What is the “European Union Insolvency Directive” and why is it so relevant now?

The EU Insolvency Directive, officially known as the Restructuring and Insolvency Directive (EU) 2019/1023, was adopted on 20 June 2019.
With this directive, Europe aims to prioritise the survival of companies, preserve jobs and prevent bankruptcies.
The primary objective is to support struggling businesses in maintaining healthy operations, for example, through reorganisations. If bankruptcy does occur, Europe emphasises that procedures should be handled more efficiently and transparently.

Three key pillars

The directive focuses on three key pillars:

  1. Preventive restructuring: Companies in financial trouble should be able to take action at an early stage to avoid bankruptcy. To achieve this, Europe aims to invest in the principle that ‘prevention is better than cure’. This approach is intended to help businesses maintain healthy operations.
  2. Efficiency of insolvency proceedings: Insolvency proceedings, such as bankruptcies, should be handled with greater transparency and efficiency. To enhance transparency, the European Union also advocates for a digital platform accessible to the citizens of each member state.
  3. Second chance for entrepreneurs: After bankruptcy or debt settlement, entrepreneurs should be given a second chance. Bankruptcy should not mark the end of entrepreneurship. Europe mandates that entrepreneurs must become debt-free within a maximum of three years. This pillar focuses on providing a 'clean slate' so that entrepreneurs can start a new business.

 

 

“Bankruptcy should not mark the end of entrepreneurship.”

 

 

Why is this directive so important now ?

The directive is currently important for several reasons. Here are the three most important ones:

  • Economic challenges: Companies in Europe are under significant pressure due to the aftermath of the COVID-19 pandemic, rising inflation, the energy crisis, and geopolitical uncertainties, such as the war in Ukraine. This directive aims to help businesses facing these challenges survive.
  • Implementation in national legislation: The directive was published in July 2019, with member states expected to transpose it into national legislation and implement it by 17 July 2021. While many member states are working on the transposition, they are also seeking ways to put it into practice. In other words, many member states are still in the process of finding the best solutions.
  • What gets measured, gets managed: In the directive, Europe also asks the various member states to provide data on how restructuring procedures and bankruptcies are handled. Indeed, the Union's stability largely depends on the strength of its enterprises and the people working in them. By collecting and comparing data from different countries, we can hopefully optimise how these situations are handled as soon as possible.

How can we help?

At Aginco, we are keenly observing how other countries are managing the transposition of this directive. In Belgium, we are actively contributing by developing digital platforms to handle insolvency proceedings such as bankruptcies, collective debt settlements, and judicial reorganisation proceedings. These platforms are crucial in supporting a stable economy in Belgium. Moreover, they are built on a flexible architecture that can be adapted for use in other member states. Our platforms serve not only stakeholders within the judicial system, but also citizens, entrepreneurs, and businesses.

If you have any questions about this directive or how Aginco can assist in its transposition, please don’t hesitate to contact us.

 

 

“If you have any questions about this directive or how Aginco can assist in its transposition, please don’t hesitate to contact us.”