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TRANSCRIPT
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The content of this document is the sole property of the beneficiaries of the JCOERE Consortium.
Copyright © 2019
The content of this document represents the views of the author only and is his/her sole responsibility.
The European Commission does not accept any responsibility for use that may be made of the information it contains.
This report is funded by the European Union’s Justice Programme (2014-2020). Project no. 800807.
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The content of this document is the sole property of the beneficiaries of the JCOERE Consortium.
Copyright © 2019
The content of this document represents the views of the author only and is his/her sole responsibility.
The European Commission does not accept any responsibility for use that may be made of the information it contains.
This report is funded by the European Union’s Justice Programme (2014-2020). Project no. 800807.
Judicial Cooperation Supporting
Economic Recovery in Europe
(JCOERE)
DG Justice Programme Project No. 800807
Report 1: Identifying substantive and procedural
rules in preventive restructuring frameworks
including the Preventive Restructuring Directive
which may be incompatible with judicial
cooperation obligations
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The content of this document is the sole property of the beneficiaries of the JCOERE Consortium.
Copyright © 2019
The content of this document represents the views of the author only and is his/her sole responsibility.
The European Commission does not accept any responsibility for use that may be made of the information it contains.
This report is funded by the European Union’s Justice Programme (2014-2020). Project no. 800807.
JCOERE Project Report 1: Table of Contents
Table of Contents 1
Acknowledgements 10
The JCOERE Project Team 11
Chapter 1: Introduction to JCOERE Report 1 12
1.1 Introduction 12
1.2 The Preventive Restructuring Directive (PRD): the Examinership Benchmark 13
1.3 JCOERE Project Summary 14
1.4 Methodology of the JCOERE Project 16
1.5 Chapter 2: Terminology 19
Chapter 2: Preventive Restructuring Terminology 20
2.1 Introduction to Chapter 20
2.2 Rescue (Corporate and Business), Rehabilitation, Reorganisation, and Preventive
Restructuring
20
2.2.1 Corporate Rescue 20
2.2.2 Business Rescue 20
2.2.3 Rehabilitation 20
2.2.4 Reorganisation 21
2.2.5 Restructuring 21
2.2.6 Preventive Restructuring 21
2.3 Pre-Insolvency 22
2.4 Homologation 22
2.5 Concordat, Composition, Arrangement, and Plan 22
2.5.1 Concordat 22
2.5.2 Composition 22
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2.5.3 Arrangement 22
2.5.4 Restructuring Plan 23
2.6 Examiner, Receiver, Trustee, and Administrator (PIFOR) 24
2.61. Examiner 24
2.6.2 Judicial Commissioner 24
2.6.3 Receiver 24
2.6.4 Trustee 24
2.6.5 Administrator 25
2.6.6 Insolvency Practitioner 25
2.6.7 Plan Expert (The Netherlands) 26
2.6.8 PIFOR (Practitioner in the Field of Restructuring 26
2.6.9 The Observer (The Netherlands) 26
2.7 Pledge, Mortgage, Charge, and Floating Charge 26
2.7.1 Pledge 26
2.7.2 Charge (Fixed) 26
2.7.3 Mortgage 26
2.7.4 Floating Charge 27
2.8 Non-Performing Loans 27
2.9 Interim and New Financing 27
2.9.1 Interim Financing 27
2.9.2 New Financing 27
2.10 Supervising Judge, Syndic Judge, Notary 28
2.10.1 Supervising Judge 28
2.10.2 Syndic Judge 28
2.10.3 Notary 28
2.11 Patrimonial Liability 28
2.12 Retention of Title 28
2.13 Right in Rem 28
2.14 Extra-Judicial Payment 29
2.15 Secured, Unsecured, Preferential, and Subordinated Creditors 29
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2.15.1 Secured Creditor 29
