From Eugenio Vaccari, Senior Lecturer in Law, Royal Holloway University of London

Legal advice generated by Large Language Models (LLMs) may prove unsound, erroneous, or even absurd. According to a recent study, gpt-4 and other similar public models: “hallucinate at least 58% of the time, struggle to predict their own hallucinations, and often uncritically accept users’ incorrect legal assumptions.” 

To address these problems, as well as an unmet request for professional and accurate legal advice from both laypersons and professionals with limited experience in a technical and narrow area of law like insolvency law, our research group developed and tested the performance of a retrieval augmented generation (RAG) system for answering legal queries related to corporate insolvency in England and Wales. 

The Insolvency Bot we created (https://fastdatascience.com/insolvency/) relies on open-source legal information and HMRC forms to provide sound responses to a user’s query focusing on insolvency matters regulated by English law. According to a tailor-made mark scheme, we show that our Insolvency Bot consistently outperforms LLMs queried without our RAG setup, and we show that newer versions of LLMs consistently outperform older ones when queried with the Insolvency Bot’s RAG enhancements, and its data sources. 

Our legal chatbot demonstrates potential to ensure “access to justice” to affected business owners by combining a generative AI system with a trusted knowledge base. However, the system is not perfect. To improve its functionality, we are constantly updating the sources on which the system relies to provide advice on English corporate insolvency law issues. We are also exploring the possibility of extending the scope of the chatbot from corporate to personal bankruptcy matters, as these two areas are strictly linked whenever non-incorporated businesses face financial distress.

Nowadays, however, businesses, irrespective of their size, operate in an interconnected world. Business transactions between the UK and Europe, as well as within the Internal Market, are becoming increasingly common for small- and micro-enterprises. These entities, however, are ill-equipped to understand the legal complexities of cross-border insolvency disputes, should one of their clients and/or suppliers enter into a restructuring or insolvency procedure.

To address these issues, thanks to the support of INSOL Europe, we have been able to put together a working group of 14 experts across key jurisdictions in Europe to create a European Insolvency Chatbot. With this project, we aim to expand the Insolvency Bot expertise to cover cross-jurisdictional and insolvency-related queries that affect companies operating in selected European countries (France, Germany, Ireland, Italy, Netherlands and Spain). The aim of the project is to expand the knowledge of our existing chatbot to cross-border European disputes by March 2026, and to present the results of our work at the 2026 INSOL Europe Academic Colloquium, as well as in an academic paper.

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Organizing auctions with the aim of selling at the highest price possible has remained a common practice since the beginning of time. While the methods of organizing auctions have changed according to the customs of the time and place, the practice is still very common in most parts of the world. An interesting fact is that people tend to have a sort of fascination with auctions and often give them symbolic meaning, writes Patricia Poulussen-Radulescu, Project Manage at CITR Romania.

That is reflected in the ways the auction is organized: from announcing the starting price, to declaring the winner. When it comes to insolvency, public tenders align perfectly within its principles and scope: maximizing asset recovery, ensuring transparency in proceedings, giving a fair treatment to creditors, selling the assets in a timely and efficient manner. In Romania, creditors can choose between methods of asset sale, from negotiation procedures to public tenders, as long as transparency over the entire process is guaranteed. But we notice that still the most common method proposed by insolvency practitioners and approved by creditors is the public tender. 

Read the full story here

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• A legal entity established with the participation of the debtor; 
• A legal entity that currently controls or has controlled the debtor within the last three years; 
• A legal or natural person that is or was controlled by the debtor within the last three years; 
• A legal entity that, together with the debtor, is or was under the control of a third party within the last three years; 
• The owners (shareholders, participants) of the debtor; 
• The CEO, management board members, chief accountant, and other executives of the debtor, including those who left their positions within three years prior to the initiation of bankruptcy proceedings; 
• Persons with whom or for whose benefit the debtor has concluded transactions for the alienation of assets that do not meet the criteria of reasonableness (economic feasibility, business purpose) and good faith; 
• A party to a fraudulent transaction made by the debtor or a transaction declared invalid under Article 42 of this Code; 
• Family members of the above-mentioned persons, including spouses, children, parents, siblings, grandchildren, and other individuals who can be reasonably considered related parties. 

• State Enterprise "Eastern Mining and Processing Plant" until January 1, 2026; 
• State-owned coal mining enterprises. 

In the Winter edition of Eurofenix Patrizia Riva (Associate Professor at Università del Piemonte Orientale, CPA, Auditor, IP) and Simone Accettura (Research fellow at Università del Piemonte Orientale, CPA, Auditor, IP assistant) discuss the integration of ESG (Environmental, Social, and Governance) non-financial information into corporate reporting and its role in early warning systems for business crises, specifically within the Italian context. 

Impact of CSRD: The Corporate Sustainability Reporting Directive (CSRD) mandates companies to provide comprehensive ESG information, emphasizing a "double materiality" perspective. This requires firms to disclose how their activities impact society and the environment, as well as how sustainability factors affect their performance. While unlisted SMEs are not directly required to report, they may still be influenced by larger firms' demands for sustainability data.

Non-Financial Information in Crisis Prevention: The Italian Insolvency and Crisis Code aligns with EU directives to promote preventive measures before a crisis occurs. It suggests combining financial indicators with ESG indicators to create a more holistic view of a company’s health. Companies must have robust organizational, administrative, and accounting structures to effectively monitor and respond to potential crises.

ESG Indicators for Crisis Forecasting: Identifying suitable ESG indicators is crucial for predicting business outlooks. The Italian Business Reporting Organisation (OIBR) has developed a framework for selecting non-financial ESG indicators to assess corporate structures and forecast crises. These indicators should consider various risks, including environmental, reputational, strategic, organizational, and market risks. The article concludes that integrating ESG factors into management and reporting is essential for effective crisis management.

You can read the full article titled 'The role of non-financial information in early warning and preventive restructuring' in the latest edition here.​

If you would like to contribute to a future edition, please follow the guidelines on our website and contact Paul Newson with your proposal and a short synopsis.

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On 3 March 2025, TRY O LLC, the management company of Gulliver, one of the largest business centres in Kyiv, initiated the first preventive restructuring procedure in Ukraine.
Law of Ukraine No. 3985-IX, implementing EU Directive 2019/1023 and introducing the preventive restructuring procedure, came into force on 23 January 2025.

The preventive restructuring procedure was initiated by a resolution of the company’s Annual General Meeting.

The crucial application is currently pending before the Commercial Court of Kyiv City (case No. 910/2221/25). This marks an important precedent for Ukrainian businesses, opening up new opportunities for restoring companies’ financial stability.

The court applied the following safeguard measures to TRY O LLC:

• Bankruptcy proceedings cannot be initiated against the debtor.
• The accrual of fines and other financial penalties under the debtor's obligations to the involved creditors is suspended.
• Any alienation or disposal of the debtor's property (except for transactions made in the ordinary course of business) shall be carried out only in accordance with the procedure provided for in the preventive restructuring plan.
• Any increase or decrease in the debtor's authorised capital, as well as the withdrawal of a member from the limited liability or superadded liability company-debtor, may be carried out only in accordance with the procedure provided for in the preventive restructuring plan.

The company must file a preventive restructuring plan with the court by 3 May 2025.

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