Towards The Transposition Of The Preventive Restructuring Frameworks Directive

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Elias Neocleous & Co LLC

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Elias Neocleous & Co LLC is the largest law firm in Cyprus and a leading firm in the South-East Mediterranean region, with a network of offices across Cyprus (Limassol, Nicosia, Paphos), Belgium (Brussels), Czech Republic (Prague), Romania (Budapest) and Ukraine (Kiev). A dynamic team of lawyers and legal experts deliver strategic legal solutions to clients operating in key industries across Europe, Asia, the Middle East, India, USA, South America, and China. The firm is renowned for its expertise and jurisdictional knowledge across a broad spectrum of practice areas, spanning all major transactional and market disciplines, while also managing the largest and most challenging cross-border assignments. It is a premier practice of choice for leading Cypriot banks and financial institutions, preeminent foreign commercial and development banks, multinational corporations, global technology firms, international law firms, private equity funds, credit agencies, and asset managers.
With the adoption of Directive (EU) 2019/1023 on preventive restructuring frameworks, discharge of debt and disqualifications and measures to increase efficiency (Preventive Restructuring Frameworks Directive)...
European Union Insolvency/Bankruptcy/Re-Structuring
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With the adoption of Directive (EU) 2019/1023 on preventive restructuring frameworks, discharge of debt and disqualifications and measures to increase efficiency (Preventive Restructuring Frameworks Directive) and amending Directive (EU) 2017/1132 on certain aspects of company law (codification), EU member states are required to incorporate minimum common standards into their national restructuring and insolvency laws by 17 July 2021.

In particular, this Preventive Restructuring Frameworks Directive aims to reduce barriers to the free flow of capital resulting from differences in member states' restructuring and insolvency frameworks and to improve aspects of the rescue culture in the EU.

Key features that member states must adopt include the following:

  • An effective preventive restructuring framework to enable debtors experiencing financial difficulties to restructure early to prevent insolvency and ensure their viability.
  • A stay of up to four months extendable to up to 12 months to support negotiations of a restructuring proposal, which should prevent individual enforcement action and include rules preventing the withholding of performance, termination, acceleration, or modification of essential contracts.
  • An ability to cram down dissenting classes of creditors.
  • Adequate protection for the financing needed to allow the business to survive or preserve the business's value pending a restructuring and for new financing necessary to implement a restructuring plan.

Cyprus has been given an 11-month extension by the European Commission to transpose the EU Restructuring Directive into national law. The bills prepared so far are under discussion and evaluation by the competent authorities, with a deadline for implementation in June 2022.

Our firm monitors the relevant process and will be providing updates on any development.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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