Member States' ambassadors to the EU (Coreper) are expected to confirm on Wednesday 19 December the agreement reached between representatives of the Council of the EU and the European Parliament on 12 December on the proposal for a directive establishing a single legal framework to deal with corporate insolvency (see EUROPE 11673).
The final text is relatively close to the Council's position, which was adopted in two stages with a 'partial approach' in June and a 'general approach' in October last year, a European source said on Tuesday 18 December.
Overall, we find the flexibility desired by the Member States in order to have minimum harmonisation. The text also validates the principle that an honest entrepreneur who has become insolvent should be given a “second chance” by being discharged from their debts for the first time after a certain period of time and the temporary stay of individual enforcement against the debtor in order to facilitate restructuring negotiations.
Among the changes made is the addition of an article to strengthen workers' rights, to which the European Parliament paid particular attention. The text thus recalls that workers' rights must be preserved as part of the restructuring process of a company and cites several of them, including the right to information.
While the Council preferred a case-by-case decision, the final text includes the obligation to appoint an insolvency practitioner in certain cases. This provision would apply in particular in the context of the 'cross-class cram-down mechanism' to ensure that dissenting creditors and minority shareholders cannot hinder the adoption of the restructuring plan for a viable business and when requested by the debtor himself, by the majority of creditors or by a court.
The text also includes provisions on the obligations of managers where there is a probability of insolvency, which had been deleted in the Council text. The final version is somewhat lighter than the Commission's initial proposal and provides that managers are required to take action early enough to avoid insolvency, to take due account of the interests of creditors and other stakeholders and to avoid negligent behaviour. (Original version in French by Marion Fontana)