The European Bank for Reconstruction and Development (EBRD) Assessment has launched on 1st September 2020 an Insolvency Assessment on Business Reorganisation.

The Assessment aims to provide detailed guidance on legislative gaps to address an expected increase in businesses needing to use formal restructuring procedures following the coronavirus pandemic.
 
Structured as a questionnaire, the assessment will provide an up-to-date map of restructuring frameworks across the EBRD regions in Europe, Asia and Africa. It aims to provide an overview of the options within pre-insolvency and insolvency frameworks across the economies where the EBRD engages, but, for benchmarking purposes, the consultation is also open to countries where the EBRD does not at present invest.
 
The results of the assessment as well as a report summarising its findings will be made publicly available online and will also be published in due course on the INSOL Europe website.

The survey is available in English, French and Russian and will be open for public consultation until 31 October 2020. The press release is accessible here.

We encourage all INSOL Europe members to participate to the EBRD Assessment given the fact that the EBRD has decided to extend the scope of the questionnaire also to EU non-EBRD countries.

Make your voice heard!

A tracker of insolvency reforms globally produced by Lexis Nexis in partnership with INSOL Europe is now available here.

Plus:
The CERIL Executive has published a Statement on COVID-19 and insolvency legislation here. [Read more]

Sam MacAuslan of Project Associates has sent us this useful guide for dealing with the media in these unprecedented times.

Engaging with a hostile media is an unappealing prospect for a restructuring professional at any time, let alone during a global crisis that has shone an unflattering spotlight on corporate behaviour. As Covid-19 has swept the world, it has been followed by a wave of anxiety as employees worry whether they will have jobs to come back to once workplaces reopen. This in turn has led to increased media scrutiny for all employers, and particularly those facing an uncertain future. 

Those leading major restructuring processes during this period will need to tame the media beast, or run the risk that negative headlines turn into false narratives and eventually derail the process. Once news of job losses or insolvency moves from the business section of newspaper or website to the front page, the reputational consequences for creditors, partners, even restructuring professionals themselves, persist once the process is complete. In the past this would be a concern only in the most high-profile sectors, such as 2019’s administration and bankruptcy proceedings in the UK and US retail sectors. In the wave of restructuring to come, any perception of business failure is likely to be front page news. 

Job losses, plant closures and cost savings are not the stuff of good news stories. The restructuring process itself creates uncertainty and generates questions. By definition, those questions cannot be fully answered until the process reaches a conclusion. Employees want to know if they will keep their jobs, customers want to know how services will be affected. This should not, however, become an excuse for keeping silent entirely. Silence risks creating mistrust and undermining authority, which in turn allows other stakeholders to control the narrative. 

In any situation, restructuring professionals will first assess the communications capabilities and expertise available to them, seeking external help where required. Next they will take into account relevant legal and regulatory communications obligations, particularly where restructuring crosses jurisdictions. Finally, they will map out the groups that have an interest in the situation, from employees and creditors to unions and suppliers.

To make the next step and start to engage with the media, three principles are crucial to keep in mind:

1. Establish Parameters
In an uncertain situation, people look for leadership. In the initial phases of a restructuring, you have the opportunity to establish expectations, not only on what the end result of the restructure will be, but also on the process. Mapping out a process and working models sets the ground rules for the media as it would for any other group. Supplying this information early on also establishes a restructuring professional’s authority and control over the situation. 

Making commitments at the outset to provide regular information updates and indicating a scope or a timescale will win you credibility, but will also become the measure by which you are judged. Bear in mind that, in the eyes of the media, estimates quickly become targets and approximate dates become deadlines. Pay close attention to your language, especially in translation, and do not give in to the temptation to provide too much information before it is confirmed, or to stop communicating entirely. 

2. Centralise information dissemination
In age of social media, information flows instantly. The smallest details can be amplified out of proportion and come to dominate the narrative. The best approach in a situation like a complex insolvency is to create one central hub of information, often a website, that is accessible to all.  
Using information from the stakeholder mapping exercise, groups like employees, analysts and the media can be directed to the information that is most useful for them. Attempting to communicate with each group separately will lead to crossed wires rather than a tailored message. A single source of information provides maximum transparency, and guiding stakeholder groups through this central source meets the ideal condition of helping people to help themselves. 

