The European Commission is presenting a set of European rules on business insolvency. Well-functioning insolvency and restructuring systems are key to supporting economic growth and job creation.

Restructure early to prevent bankruptcy

Well-functioning insolvency and restructuring systems are key to supporting economic growth and job creation. The initiative will increase the opportunities for companies in financial difficulties to restructure early on so as to prevent bankruptcy and avoid laying off staff.

The proposed Directive focuses on three key elements:

• Common principles on the use of early restructuring frameworks, which will help companies continue their activity and preserve jobs.
• Rules to allow entrepreneurs to benefit from a second chance, as they will be fully discharged of their debt after a maximum period of 3 years.
• Targeted measures for Member States to increase the efficiency of insolvency, restructuring and discharge procedures.

Alternative finance

In the proposal is currently mostly focused on banks and reducing the number of non-performing loans at banks. It also reduces the influence of minority creditors and shareholders who will not be able to block restructuring plans anymore. For businesses this is good news, but proper safe guarding for their rights should also be implemented.

This blog is brought to you courtesy of the Altfinator project in which PEDAL is a partner.