Restructuring legislation

The Insolvency Act distinguishes between 'insolvency/bankruptcy' (Konkursverfahren) and ‘restructuring’ (Sanierungsverfahren) procedures. Whereas the first leads to selling the company to satisfy creditors, the second procedure aims to restructure business operations in order to continue the operations of the insolvent company (Business Service Portal). Companies can file for restructuring procedures in cases of indebtedness, bankruptcy or imminent insolvency. Similar to insolvency procedures, companies first have to make an insolvency filing. Restructuring procedures require a restructuring plan that needs to be submitted before the opening of the insolvency procedures (§ 167). The restructuring plan needs to be approved by the majority of the creditors (which represent at least half of all due claims) within 90 days after the opening of insolvency procedures. After its approval the case will be continued as restructuring procedure. The debtor must offer the insolvency creditors in the payment plan at least a quota corresponding to his income situation in the following 3 years (instead of the previous 5 years). The procedure can either be with or without self-administration (§ 169). Procedure with self-administration: The court appoints a restructuring administrator while the debtor is able to dispose over assets and keeps legal authority. The restructuring administrator examines whether the restructuring plans are feasible and monitors the company's expenditures. Dispositions by the debtor of the insolvency estate shall be effective only if the insolvency court consents thereto. Liabilities incurred by the debtor after the opening of insolvency proceedings shall only be claims of the insolvency estate if the insolvency court agrees. The debtor does not have the right to apply for the liquidation of the insolvency estate in accordance with the law (debt collection or auction via the court). Prerequisites for this procedure are:

• The restructuring plan was submitted before the opening of insolvency procedures.
• The plan includes detailed information on current debts, assets (including annual financial statements from the last three years) and how restructuring will be financed during the following 90 days.
• The company is able to pay at least 30% of liabilities within two years.

Procedure without self-administration: Authority is handed over to a liquidator until the court approves the plans for restructuring. After that, debtors get back full access to company assets. Prerequisites for this procedure are:

• The restructuring plan was submitted before the opening of insolvency procedures.
• The company is able to pay at least 20% of liabilities within two years.

If the restructuring plan fails or is withdrawn by the debtor, insolvency procedures and a liquidation of insolvency assets will be initiated. If new financing or interim financing is provided in the course of restructuring within the meaning of the ReO, such financing or interim financing cannot be challenged if the insolvency was not known (to the opponent of the challenge). This applies to new financing or interim financing that is included in the confirmed restructuring plan or has been approved by the court. Transactions during a restructuring are not voidable if they were approved by the court and the insolvency was not known (to the opposing party).

Book XX of the Economic Law Code, entered into force on 1 May 2018, replaced the Act of 8 August 1997 on Bankruptcies and the Act of 31 January 2009 on the Continuity of Undertakings. The scope of application of Book XX of the Economic Law Code has been extended to include all enterprises, the debtor being defined as:

• any individual who independently exercises a professional activity;
• any legal entity;
• any organisation without legal personality.

With these changes independent liberal professionals, farmers, not for profit organisations, foundations, and trusts, are included in the scope of the law. The law does not apply in cases where the legal person has a public law entity status or is a natural person. The 'insolvency of enterprises law' also recognises the role of the 'chambers for companies facing economic difficulties' (chambres des entreprises en difficulté) which are in charge of monitoring the 'health' of the companies. They check whether companies:

• have not paid their bills;
• have not paid their social security contributions, VAT or have been withholding tax for two quarters;
• have not pay their contributions to the National Institute of Social Insurance for Self-Employed for a quarter;
• have any ongoing trial for non payment of debt;
• have received notices mentioning seizing of assets;
• has been subjected to the opening of insolvency proceedings in another Member State, this fact must now be communicated (article XX.202 CDE)

The aim of the chambers is threefold:

• Track businesses in difficulty;
• Enable them to become aware of the situation;
• Encourage them to react appropriately to ensure their recovery and their safeguarding.

