Panel VI: Rescue of Business in Insolvency Law

The ELI project on 'Rescue of Business in Insolvency Law' was presented in the VI Panel. The project has been on-going since early 2014 and has made great progress. The panel was chaired by Bob Wessels, Professor of International Insolvency Law at the University of Leiden, who introduced the project and the other panel members.

Stephan Madaus, Professor of Civil Law, Civil Procedure and Insolvency Law at the Martin Luther University Halle-Wittenberg, discussed the options to resolve financial distress outside formal insolvency proceedings. Professor Madaus explored various options to further support an out-of-court rescue by making use of voluntary options. He noted that it was particularly challenging to find the balance between realising an out-of-court rescue and ensuring that secured and preferential creditors are not worse off than they would be in insolvency proceedings, because then they would not have an incentive to negotiate.

Stephen Taylor, Partner at Isonomy, focused on the role of lawmakers and highlighted issues that, from his perspective, cause considerable confusion. He also discussed differences between financial difficulties of small companies and larger enterprises. When small companies are financially distressed, the cause usually is a structural problem in their business model, while for enterprise groups the issue is often over-indebtedness. Different approaches are required for these different situations.

Paul Oberhammer, Dean and Professor at the Faculty of Law of the University of Vienna, emphasised that over the years many EU Member States have taken initiatives to improve their insolvency laws. He noted that when further improvements of insolvency laws are considered, it had to be accepted that lawmakers cannot provide what is most needed, namely new capital. The lawmaker can, however, redistribute money among the parties involved. He also pointed out that insolvency law is an embedded law, intertwined with a number of other laws. This provides challenges when harmonisation is attempted.

The project reporters plan to have their first drafts ready by spring 2016.