Clifford Chance

Bankruptcy Laws of EU Member States Will Soon Become More Like Chapter 11

24 July 2019

Late last month, the European Union's long awaited "Directive" on business restructurings officially became effective. The Directive requires each EU member state to revise their corporate restructuring laws within the next two years to ensure that they satisfy certain EU-defined principles. Many of the principles are inspired by US Chapter 11 bankruptcy law. For example, the Directive requires member state laws to (a) permit a debtor to file for bankruptcy prior to becoming insolvent, (b) protect a debtor from certain creditor enforcement actions for a period of time, (c) provide that a debtor may remain in control of its business during its bankruptcy, (d) create enhanced protections for debtor financing, and (e) ensure that a majority of creditors in each class (not to exceed 75%) who support a restructuring proposal may bind the minority.

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