Most importantly, the media should be treated like any other stakeholder. Particularly in larger restructuring processes, interested parties may default to receiving news about the process through the media. It is in everyone’s interest to ensure that the media reports news accurately. Journalists should have access to information in the same way and on similar terms to other stakeholders. Like other stakeholders, they need their own guide to the process and access to the same central information source. Neglecting the media or restricting information flows will only create confusion and mistrust. 

3. Understand local context
Working life, and employment relations in particular, is an area where stark differences remain between cultures. Employees in different jurisdictions have vastly different rights and obligations, and with them an entirely different set of expectations during restructuring. There will also be different legal and professional norms for journalists, as well as widely varying habits on social media. 

Effective communicators will cater to these local contexts without mixing their messages or undermining a central communications effort. That means working with experts that understand the jurisdiction and ensuring that a path can be plotted through the process for each stakeholder in a way that meets their expectations. 

Borders may be closed across the world, but experience of working in different cultural contexts has never been more important than now. With much of the world working remotely and with communications mediated by relatively young technologies, there is a huge risk that nuances and cultural cues in communications are missed or misunderstood. 

With these three principles in mind, it is possible to master the media and have it play a positive role in a communications strategy that supports a constructive restructuring process. 

As you are aware, the situation regarding the new Coronavirus is changing on an almost daily basis. INSOL Europe has been closely monitoring developments of the impact of COVID-19 at local and global levels. The health and well-being of the INSOL Europe community are our priority.

Following advice provided by the World Health Organization (WHO) and European governments, many of our forthcoming events are now affected.

• The joint conference in Zagreb, planned for 27-28 March, has now been postponed indefinitely.
• The joint conference with INSOLAD on 11 June in Amsterdam has now been postponed.
• The joint conference with R3, planned for 2 July in London, has now been cancelled.
• The Eastern European Countries Committee Conference, Kyiv, Ukraine, on 21-22 May is now postponed until the Autumn.  

INSOL Europe will continue to monitor all developments related to COVID-19 and will advise as soon as possible on future developments. 

Please note that our Annual Congress in Sorrento, Italy, 1-4 Ocober 2020 is still going ahead as planned at the moment.

For any additional information, please contact Harriet Taylor.

​Our thoughts are with our colleagues around the world impacted by COVID-19.

The 54th session of Working Group V began in Vienna with the nomination of a new Chair, Harold Foo from Singapore. The objective of the session was to consider the problem of insolvency in relation to Micro- and Small-Enterprises (MSEs). Delegates to Working Group I on business law rules joined the insolvency experts in the room for four days of deliberations. The aim was to provide a model law to help govern the position of enterprises that constitute, in many developing and developed countries, 90-95% of all businesses operating in the economy. Recommendations on the principle of a simplified insolvency regime and its treatment of all business debts were readily adopted at the end of the four days’ work, though not without a great deal of scrutiny of the proposals. Overall, the right balance was sought between the UNCITRAL Legislative Guide framework and the simplified version that was to be recommended for adoption by UN member states.
 
A great number of issues arose that required a resolution through the consensus model that UNCITRAL operates. Delegates were asked to determine, inter alia, whether a debt repayment plan as a condition for discharge should be an adjunct to or an outcome of simplified proceedings and whether the overall framework should refer to “competent authorities” or just “courts”, with a view to being as embracing as possible with respect to the oversight authority for such proceedings. Other issues canvassed included whether there should be a cap on the number of times proceedings can be extended or instigated, avoiding the possibility of “repeat offenders”, whether the principle of a “discharge” should be framed negatively or positively, by being attainable at a reduced cost and with limited formalities (as the World Bank Principles also foresee) and whether, in particular, secured creditors should be immune from any stay provided in such proceedings.
 
In addition, concerns were raised over what information should debtors have to provide for proceedings to begin or continue and whether the opening of proceedings could be “automatic” on filing or needs to be subject to control by a competent authority. Whether clawback rules needed to be expressly mentioned was also a theme debated in the group. The context for these issues, in particular, was how to avoid fraudulent filings and how to prevent abuse of process. Lastly, touching on the situation of No Income No Asset cases, delegates were of the view that guidance had to be given as to what elements of a simplified regime would be appropriate for these problematic, but increasingly prevalent cases. As such, a number of delegations volunteered to provide technical assistance should any UN member states require help in transposing one or more of the series of Model Laws that have resulted from UNCITRAL’s work since 1997.

Report by: Florian Bruder, DLA Piper Munich and Paul Omar, Technical Research Coordinator, INSOL Europe.