1. The directive on preventive restructuring frameworks
Prof. Dr. Christoph Thole, Dipl.-Kfm.
Direktor des Instituts für Verfahrensrecht und Insolvenzrecht und des Instituts für Europäisches und Internationales Insolvenzrecht

2. Agenda The concept of the directive
In particular: The restructuring plan
German perspectives
Discussion
© Prof. Dr. Christoph Thole

3. The concept of the directive
Premise: Avoiding insolvency proceedings
Debtor-oriented
At what costs?
Availability: likelihood of insolvency
To be defined by national law
Recital 24: A restructuring framework should be available before a debtor becomes insolvent under national law, namely before the debtor fulfils the conditions under national law for entering collective insolvency proceedings, which normally entail a total divestment of the debtor and the appointment of a liquidator
Stay of individual enforcement actions (and the obligation to file)
4 months or even up to 12 months
Exception for obligation to file for insolvency on the grounds of inability to pay
Why a stay?
Stay can be made dependant on viability test
Stay can be general or limited to certain creditors

4. The concept of the directive
The restructuring plan
Resembles the German insolvency plan
Cram-down
No collective proceeding, court involvement restricted
Debtor in possession and the Practioner in the field of restructuring
PIFOR: supposed to supervise the restructuring
Needs to be independent

5. The goals of the directive
To limit non-performing loans
To enable banks and creditors to get rid off NPL
To incentivize distressed debt investors to buy
Harmonisation of national laws
An illusion – more than 70 options for national legislators

6. Forum Shopping and law competition
Directive: cf. Recital 13 and 14: EIR and COMI principle applicable
But: Member States are not required to opt for notification under Annex A
If not, recognition under Brussels Ia-reg. or autonomous law?
Directive leads to law competition instead of harmonisation

7. The restructuring plan
Content: restructuring as defined by art. 2 para. 1 no. 1 (including asset deal)
Inter alia:
Description of the causes of the difficulties
Description of the estimated financial flows of the debtor, if provided for by national law
a statement of reasons which explains why the restructuring plan has a reasonable prospect of preventing the insolvency of the debtor and ensuring the viability of the business, including the necessary pre-conditions for the success of the plan. Member States may require that that statement of reasons be made or validated either by an external expert or by the practitioner in the field of restructuring if such a practitioner is appointed.
More details as required by art 8

8. The restructuring plan
Procedure and adoption:
Voting in classes of creditors
Majority of the amounts of claims of affected creditors (not more than 75%)
Member States may require majority of heads
Member States may, i.a., exclude equity holders and subordinated creditors
Generally: Member States may exclude affection of employees‘ rights
Votings rights may be examined ex ante by court
Confirmation by the court if best interest of creditors-test is complied with (no creditor worse off), valuation by experts
Appeal against confirmation or rejection of confirmation

9. The restructuring plan
Cross-class cram down
Concept of the directive: majority of one single class sufficient to cram down other classes,
if, i.a. dissenting voting classes of affected creditors are treated at least as favourably as any other class of the same rank and more favourably than any junior class (relative priority)
Member States may opt for absolute priority, i.e. may provide that the claims of affected creditors in a dissenting voting class are satisfied in full by the same or equivalent means where a more junior class is to receive any payment or keep any interest under the restructuring plan
Equity holders:
Left out completely
Or included in the plan, thus having voting rights (but subject to cross-class cram down)

10. German perspectives (my opinion)
No need to make major changes, because insolvency procedure is not too bad
Should be included in the context of the insolvency law (Insolvenz-und Restrukturierungsordnung), specialised insolvency courts
Likelihood of insolvency means likelihood of inability to pay (§ 18 InsO)
Germany should restrict availability by introducing viability test (examination by the PIFOR instead of by the court) and limit the access of debtors where their books and records are incomplete or deficient to a degree that makes it impossible to ascertain the business and financial situation of the debtors (recital 27)
Parallels to the insolvency plan procedure
Equity holders: to be included in the restructuring framework
Relative or absolute priority: Connection with § 245 InsO
No need to get rid off obligation to file due to over-indebtedness

11. Thanks for your attention.
Prof. Dr. Christoph Thole, Dipl.-Kfm.
Institut für Verfahrensrecht und Insolvenzrecht
Albertus-Magnus-Platz
50923 Köln