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Rescue of Business in Insolvency Law

In its decision of 3 September 2013, the ELI Council accepted the project proposal as a project to be carried out under the auspices of the ELI. Professors Stephan Madaus, Bob Wessels and Dr. Kristin van Zwieten were appointed as project reporters.

You can download the brochure here.

Background

On 15 November 2011 the European Parliament (EP) approved a ‘Motion for a European Parliament resolution with recommendations to the Commission on insolvency proceedings in the context of EU company law’. In its motion, the EP requests the Commission to submit one or more legislative proposals to the Parliament. The EP lists no less than 31 points, several of which are related to the enhancement of 'corporate rescue as an alternative to liquidation'. The Commission has taken up this idea in various publications. While further targeted harmonization of national insolvency laws is limited to a few specific topics within the ongoing revision of Council Regulation (EC) No 1346/2000, 'rescue' of businesses is a key element of the Commission’s proposal of 12 December 2012 to amend this Regulation. Insolvency law seems to be at the forefront of reform initiatives in Europe and elsewhere and business rescue is an issue which ranks top on the insolvency law related agenda of the EU institutions. An ELI project in the field could profit from experiences in insolvency practice and reform of insolvency law in many parts of the world, not least in the US. For Europe, the ELI could play a leading role in designing the future scheme.

Project outline

The aim of the ELI Project on Rescue of Business in Insolvency Law is to design (elements of) an appropriate legal enabling framework, which includes certain statutory procedures that encourage parties to negotiate solutions in a situation of business distress. In addition, such a framework would include rules to determine in which procedures and under which conditions an enforceable solution can be imposed upon creditors (including equity holders, etc.) despite their lack of consent. This ELI Instrument therefore will also cover the constitutional aspects of those parts of the law, such as the constitutional protection of property, which is often understood to impose the 'no creditor worse off principle' (i.e. not worse off than in case of liquidation). The results of the project will go beyond the probable outcome of the revision of the Insolvency Regulation. Amendments to this Regulation will have to have a cross-border element in the meaning of Article 81 TFEU (Title V, 'Area of Freedom, Security and Justice', Chapter 3, 'Judicial Cooperation in Civil Matters'). The project does not have such a limitation.

The project is to be carried out over a period of 30 months. During the first year, National Correspondents (NCs) will draft inventory reports on their respective national insolvency laws, based on a detailed questionnaire prepared by the reporters. NCs are experts from a selected group of 14 different European countries which each represent different approaches to insolvency law. Some topics that will be covered in those reports include: governance and supervision of in-court and out-of-court rescue, special protection for financing a rescue, treatment of executory contracts, ranking of creditors, avoidance powers, restructuring plans, special arrangements for SMEs, and the position of liquidators and directors. In addition to these national reports, an inventory report on international recommendations from standard-setting organisations, such as the World Bank and UNCITRAL, will be drafted.

The results of the first year’s work were presented and discussed at a conference held in Vienna on 19 and 20 March 2015. In the later stages of the project, these outputs will be used by the Project Team to formulate their recommendations for reform, which are at this stage expected to be presented in the form of a legislative guide. This process will be assisted by input from a specialist Advisory Committee (AC), staffed by experts in relevant areas of law and legal practice across Europe.  

In the first few months of the project, the reporters have engaged in intensive discussions over the composition of the AC as well as candidates for the NCs, striving to assemble a diverse group not only in terms of nationality, but also vocational backgrounds and expertise. In all some 40 experts have been assembled to date, from some 14 jurisdictions. A Members Consultative Committee (MCC) was established. Through the MCC all interested ELI members will have the opportunity to actively participate and contribute to the work on the project.

Working Group

The Reporters are supported by an expert Advisory Committee, comprised of:

  • Jan Adriaanse (Professor, University of Leiden)
  • Catherine Bridge (European Bank for Reconstruction and Development)
  • Horst Eidenmüller (Professor, Munich University)
  • Damien Geradin (Covington & Burling, Brussels / Professor, Tilburg University)
  • Robert Hodgkinson (Institute of Chartered Accountants in England and Wales)
  • Francis Kessler (Professor, Sorbonne Law School at University Paris I)
  • Chris Laughton (Partner, Mercer & Hole, London)
  • Rimvydas Norkus (Supreme Court of Lithuania)
  • Alberto Núñez-Lagos (Partner, Uría Menéndez)
  • Paul Oberhammer (Professor, University of Vienna)
  • Elizabeth Stong (U.S. Bankruptcy Court Eastern District of New York)
  • Matthias Storme (Professor, University of Leuven and University of Antwerp / Attorney)
  • Onofrio Troiano (Professor, University of Foggia)
  • Heinz Vallender (Cologne Bankruptcy Court / Professor, University of Cologne)

Contact details

If you are interested in the project and wish to receive further information, please contact businessrescue@europeanlawinstitute.eu.