2.15.2 Unsecured Creditor 29
2.15.3 Preferential Creditor 29
2.15.4 Subordinated Creditors (Subordinated Debt) 30
2.16 Self-Administration or Debtor in Possession 30
2.16.1 Self-Administration 30
2.16.2 Debtor in Possession 31
2.17 Court Protection, Stay, Moratorium 31
2.17.1 Court Protection 31
2.17.2 Stay 31
2.17.3 Moratorium 31
2.18 Intra- and Cross-Class Cram-Down 31
2.18.1 Intra-Class Cram-Down 31
2.18.2 Cross-Class Cram-Down 31
2.19 Absolute Priority 32
2.20 Relative Priority 32
2.21 Unfair Prejudice 32
2.22 Best Interest of Creditors 32
2.23 Conclusion and Transition 33
Chapter 3: The Regulation of Cross-Border Insolvency and Restructuring in the EU 34
3.1 Introduction: Cross-Border Insolvency in the EU 34
3.2 History and Development of European Insolvency Coordination 34
3.3 The Key Features of the EIR Recast 36
3.4 The Harmonisation Debate over European Insolvency and Restructuring 37
3.5 Jurisdiction in Cross-Border Restructuring Cases: Forum Shopping 38
3.6 Recognition and Enforcement: Including Restructuring Frameworks in Annex A 40
3.7 Conclusion 41
3.8 Chapter 4: Context of Preventive Restructuring in the EU 41
Chapter 4: Context of Preventive Restructuring in the EU 42
4.1 The Evolution of Corporate Rescue and the Rescue Culture 42
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4.2 Preventive Restructuring: Principles and Context 42
4.2.1 Insolvency theory 42
4.2.2 Shifting from Liquidation to Rehabilitation, Restructuring, and Rescue 44
4.2.3 Communitarianism in Insolvency and Restructuring 45
4.3 Rehabilitation of Companies in Financial Distress 46
4.4 Defining Preventive Restructuring 47
4.5 Preventive Restructuring in Europe 51
4.6 Specific Restructuring Provisions as Potential Causes of Conflict in Co-Operation 53
4.6.1 The Stay of Individual Enforcement Actions 53
4.6.2 The “Intra-Class” Cram-Down (or Majority Rule) 54
4.6.3 The Cross-Class Cram-Down 55
4.6.4 Protection and Priority of Rescue Financing 58
4.7 Summary and Conclusion: Implementation and Conflicts 60
4.8 Chapter 5: Exposition of the Preventive Restructuring Directive 61
Chapter 5: Exposition of the Preventive Restructuring Directive 62
5.1 Introduction 62
5.1.1 Context of Exposition within the JCOERE Project 62
5.1.2 Presentation of the Chapter 62
5.2 Historical Context 63
5.2.1 Committee on Legal Affairs Report (2011) 63
5.2.2 Commission Communication ‘A New Approach to Business Failure’ (2012) 64
5.2.3 Commission Recommendation and Impact Assessment (2014) 65
5.2.4 Conclusion 68
5.3 The Commission Proposal 69
5.3.1 The Stay 70
5.3.2 Protection for New Finance 71
5.3.3 Cross-Class Cram-Down 71
5.3.4 Decreased Court Formality 71
5.4 The Consultation Process 71
5.4.1 European Economic and Social Committee 72
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5.4.2 The European Central Bank 72
5.4.3 European Parliament Committees: Committee on Legal Affairs 73
5.4.4 European Parliament Committees: Employment and Social Affairs (“EMPL”) 74
5.4.5 European Parliament Committees: Economic and Monetary Affairs (“ECON”) 75
5.5 Council of the European Union 76
5.5.1 The Stay 77
5.5.2 Protection of New Finance 78
5.5.3 Cross-Class Cram-Down 79
5.6 Conclusion 81
5.7 Transition to Chapter 6: 81
Chapter 6: Mapping the Preventive Restructuring Frameworks and the EU Directive:
Part 1 – Introduction and Methodology
83
6.1 Introduction: The JCOERE Context 83
6.2 Introducing the Irish Examinership Procedure 84
6.3 Methodology 84
6.4 JCOERE Approach to Comparative Legal Analysis 85
6.5 General Context of Preventive Restructuring: Questionnaire Part 1 86
6.5.1 Functions and Aims of Preventive Restructuring 86
6.5.2 Legislative Frameworks of the Contributing Jurisdictions in Context 86
