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Business Insolvency – New EU Rules

The EU is giving reputable bankrupt entrepreneurs a second chance, and making it easier for viable enterprises in financial difficulties to access preventive restructuring frameworks at an early stage to prevent insolvency.

The Council formally adopted today the directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures. This decision marks the end of the legislative procedure.

The overall objective of the directive is to reduce the most significant barriers to the free flow of capital stemming from differences in member states’ restructuring and insolvency frameworks, and to enhance the rescue culture in the EU based on the principle of second chance. The new rules also aim to reduce the amount of non-performing loans (NPLs) on banks’ balance sheets and to prevent the accumulation of such NPLs in the future. In doing so, the proposal aims to strike an appropriate balance between the interests of the debtors and the creditors.

The key elements of the new rules include:

  • Early warning and access to information to help debtors detect circumstances that could give rise to a likelihood of insolvency and signal to them the need to act quickly.
  • Preventive restructuring frameworks: debtors will have access to a preventive restructuring framework that enables them to restructure, with a view to preventing insolvency and ensuring their viability, thereby protecting jobs and business activity. Those frameworks may be available also at the request of creditors and employees’ representatives.
  • Facilitating negotiations on preventive restructuring plans with the appointment, in certain cases, of a practitioner in the field of restructuring to help in drafting the plan.
  • Restructuring plans: the new rules foresee a number of elements that must be part of a plan, including a description of the economic situation, the affected parties and their classes, the terms of the plans, etc.
  • Stay of individual enforcement actions: debtors may benefit from a stay of individual enforcement actions to support the negotiations of a restructuring plan in a preventive restructuring framework. The initial duration of a stay of individual enforcement actions shall be limited to a maximum period of no more than four months.
  • Discharge of debt: over-indebted entrepreneurs will have access to at least one procedure that can lead to a full discharge of their debt after a maximum period of 3 years, under the conditions set out in the directive.

Next steps

This formal vote marks the end of the legislative process. The directive will now be formally signed and then published in the official journal. Member states will have two years (from the publication in the OJ) to implement the new provisions. However, in duly justified cases, they can ask the Commission for an additional year for implementation.

Background

The proposal was presented by the Commission on 22 November 2016. The new rules complement the 2015 Insolvency Regulation which focuses on resolving the conflicts of jurisdiction and laws in cross-border insolvency proceedings, and ensures the recognition of insolvency-related judgments across the EU.

The European Parliament formally voted on the directive on 28 March 2019.

Setting up a Company in the EU to become easier

EU company law is being updated to reflect the digital age. The Council today adopted a directive that facilitates and promotes the use of online tools in the contacts between companies and public authorities throughout their lifecycle.

The directive will provide improved online procedures, creating a modern and safe way for businesses to dismantle the obstacles involving setting up companies, registering their branches or filing documents, especially in cross border operations.

Ana Birchall, Minister of Justice, Vice Prime Minister for the implementation of Romania’s strategic partnerships, interim

The new rules ensure that:

  • companies are able to register limited liability companies, set up new branches and file documents in the business register fully online;
  • national model templates and information on national requirements are made available online and in a language broadly understood by the majority of cross-border users;
  • rules on fees for online formalities are transparent and applied in a non-discriminatory manner;
  • fees charged for the online registration of companies do not exceed the overall costs incurred by the member state concerned;
  • the ‘once-only’ principle applies, meaning that a company will only need to submit the same information to public authorities once;
  • documents submitted by companies are stored and exchanged by national registers in machine-readable and searchable formats;
  • more information about companies is made available to all interested parties free of charge in the business registers.

At the same time, the directive sets out the necessary safeguards against fraud and abuse in online procedures, including control of the identity and legal capacity of persons setting up the company and the possibility of requiring physical presence before a competent authority. It maintains the involvement of notaries or lawyers in company law procedures as long as these procedures can be completed fully online. It also foresees exchange of information between member states on disqualified directors in order to prevent fraudulent behaviour.

The directive does not harmonise substantive requirements for setting up companies or doing business across the EU.

White & Case Advises on Polish MoF €2 Billion Green Bonds Issuance

Global law firm White & Case LLP has advised the Polish Ministry of Finance on the €2 billion issuance of ten- and 30-year euro-denominated ‘Green Bonds’, maturing respectively on March 7, 2029 and March 8, 2049.

The €1.5 billion issuance of the ten-year Green Bond yields 1.057% with an annual coupon of 1%. The €500 million issuance of the 30-year Green Bond yields 2.071% with an annual coupon of 2%.

The bonds were issued under the Republic of Poland’s €60 billion Euro Medium Term Note Programme, and the proceeds will finance environmental projects according to the Green Bond Framework developed by the Ministry of Finance in line with the ICMA Green Bond Principles.

The buyers of the ten-year and 30-year Green Bonds were well diversified with, respectively, 47 percent and 43 percent of the allocations going to designated green accounts.

The White & case team which advised on the transaction was led by local partner Andrzej Sutkowski (Warsaw), with support from counsel Doron Loewinger (London) and associates Katarzyna Grodziewicz, Damian Lubocki (both Warsaw) and Luiza Salata (London).

EU launches new infringement proceedings against Poland

The European Commission on Wednesday launched infringement proceedings against Poland by sending a Letter of Formal Notice regarding its new disciplinary regime for judges.

The notice alleges that the new regime “undermines the judicial independence of Polish judges by not offering necessary guarantees to protect them from political control, as required by the Court of Justice of the European Union.” Poland has two months to reply.

The Commission alleges that Poland has failed to meet its obligations under Article 19(1) of the Treaty on European Union and Article 47 of the Charter of Fundamental Rights of the European Union, which preserve the right to “an effective remedy before an independent and impartial court.” The Commission alleges that Polish law “allows to subject ordinary court judges to disciplinary investigations, procedures and ultimately sanctions, on account of the content of their judicial decisions.”

In addition, the Commission alleges that Poland’s regime does not ensure that a court can decide in first instance on disciplinary proceedings against ordinary court judges, because it gives the power to the President of the Disciplinary Chamber to determine the disciplinary court of first instance to hear a given case, “on an ad-hoc basis and with an almost unfettered discretion.”

The Commission is also of the opinion that Poland has failed to fulfill its obligations under Article 267 of the Treaty on the Functioning of the European Union (TFEU), which ensures courts’ right to request preliminary rulings from the European Court of Justice.

The EU’s concern about Poland not adhering to EU’s principles on rule of law is increasing. Last December the European Court of Justice ruled that Poland must “immediately” suspend the national legislation which lowered the mandatory retirement age for its supreme court judges.