A stay of individual enforcement actions as a basis for effective restructuring proceedings

Abstract

t. This article focuses on the implementation of a stay of individual enforcement actions in corporate restructuring proceedings. The authors analyse the general goals of a stay of individual enforcement actions in restructuring proceedings by considering, for instance, the economic reasons for such a stay, when it should be applicable, and the exceptions that should be established for its application. The Directive on restructuring and insolvency, adopted on 20 June 2019, reforms the regulation of a stay of individual enforcement actions in Member States of the European Union, aims to increase the efficiency of restructuring proceedings by providing legal instruments to facilitate a debtor’s negotiation of a restructuring plan, and provides certain rules as to how a debtor’s assets should be protected during these negotiations. Namely, a stay of individual enforcement actions and the protection of essential executory contracts should protect a debtor and ensure the equality of all creditors (pari passu) during the negotiation of a restructuring plan. However, in practice these goals result in less protection – especially for ordinary creditors. The authors analyse which aspects of a stay of individual enforcement actions are harmonized under the Directive on restructuring and insolvency, and whether they are sufficient to ensure the effective negotiation of a restructuring plan. Nevertheless, a fair balance between the interests of the debtor and their creditors should be ensured in restructuring proceedings, and the authors assess whether or not such a balance is established.