a) Ireland 87
b) Italy 87
c) Romania 89
d) France 89
e) The Netherlands 91
f) Spain 92
g) Austria 92
h) Poland 93
i) Germany 94
j) Denmark 95
k) England and Wales 95
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6.6 Conclusion 96
6.7 Chapter 7: Mapping of Preventive Restructuring Frameworks and the EU Directive Part II –
Substantive Aspects of Preventive Restructuring in Domestic Processes and in the Directive
97
Chapter 7: Mapping of Preventive Restructuring Frameworks and the EU Directive:
Part II – Substantive Aspects of Preventive Restructuring in Domestic Processes and in
the Directive
99
7.1 Introduction to Part II of the Questionnaire Mapping Preventive Restructuring Frameworks 99
7.2 The Stay of Individual Enforcement Actions (PRD Article 6) 99
7.2.1 The Purpose of Article 6 in the PRD (Question 3) 100
7.2.2 Jurisdictional Contributions: Existence of the Stay (Article 6(1-8)) 101
7.2.3 Summary of Implementation Requirements for Article 6(1) 104
7.2.4 Jurisdictional Contributions: Removal of Stay by Authority (Article 6(9)) 105
7.2.5 Summary of Implementation Requirements (Article 6(9) 106
7.3 The Adoption of Restructuring Plans (Article 9) 107
7.3.1 The Purpose of Article 9 in the PRD (Question 4) 107
7.3.2 Jurisdictional Contributions: Voting Rights and Exclusions (Article 9(1)) 108
7.3.3 Summary of Implementation Requirements 111
7.3.4 Jurisdictional Contributions: Class Formation (Article 9(4)) 111
7.3.5 Summary of Implementation Requirements 113
7.3.6 Jurisdictional Contributions: Examination of Voting Rights and Class Formation by
Authority (Article 9(5))
114
7.3.7 Summary of Implementation Requirements 117
7.3.8 Jurisdictional Contributions: Intra-Class Cram-Down (Majority Voting) (Article 9(6&7)) 118
7.3.9 Summary of Implementation Requirements 120
7.4 The Confirmation of Restructuring Plans (Article 10) 121
7.4.1 The Purpose of Article 10 in the PRD (Question 5) 121
7.4.2 Jurisdictional Contributions: Conditions for Obligatory Court Confirmation of Restructuring
Plans (Article 10(1))
122
7.4.3 Summary of Implementation Requirements 124
7.4.4 Jurisdictional Contributions: Conditions for Refusal to Confirm a Plan (Article 10(2)) 124
7.4.5 Summary of Implementation Requirements 128
7.5 Cross-Class Cram-Down (Article 11) 129
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7.5.1 The Purpose of Article 11 in the PRD (Question 6) 129
7.5.2 Jurisdictional Contributions: Existence of a Cross-Class Cram-Down (Article 11(1)(a-b)) 130
7.5.3 Summary of Implementation Requirements 132
7.5.4 Jurisdictional Contributions: Dissenting Creditors and Conditions for Approval (Article
11(1)(c) and 11(2))
132
7.5.5 Jurisdictional Contributions: Question 6.3 – Unfair Prejudice Test (Article 11(2) para 2) 135
7.5.6 Summary of Implementation Requirements for Questions 6.2 and 6.3 136
7.6 Protection of New and Interim Financing 137
7.6.1 The Purpose of Article 17 in the PRD (Question 8) 137
7.6.2 Jurisdictional Contributions: Question 8 – Existence of Protection or Priority for Interim
Financing (Article 17(1)&(4))
138
7.6.3 Summary of Implementation Requirements 141
7.7 Workers (Article 13) 141
7.8 Conclusion: Benchmarking the Directive 143
7.9 Chapter 8: Mapping of Preventive Restructuring Frameworks and the EU Directive Part II
Specific Procedural Aspects of Preventive Restructuring in Domestic Processes and in the
Directive
144
Chapter 8: Mapping of Preventive Restructuring Frameworks and the EU
Directive Part III Specific Procedural Aspects of Preventive Restructuring in
Domestic Processes and in the Directive
145
8.1 Introduction to Part III of the Questionnaire Mapping Preventive Restructuring Frameworks 145
