The Problems of Provision and Protection of New and Interim Financing in Restructuring Proceedings

Abstract

The scientific study aimed to examine the legal framework governing the provision and protection of new and interim financing in restructuring proceedings under the EU Restructuring Directive, focusing on the challenges arising from legal uncertainty, fragmentation and insufficient harmonisation across the Member States. The research analyses whether the current EU insolvency framework in terms of new and interim financing contributes to the effectiveness of restructuring proceedings, assesses the legal distinction between the interim and new financing, examines the concept of “financing” and the eligibility of financing providers, and evaluates whether the existing rules provide adequate legal certainty and protection for the lenders. Focus is given to substantive requirements for granting such financing, safe harbour protections, ex ante judicial control, monitoring mechanisms and procedural safeguards against abuse and opportunistic behaviour of the lenders and the debtor company. The research demonstrates that the current regulatory framework remains vague and fragmented, creating uncertainty regarding the definition, provision, protection and supervision of new and interim financing. Divergent national approaches of the Member States reduce legal predictability, discourage lender participation and weaken the effectiveness of the restructuring proceedings. The Master Thesis provides that in order to ensure the effectiveness of the restructuring proceedings ex ante judicial control should be mandatory, clear rules on substantive criteria for grating the new and interim financing is necessary, in order to eliminate abuse of restructuring law and opportunistic behaviour conducted by the lenders and the debtor company. The lenders must be protected against avoidance action provided that financing is granted in a good faith, priority payment rules for the grantors of such financings should be ensured prior to existing secured or unsecured creditors.