Loopholes of the European directive 2019/1023 on preventive restructuring frameworks: a law & economic analysis

The European directive 2019/1023 will be gradually transposed by the Member States by 17 July 2021. As it is the fruit of numerous political compromises, the Directive gives a lot of room for maneuver to Member States in their transposition efforts.

However, a Law & Economics analysis of the Directive shows that numerous aspects, either left to the Member States or simply ignored by the Directive, would have strongly deserved to be dealt with, in the interest of the Capital Markets Union: (i) implementing claw-back (avoidance) actions rules preventing the debtor from engaging in abusive behavior before the opening of a preventive restructuring framework, (ii) fostering transparency, and (iii) ensuring the sophistication of judges and insolvency/restructuring practitioners, especially when dealing with the most complex cases.

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