The role of Preventive Restructuring Directive for cross-border companies in financial distress: rescue for efficiency?

Abstract: This study focuses on the recent Directive (EU) 2019/1023 on preventive restructuring frameworks (‘Preventive Restructuring Directive’) that was adopted by the European Parliament and the Council on 20 June 2019. The purpose of this thesis is to examine and assess the EU legislator’s intentions in harmonisation of national laws on restructuring and to clarify the rationale behind business rescue. The study focuses on the position of cross-border companies in preventive restructuring proceedings, as well as the impact of legislative choices made by Member States on the convenience of restructuring processes. It will show that, while the legislator strives for minimal harmonisation, the legal act is necessary in the insolvency law regime to guarantee the efficiency of cross-border restructuring proceedings. The study will demonstrate that the connection between the Directive and the legislative acts that establish the European insolvency regime has a significant impact on cross-border enterprises' legal certainty. It will examine the scope of Recast Insolvency Regulation and question the role of Annex A in respect of preventive restructuring frameworks. It will demonstrate that, while the Regulation allows restructuring frameworks to fall under its scope, it takes a somewhat limited approach to the concept of corporate restructuring, placing it rather close to the concept of liquidation. The thesis will further address the difficulties that cross-border companies may face during the process of restructuring in terms of recognition and enforcement of the national proceedings in other Member States. It holds that the feasibility of recognition and enforcement will be determined on the case-by-case basis, based on substantive laws and interpretation of the restructuring frameworks’ position under this set of rules. Finally, the study indicates that the Directive is an important tool that was previously missing from the EU's insolvency system. The pre-insolvency mechanisms that it introduces, on the other hand, may be problematic due to significant differences in the national laws of the Member States, as well as the fact that the legal acts that precede the adoption of the Directive were not drafted in such a way as to include the range of restructuring frameworks in its scope.