8.2 The Threshold for Insolvency and Restructuring 146
8.2.1 Threshold of Insolvency and Restructuring in the Contributing Jurisdictions 147
8.3 Insolvency Practitioners in Preventive Restructuring (Article 5 – Debtor in Possession) 150
8.3.1 Purpose and Spirit of Article 5: Debtor in Possession (Qn 9) 150
8.3.2 Jurisdictional Contributions (Article 5 – Debtor in Possession) 152
8.4 Rights in Rem (Question 10) 156
8.4.1 Introduction to the Concept of a Right in Rem 156
8.4.2 Contributor Definitions of a Right in Rem 157
8.4.3 A Right in Rem under the EIR Recast 158
8.4.4 Rights in Rem under the PRD 159
8.4.5 Jurisdictions Allowing Potential Impairment of Rights in Rem 159
8.5 Conclusion and Transition 161
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Chapter 9: Conclusion of the JCOERE Project Report 1 163
9.1 Introduction 163
9.2 Summary of Findings 164
9.2.1 Preventive Restructuring Terminology 164
9.2.2 The Regulation of Cross-Border Insolvency and Restructuring in the EI 164
9.2.3 The Context of Preventive Restructuring in the EU 164
9.2.4 Exposition of the Preventive Restructuring Directive 166
9.2.5 The JCOERE Questionnaire: Chapters 6-8 166
9.3 Conclusion and Introduction to JCOERE Report 2 168
Annex 1 – Additional Submissions Contributing to the Exposition of the Preventive
Restructuring Directive
10.1 The Experts Group on Restructuring and Insolvency Law (2016) 169
10.2 The National Parliament Submissions to the European Parliament 172
10.3 EMPL – Workers’ Rights 173
10.4 ECON – Article 7 174
10.5 Committee of the Regions 175
Annex 2 – Mapping the Preventive Restructuring Frameworks and the EU Directive
for the JCOERE Project: Jurisdiction Questionnaire
11.1 Introduction 176
11.2 The Questionnaire 179
Annex 3: Contributor Responses to Jurisdiction Questionnaire (Pending Publication)
12.1 Ireland
12.2 Italy
12.3 Romania
12.4 Austria
12.5 France
12.6 Denmark
12.7 Germany
12.8 The Netherlands
12.9 Poland
12.10 Spain
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12.11 United Kingdom (England & Wales)
Annex 4 : Bibliography
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The content of this document is the sole property of the beneficiaries of the JCOERE Consortium.
Copyright © 2019
The content of this document represents the views of the author only and is his/her sole responsibility.
The European Commission does not accept any responsibility for use that may be made of the information it contains
Acknowledgements
The progress of the JCOERE Project (800807) from its commencement in December 2018 to the present
has been intense, challenging and inspiring. The first JCOERE Report is now presented here in 9
Chapters. This considers the existing preventive restructuring frameworks in a number of member states
in the European Union together with the reforms proposed in the Preventive Restructuring Directive
passed in June 2019 (1023/2019). The publication of the JCOERE 1 Report could not be more timely,
in that it sets out the context across Europe against which preventive restructuring frameworks will be
implemented in accordance with the Directive. It also captures the debate around core concepts in
restructuring, including the threshold of insolvency at which time restructuring processes are available,
the imposition of a stay against creditors and other claimants, cram-down and cross-class cram-down,
and the mechanism for approving restructuring schemes. There is much in this report that will be of
interest to all those practising and researching in this area. JCOERE will now continue on to consider
obligations regarding court to court co-operation in this context, which will form the subject matter for
JCOERE Report 2.
