Insolvency Reform

AFME is working with its members to make a positive contribution to the European insolvency reform debate.

Overview

In February 2016, AFME published a new report in cooperation with Frontier Economics and Weil Gotshal & Manges LLP, on the 'Potential economic gains from reforming insolvency law in Europe'. The report shows that improvements in insolvency frameworks across the EU could increase GDP by between €41 and €78 billion (or between 0.3% and 0.55% of EU28 GDP) over the long-term. With the Commission due to propose a legislative initiative on business insolvency later this year, we hope that this report will make a positive contribution to the policy debate.

Read the report in English, French, German

Key findings of the report:

Collapse

Expand

Several EU Member States are already reforming their national insolvency rules, but there remains the opportunity for targeted and coordinated reform.
Further improvements in insolvency frameworks across the EU could increase GDP by between €41 and €78 billion (or between 0.3% and 0.55% of EU28 GDP).
Much of the absolute gains from insolvency reform could flow to Italy, Spain and France. Countries such as Greece, Hungary and Romania stand to gain most in relative terms.
A number of additional channels could increase the economic impact of insolvency reform in Europe, including: improved access to finance for companies; greater levels of entrepreneurship and company formation; and progress in addressing Europe’s high level of non-performing loans.

Recommendations

Collapse

Expand

A Chapter 11-type stay of proceedings to enable quick and effective restructuring;
Granting super-priority status to new financing to provide working capital to a distressed company;
Giving creditors need stronger rights to propose viable restructuring plans; and
Requiring national insolvency agencies to publicly report on outcomes.