Frank
Tschentscher
President of
INSOL Europe

The analysts at Dun & Bradstreet Worldwide Network (WWN) have prepared a 2021 Global Bankruptcy Report that’s covers bankruptcy data from 43 economies.

Nearly half of them saw a decrease in business failures during 2021. In some countries, business failures reached their lowest level in a decade. Much like 2020, when business disruption rose to unprecedented levels, Covid-19 dominated the narrative in 2021. Sporadic increases in cases across many countries prompted mandatory shutdowns and continued to wreak havoc on businesses.

Data from the Dun & Bradstreet Commerce Disruption Tracker shows that the percentage of businesses disrupted globally increased by 4 percentage points in the first half of 2021 compared to the second half of 2020. As a result, the precipitous fall in business failures may appear counterintuitive. But there are several factors that have helped thousands of businesses keep their heads above water.

Undoubtedly, one of the biggest factors that helped many firms stay afloat was the massive support packages provided by governments across the world. While many of the measures were announced in 2020, they were also extended beyond this period. Cumulative fiscal measures in response to the Covid-19 pandemic account for 18% of the global Gross Domestic Product (GDP), according to data from the IMF.

Much of this stems from advanced economies, which on average have provided fiscal support to the tune of 28.4% of their GDP. By comparison, stimulus packages provided by these economies in response to the Global Financial Crisis of 2008 were worth just 2.6% of their GDP.

To read the complete Global Bankruptcy Report, download the report here.

Springtime in New York…although not many of the delegates and observers shared the joy of this trip to the Big Apple given the hybrid approach taken this year due to the continuing impact of COVID, many did attend in person to enjoy once again the camaraderie and fellowship with colleagues from all over the world, reports our INSOL Europe WGV Observer Jenny Gant (University of Derby, UK)​.

During this session, the UNCITRAL Working Group V met to discuss firstly a few updates on the UNCITRAL Model Law on Cross-Border Insolvency: the Judicial Perspective. This document aims to acknowledge the international origin of the Model Law on Cross-Border Insolvency and to promote the uniformity in its application.

The updates to the Judicial Perspective cover developments by other international bodies as well as interpretations of the MLCBI by judiciaries across the world. The Updates proposed were accepted with a few additions during the session.

The second important topic on the agenda revolved around the introduction of some kind of harmonising instrument that deals with civil asset-tracing and recovery in insolvency proceedings. Finally, the Working Group considered the topic of applicable law in insolvency proceedings. Download the full report here and find previous 'Inside Stories' on our website.

In-court restructuring, discharge of debt, and disqualification are already part of the Danish Bankruptcy Act, and a temporary early warning system exits. The Implementation complements the in-court restructuring regime rather than introducing a new regime.  

Preventive restructuring procedure:
Restructuring is now feasible also in case of only likelihood of insolvency. Notification to creditors and the public as well as appointment of an administrator will only be mandatory if a stay is granted by the court. 

Preventive restructuring is only applicable to a person that carries business activities or a company. The debtor (not a creditor) may file. A more extensive access to withdraw from the procedure without an automatic bankruptcy.

The purpose of the restructuring:
In addition to a business transfer and/or a voluntary composition, the purpose may also be "other tools", e.g. write-down of existing shares and subscription for new shares.

Class formation and cross class cram-down:
Prior to the Implementation, claims of the unsecured creditors are in the same class, votes cast (creditors related to the debtor excepted) according to the amount of the respective claims. The Implementation introduces class formation, a vote will be between the classes rather than the creditors individually and the majority (number) of the classes will decide the vote.
For SMEs, class formation is voluntary (mandatory for large companies). Class formation must be based on a sufficient commonality of interest between the creditors - e.g. tax claims, financial creditors, other unsecured creditors. Class formation applicable only to a vote for the approval of the final restructuring plan (in Danish: "rekonstruktionsforslag"). 

Mutual contracts:
Prior to the Implementation a debtor under bankruptcy or a restructuring procedure may continue mutual contracts (despite payment default re. period prior to opening). Contracts for ongoing deliveries; payment (as a preferential claim) only for deliveries relating to the period following the opening of such proceedings - despite agreed ipso facto-clauses. Under a preventive restructuring mutual contracts may be continued but a default (re. period prior to the opening) entitles to termination expect if a stay is granted. 

Early warning system:
The temporary early warning system becomes permanent. 

A more detailed report by our Council member and Country Coordinator for Denmark Michala Roepstorff (Plesner Law Firm, Denmark) will follow in Eurofenix.

Already we have started planning our 2023 Congress, which next year will be held in Amsterdam from 12-15 October 2023.

We are pleased to announce that our Council member, Membership Development Leader and Country Coordinator for The Netherlands, Alice van der Schee (Van Benthem & Keulen, The Netherlands) and our Anti-Fraud Forum Co-Chair Carmel King (Grant Thornton, UK) have been appointed as Co-Chairs and will be forming a Technical Committee soon. 

As a reminder, all INSOL Europe members are invited to express their interest to participate as speakers at our flagship event and if you are interested, we encourage you to contact our Chief Technical Officer Emmanuelle Inacio as soon as possible.