As Principal Investigator, I would like to formally acknowledge the splendid work of our core team here
at UCC. Dr Jennifer L. L. Gant, Aoife Finnerty and Molly O’Connor have all worked extremely well
together and in collaboration with me to produce an excellent piece of work. Their team-work is second
to none. In addition, I extend our thanks to all of our partner teams and their leaders, Dr Paul Omar and
Caroline Taylor at INSOL Europe; Professor Lorenzo Stanghellini, Professor Andrea Zorzi, Dr Iacopo
Donati, and Niccoló Usai at UNIFI; and Judge Nicoleta Nastasie, Dr Cristian Drăghici, Professor Ioana
Panc, Professor Smaranda Angheni and Ioana Duca at UTM for their help and support.
I am also grateful to our Advisory Board members, in particular the Honourable Judge Michael Quinn
and his judicial assistant Lorna Reid (and before that the Honourable Judge Caroline Costello), Adjunct
Professor Jane Marshall, Professor Gerry McCormack and Dr Emilie Ghio, all of whom have given
generously of their time at our project meetings in Cork, Florence and Copenhagen. We also extend our
thanks to the other members of our Board, Declan Walsh and The Honourable Judge Anthony Collins,
whose support will continue to be important into the next phase.
Finally, we are more than grateful to our national contributors Dr Emilie Ghio (France), Gert-Jan Boon
(The Netherlands), Dr Antonio Sotillo Marti and Javier Vercher, with additional input from Nuria
Bermejo and Professor Francisco Garcimartin (Spain). Dr Susanne Fruhstorfer (Austria), Sylwester
Zydowicz with additional input from Michał Barłowski (Poland), Professor Dr Stephan Madaus
(Germany), and Assistant Professor Line Langkjær (Denmark) who have responded so generously to
our questionnaire and our follow up queries. They have complied with our intense deadlines and work
programme and have done so with a great deal of intellectual interest, good humour, and enthusiasm,
which is reflected in this excellent piece of work. We can honestly say that co-operation amongst
European scholars and commentators is thriving and inspiring and points the way to an optimistic future
for the European Union.
Professor Dr Irene Lynch Fannon, 14 January 2020.
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The JCOERE Project Team
Voluntary Contributors to the JCOERE Project to whom the JCOERE Project Team owes its sincere
thanks for excellent and detailed country reports given in response to the JCOERE Questionnaire:
• Dr Emilie Ghio, Birmingham City University and Dr Paul Omar, INSOL Europe (France)
• Gert-Jan Boon, University of Leiden (The Netherlands)
• Dr Antonio Sotillo Marti and Javier Vercher, Universitat de Valencia (Spain)
• Nuria Bermejo and Professor Francisco Garcimartin Universidad Autonoma de Madrid (Spain)
• Dr Susanne Fruhstorfer, Taylor Wessing (Austria)
• Sylwester Żydowicz, Taylor Wessing (Poland)
• Michał Barłowski, Wardynski & Partners, Warsaw (Poland)
• Professor Dr Stephan Madaus, Martin Luther University, Halle-Wittenberg (Germany)
• Assistant Professor Line Langkjær, Aarhaus University (Denmark)
JCOERE Consortium
University College Cork:
• Professor Irene Lynch Fannon – Principal Investigator
• Dr Jennifer L. L. Gant – Post Doctoral Researcher
• Aoife Finnerty – Research Assistant
• Molly O’Connor – Project Manager
Università degli Studi di Firenze:
• Professor Lorenzo Stanghellini
• Professor Andrea Zorzi
• Dr Iacopo Donati - Post Doctoral Researcher
• Niccoló Usai – Research Assistant
Universitatea Titu Maiorescu:
• Judge Nicoleta Mirela Nastasie
• Dr Cristian Drăghici – Post Doctoral Researcher
• Professor Ioana Panc
• Professor Samaranda Angheni
• Ioana Duca
INSOL Europe:
• Dr Paul Omar
• Caroline Taylor
JCOERE Advisory Board
• The Honourable Judge Michael Quinn – High Court, Ireland
• The Honourable Judge Anthony M. Collins – General Court of the European Union
• Mrs Jane Marshall – Solicitor, Adjunct Professor, UCC
• Dr Emilie Ghio – Birmingham City University
• Mr Declan Walsh – School of Law UCC
• Professor Gerry McCormack – University of Leeds