicated to 
the Commission on the basis of a standard data communication form annually, by 31 
March of the calendar year following the year for which data is collected. 

The Commission shall establish the communication form referred to in paragraph 3 
by  way  of  implementing  acts.  Those  implementing  acts  shall  be  adopted  in 
accordance with the advisory procedure referred to in Article 30(2). 

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Article 30 

Committee 

1. 

2. 

The  Commission  shall  be  assisted  by  a  committee.  That  committee  shall  be  a 
committee within the meaning of Regulation (EU) No 182/2011.  

Where  reference  is  made  to  this  paragraph,  Article  4  of  Regulation  (EU)  No 
182/2011 shall apply. 

TITLE VI 

 Final provisions 

Article 31 

Relationship with other acts 

1. 

This Directive shall be without prejudice to the following acts: 

(a)  Directive  98/26/EC  of  the  European  Parliament  and  of  the  Council  on 

settlement finality in payment and securities settlement systems80;  

(b)  Directive  2002/47/EC  of  the  European  Parliament  and  of  the  Council  on 

financial collateral arrangements81; and  

(c)  Regulation (EU) No 648/2012 of the European Parliament and of the Council 

on OTC derivatives, central counterparties and trade repositories82. 

2. 

This Directive shall be without prejudice to workers' rights guaranteed by Directives 
98/59/EC, 2001/23/EC, 2002/14EC, 2008/94/EC and 2009/38/EC. 

Article 32 

Amendment of Directive 2012/30/EU 

In Article 45 of Directive 2012/30/EU, the following paragraph 4 is added: 

"4. Member States shall derogate from Article 19(1), Article 29, Article 33, Article 
34, Article 35, Article 40(1)(b), Article 41(1) and Article 42 to the extent and for the 
period  that  such  derogations  are  necessary  for  the  establishment  of  the  preventive 
restructuring  framework  provided  for  in  Directive  ….  of  the  European  Parliament 
and of the Council [on preventive restructuring frameworks and second chance ]*.  

*  Directive  (….)  of  the  European  Parliament  and  of  the  Council  on  preventive 
restructuring and second chance frameworks (OJ …).".  

80 

81 

82 

Directives  98/26/EC  of  the  European  Parliament  and  of  the  Council  of  19  May  1998  on  settlement 
finality in payment and securities settlement systems, OJ L 166/45, 11.6.1998. 
Directive  2002/47/EC  of  the  European  Parliament  and  of  the  Council  of  6  June  2012  on  financial 
collateral arrangements, OJ L 168/43, 27.6.2002. 
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 
derivatives, central counterparties and trade repositories, OJ L 201/1, 27.7.2012. 

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Article 33 

Review clause 

No  later  than  [5  years  from  the  date  of  start  of  application  of  implementing  measures]  and 
every  7  years  thereafter,  the  Commission  shall  present  to  the  European  Parliament,  the 
Council and the European Economic and Social Committee a report on the application of this 
Directive,  including  on  whether  additional  measures  to  consolidate  and  strengthen  the  legal 
framework on restructuring, insolvency and second chance should be considered.   

Article 34 

Implementation 

1. 

Member States shall adopt and publish, by [2 years from the date of entry into force 
of  this  Directive]  at  the  latest,  the  laws,  regulations  and  administrative  provisions 
necessary  to  comply  with  this  Directive.  They  shall  forthwith  communicate  to  the 
Commission the text of those provisions. 

They shall apply those provisions from [2 years from the date of entry into force of 
this  Directive],  with  the  exception  of  the  provisions  implementing  Title  IV  which 
shall apply from [3 years from the date of entry into force of this Directive]. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

2. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

Article 35 

Entry into force 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

This Directive is addressed to the Member States. 

Done at Strasbourg, 

Article 36 

For the European Parliament 
The President 

For the Council 
The President 

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