In March 2014 the European Commission issued a Recommendation considering a new approach to business failure and insolvency, targeting efficient restructuring of viable enterprises in financial difficulty and a second chance for honest entrepreneurs. The objective of this Recommendation was: “to encourage Member States to put in place a framework that enables the efficient restructuring of viable enterprises in financial difficulty” and to “give honest entrepreneurs a second chance.”
Noting that the differing legal regimes across Europe negatively affect the level of recoveries to creditors, access to cross border funding, the ability to restructure pan-European corporates, entrepreneurship, employment and innovation, the Recommendation contained detailed provisions seeking to harmonise insolvencies and restructurings throughout the EU and set out minimum standards for how it suggested this could be achieved.
Last week the UK Government published the results of a consultation it held during February and March 2015 into how the Recommendation would affect the UK, if implemented.
Views were sought from restructuring experts and other interested parties (referred to as Stakeholders) on how the UK regime works in theory and practice. Recognising the importance of business recovery and restructuring frameworks to both national and global economies, the response states that the UK’s existing regime is aligned with the Commission’s recommendation and is recognised globally for its “efficiency, emphasis on business rescue and high level of returns to creditors.”
By reference to the minimum standards suggested in the Recommendation, in the view of the UK Government and Stakeholders, the UK’s framework is not only flexible but is updated as necessary to reflect experience and changing market needs. Further, it is noted that in the UK, the learned and predictable judiciary coupled with experienced and creative professional advisors and a flexible lender community results in a “ flexible tool kit that ensures that, wherever possible, businesses are rescued at an early stage”.
On balance there is little sign of the UK doing anything other than continuing on with what the statistics show is a restructuring venue of choice across the globe for struggling corporates.