The chamber can examine at-risk cases and, if deemed necessary, a representative of the company is called upon by the chamber to discuss the situation of the company. The discussions are confidential. If the company is deemed in difficulties, the company can file for reorganisation. The law (Title III of book XX)  allows a company in temporary difficulties to undertake certain restructuring measures under the supervision of the judicial authority in order to avoid bankruptcy. There are three main options for restructuring, characterised by their different degree of voluntarism (low involvement of courts) and impact on the business. From the most voluntary and least impactful to the most, the three main options for restructuring are:

• An out-of-court agreement (article XX.38 CDE) with all or at least two creditors, chosen by the debtor, with a view to restructuring the debtor's liabilities. The out of court agreement is protected by confidentiality and indivisibility of the company;
• The conclusion of a reorganisation plan, which must be approved by both the creditors and the national court; in this cases the CEO is replaced by an administrator appointed by the court;
• The sale of the business (or part thereof) as a going concern. This option is always overseen by the courts. If the application for insolvency has been filed less than two months before the agreed sale of assets seized to repay debt, the sales of assets should proceed unless the court decides otherwise. This is to avoid wasted costs of a sale where the filing of a petition is merely a procedural tactic to delay the process.

Another important feature introduced by book XX art. 2 paragraph 6,  is the establishment of an online register where all the documents of the insolvency are kept; all communication is also via digital media (email) and has legal value. On 25 May 2023, the House of Representatives adopted the draft law transposing Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring schemes, on debt write-offs and prohibitions on appeals, and on measures to increase the efficiency of restructuring, insolvency and debt cancellation procedures, and amending Directive (EU) 2017/1132 and containing various provisions on insolvency. This law takes another step towards a more modern insolvency law and companies are given additional opportunities to restructure themselves in order to preserve the economic fabric. Its main objectives are:

• To give a company in financial difficulties access to an effective preventive restructuring system that allows it to avoid insolvency.
• To give a company natural person a second chance.
• Make procedures on restructuring, insolvency and debt cancellation more efficient and shorter.
• Achieve further harmonisation of insolvency proceedings in the European Union.

Amendments to the commerce act  introduced in 2017 provide for rescue procedures in case of insolvency (restructuring proceedings). The purpose of the merchant restructuring proceedings is to avoid initiation of bankruptcy proceedings by an agreement reached between the merchant and its creditors on the settlement of the merchant’s payables, allowing the merchant’s business to continue. The restructuring procedure aims at preventing bankruptcy proceedings through an agreement between the company and its creditors in such a manner of settling the debt, which would allow the company to continue running its business. Restructuring proceedings may be initiated for any company which is not bankrupt, but is in imminent danger of bankruptcy. An imminent danger of bankruptcy is defined as the risk of not being able to pay pending payables within 6 months. The rescue procedure is not applicable to any public entity exercising a state monopoly or created by a special law, as well as to a bank or to an insurer. The application for initiating the rescue procedure is submitted by the company to the district court and notification of the application is recorded in the commercial register. The application must include copies of balance sheets, history of past payments and forecast of future payments and all the information necessary for the court to judge on the situation of the company. The district court of the registered office of the merchant at the time of filing of the restructuring application shall have jurisdiction over the restructuring proceedings. If requested by one of the parties, the court should rule on the case within 3 days. The court decision to accept the rescue application prompts the words 'under restructuring proceedings' to be added after the merchant's name in the commercial register. Company's finances and asset cannot be used unless agreed by the court, exception is made for amounts necessary to pay outstanding taxes and social contributions. An administrator or trustee is appointed by the court (according to certain criteria among which the fact that the person should not have been involved in bankruptcy) to assist and supervise operations and the company must collaborate with them. The trustee is in charge of drawing a creditors' list in collaboration with the company and the creditors, including employees with unpaid wages, and presenting it to the court for endorsement. The restructuring proceedings include participation of all creditors in the creditors' list. Restructuring proceedings are heard by the court and end with the approval of a 'restructuring plan' which is voted by the creditors. This plan includes employees who were employed before the date of opening the restructuring proceedings. The restructuring proceedings shall be terminated:

• if the merchant withdraws its proposal for a restructuring plan, before the creditors have voted on the plan;
• if a restructuring plan is not endorsed by the court within 4 months after the initiation of the proceedings, regardless of any suspensions thereof;
• if, after initiation of the proceedings, obstacles under article 762, paragraph 3 to conduct restructuring proceedings for the merchant are found (for example initiation of restructuring proceedings or bankruptcy in the previous three years, or if more than one fifth of the creditors have acquired, over the past three years, receivables from the merchant or its related parties) or if it is found that the details provided by the merchant are false;
• if the merchant fails to appear at the court hearing of the plan;
• upon violation of the restrictions on the merchant’s actions imposed by the court;
• if the merchant fails to cooperate with the trustee, the court appointed auditor or fails to submit to the court, within the set time limit, any requested information and evidence, or fails to deposit the expenses set by the court for the remunerations of the trustee, the auditor or the forensic expert;
• if the proposed restructuring plan has not been adopted or endorsed;
• upon the endorsement of the restructuring plan.

