Rescue of Business in Insolvency Law
The ultimate aim of this project (initiated by the European Law Institute) is to design a framework that will enable the further development of coherent and functional rules for business rescue in Europe.
- 2014 - 2017
- Gert-Jan Boon
- European Law Institute
Professor Stephan Madaus - Martin-Luther-Universität Halle-Wittenberg
Ever since the financial downturn of last decennium, there has been ample attention for the rescue of distressed businesses. Attempts have been made to achieve more successful rescues by amending national insolvency laws. Though there are many differences across jurisdictions with regard to their insolvency systems, at a national, European and global level it has been recognised that better alignment would facilitate this aim.
This project called ‘Rescue of Business in Insolvency Law’, initiated by the European Law Institute, aims to design elements of a legal framework for EU Member States to facilitate that these distressed businesses will have more chances across Europe for a successful rescue.
Background to the Project
Since the global financial crisis, insolvency law has been at the forefront of law reform initiatives in Europe and beyond. The specific topic of business rescue appears to rank top on the insolvency law related agenda of the EU institutions; with the economic recession of the past few years Europe has faced a rapid growth of insolvencies, clearly highlighting the importance of effective business rescue. Indeed, in 2011 the European Parliament requested the European Commission to submit legislation to enhance the availability of business rescue tools as alternatives to liquidation. The Commission has taken up this idea in various publications and projects. Given the widespread and growing interest in insolvency law and particularly in business rescue, the ELI has resolved that it is an appropriate time for it to engage in a scholarly and detailed assessment of the subject within the European context, and the prospects for reform.
Aim of the Project and Expected Outcomes
The issue of rescue of business lies at the core of this project. The ultimate aim of the project is to design (elements of) a legal framework that will enable the further development of coherent and functional rules for business rescue in Europe. This will include certain statutory procedures that could better enable parties to negotiate solutions when a business becomes financially distressed. Such a framework would include rules to determine in which procedures and under which conditions an enforceable solution can be imposed upon creditors and other stakeholders despite their lack of consent. The project has a broad scope, and will extend to consider frameworks that can be used by (non-financial) businesses out of court, and in a (pre-)insolvency context.
The project has several outcomes. The first major outcome will be the production of inventory reports on national insolvency laws (of 13 EU countries) by expert national correspondents, and a complementary inventory report on recommendations from international standard-setting organisations for business rescue.
The results of the project included an instrument and national inventory and normative reports, as well as an international inventory report on recommendations from standard-setting organisations. This is presented in the OUP Publication ‘Rescue of Business in Europe’. It will provide a full overview of the work prepared in the course of the project in some 1,500 pages.
The Instrument on Rescue of Business in Insolvency Law (Instrument) has been unanimously approved by the ELI Council and ELI General Assembly in 2017. The Instrument has ten Chapters that contain recommendations on a variety of themes affected by the rescue of financially distressed businesses. In total, the Instrument consists of some 115 recommendations. The Instrument can be downloaded here.
In addition to the Instrument, the OUP book will also include national/international inventory reports and normative reports. The national reports sketch the legal landscape in 13 EU Member States, it includes Austria, Belgium, England and Wales, France, Germany, Greece, Hungary, Italy, Latvia, The Netherlands, Poland, Spain and Sweden. Furthermore, it comprises an inventory report by Gert-Jan Boon on international recommendations from standard-setting organisations for business rescue.