Update to Eurofound’s database on restructuring-related legislation
In this blog post, Eurofound Research Assistant Eleonora Peruffo takes us through the various updates made to the ERM Restructuring-related legislation database during 2017.
During 2017, Eurofound updated the European Restructuring Monitor (ERM) database on restructuring-related legislation, which collects information on EU Member State regulations related to the anticipation or management of restructuring events. It now includes two new categories of legislation: ‘Rescue procedures in insolvency’ and ‘Employment protection in relation to business transfers’.
Rescue procedures in insolvency
The ‘Rescue procedures in insolvency’ category collects information on the procedures that companies can undertake to avoid filing for insolvency when they are facing financial difficulties. Most Member States have put such laws in place, and, in general, distinctions can be made among them based on:
- the number of days the procedure(s) can last, in most Member States ranging from three months to one year;
- the authority of the administrator (in term of negotiations and restructuring decisions) in charge of the process;
- the length of time this legislation has been in place; for example, Poland introduced it in 2016 and Cyprus in 2015.
In Ireland, such legislation allows for a grace period of 100 days called ‘examinership’. During this period, companies’ assets are protected from creditors, and an administrator is appointed by a court to negotiate repayments and secure funding. A company enters this procedure on its own initiative, while other types of procedures are in place when a creditor applies to recoup payments. The UK has a similar legislation, but the ‘administrative proceeding’, as it is known, can last up to one year. The concordato preventivo in Italy has a similar function: the procedure is accessible if thresholds relating to assets’ value (over €300,000) and debt (over €500,000) are met. The legislation is being revised to allow more companies to access it.
France has a procedure (procédure de mandat ad hoc) that can be started before the company enters financial difficulty. Another two options available before entering into insolvency are sauvegarde (when a company is close to being unable to pay bills) and conciliation (when a company has been unable to pay bills for at least 45 days). In the Netherlands, legislation is being approved for a procedure called ‘pre-pack’. Pre-pack, short for ‘pre-packaged insolvency’, is a proceeding where a restructuring plan is set prior to a company declaring insolvency, and it includes employment safeguards in case the company is bought.
In Bulgaria, the Czech Republic, Finland and Latvia certain measures can be applied only after a company has entered insolvency procedures.
Employment protection in relation to business transfers
The other new category in the database, ‘Employment protection in relation to business transfers’, deals with the obligations of an acquiring company towards employee dismissals and collective agreements. To learn more about this category and to read updates on other types of legislation, please consult the restructuring-related legislation database, accessible through the links below.
Database category: Rescue procedures in insolvency
Database category: Employment protection in relation to business transfers
Rescue procedures in insolvency: Cyprus
Rescue procedures in insolvency: Finland
Rescue procedures in insolvency: France
Rescue procedures in insolvency: Ireland
Rescue procedures in insolvency: Italy
Rescue procedures in insolvency: Latvia
Rescue procedures in insolvency: The Netherlands
Rescue procedures in insolvency: Poland
Rescue procedures in insolvency: UK