All 27 EU member states must implement the European Restructuring Directive of 20 June 2019 by 17 July 2021. The Directive was in part a reaction to the phenomenon observed with continental European companies in a financial crisis to restructure their debt under an English Scheme of Arrangement. The Scheme of Arrangement, which is not an insolvency process, offers the possibility to implement a debt restructuring on the basis of a majority decision by the creditors. Under these rules, a single "hold-out" creditor is unable to block a reasonable restructuring plan if the majority of creditors approves it.
Many European countries did not offer such a valuable possibility outside of an insolvency. In many cases, insolvencies are value-destructive and lower the prospects of recovery for creditors (especially in cases where nothing more than a debt restructuring is required to prevent the insolvency). For that reason, the Directive made it mandatory for EU member states to offer a “preventive restructuring framework” for companies in a financially distressed situation.
In this newsletter, we provide you with a snapshot on the status of implementation of the EU Restructuring Directive in key European jurisdictions, as well as an overview of the new English Scheme of Arrangement.