Restructuring and Insolvency in Europe: Policy Options in the Implementation of the EU Directive

IMF Working Papers, May 27, 2021

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The Directive on Restructuring and Insolvency sets minimum standards for restructuring and certain insolvency matters.
The Directive’s harmonization effect will be limited given multiple options for implementation, likely leading to divergent restructuring models in Europe.
Implementation options reflect different policy approaches to the regulation of restructuring and insolvency.
The breadth of policy choices has material consequences for restructuring activity.
Certain implementation options could undermine creditors’ rights or result in unpredictable outcomes, particularly in cross-border cases.

The paper illustrates the range of policy choices available to Member States and the consequences of those choices for restructuring activity.
States should carefully design restructuring procedures to avoid negative economic effects stemming from particular implementation options.
Cross-border unpredictability is a central concern when implementation choices vary across jurisdictions.

Design restructuring procedures with attention to preserving creditor rights.
Prioritize predictability in cross-border restructuring frameworks to limit adverse economic spillovers.
Evaluate the trade-offs of different implementation options to minimize negative effects on restructuring activity.