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.
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