The restructuring plan approved by the court is mandatory for the debtor and the creditors, including workers, and is not revocable. The bankruptcy court is the district court at the seat of the merchant, registered no later than 6 months before the filing of the application to open bankruptcy proceedings. This Law for amending and supplementing the Commerce Act introduces the requirements of Directive (EU) 2019/1023 of the European Parliament and of the Council of June 20, 2019 on the frameworks for preventive restructuring, on remission of obligations and the ban on carrying out an activity, on measures to increase efficiency of restructuring, bankruptcy and discharge proceedings and amending Directive (EU) 2017/1132 (OJ, L 172/18 of 26 June 2019). New Art. 693а (2023) is introducing a standardized samples of application for presenting the claims and for lists of accepted and rejected claims prepared by the receiver. In this connection, it is also foreseen to supplement Art. 685 of the current Commerce Act and creation of texts regarding the presentation of claims according to a model determined by an ordinance of the Minister of Justice.

The pre-bankruptcy proceedings shall be conducted in order to regulate the legal position of the debtor and his relation to creditors and to maintain his activity (bankruptcy act, article 2). Bankruptcy proceedings instead, aim primarily at repaying debts and may envisage the dissolution of the company and of its assets. The debtor is required to prepare and submit an initial draft of the pre-bankruptcy restructuring plan (Bankruptcy Act, article 26). During the procedure, the debtor is required to adjust the plan in accordance with the accepted and challenged claims of the creditors. According to article 37 of the Bankruptcy Act, employees and previous employees of the debtor in pre-bankruptcy proceedings cannot file a claim for unpaid wages and salaries and severance payments up to the amount prescribed by law or collective agreements. That applies as well to claims on compensation for damages due to work injury or occupational disease. The application for the restructuring plan must include information on liabilities and securities of the debtor as well as a list of the creditors and employees. If the court approves the plan, it is published on the official journal. From that moment on, assets of the company are protected against seizure and the company can carry on its operations, provided that the funds are used to satisfy the creditors' claims. The restructuring plan is monitored by a pre-bankruptcy trustee whose appointment can be revoked by the court (Bankruptcy Act, article 27). The Law on the Executive Administration Procedure in Companies of Systemic Importance for the Republic of Croatia (article 4) applies if a company with at least 5,000 employees fails to secure agreements with creditors and suppliers and is intended to protect the economy in the event of future corporate failures. Under the law, devised for financially troubled companies with at least 5,000 employees and a debt of €1 billion, the state is able to appoint an executive to steer a restructuring plan at the request of the debtor as well as at the request of creditors with the company agreement. The law envisages a company reaching a restructuring deal within 15 months. The law prevents creditors from launching litigation, administrative and security procedures or procedures for out-of-court debt collection against the debtor, its subsidiaries, affiliated companies and suppliers during the period of extraordinary administration. With this Act (OG 36/22), Directive (EU) 2019/1023 of the European Parliament and of the Council of June 20, 2019 on frameworks for preventive restructuring, debt relief and prohibitions and on measures to increase the efficiency of procedures related to restructuring, insolvency and discharge is adopted into Croatian legislation. debt and amending Directive (EU) 2017/1132 (Restructuring and Insolvency Directive) (OJ L 172/18).«. According to the Act of Amendments of the Bankruptcy Act (OG 36/22), after Article 7, Article 7.a and the title above it are added, following title “Early warning of debtors and access to information” Article 7.a (1) The debtor is provided with access to a clear and transparent system of early warning of circumstances that could lead to a threatening inability to pay, especially in the case of his or her failure to make certain types of payments, and through which system the debtor is warned that it is necessary to act without delay. (2) The debtor may use consulting services provided by public or private organizations, in order to create a strategy based on which the imminent inability to pay would be avoided. (3) The employer is obliged to inform the workers at least once a year about the news regarding the early warning system, as well as procedures and measures related to restructuring and debt forgiveness (release from remaining obligations). (4) Debtors and the general public have available relevant and updated information on access to the early warning system, as well as procedures related to debt restructuring and discharge (release from remaining obligations) on the courts' e-Notice board website, where the information must be easily accessible and presented in a user-friendly way. (5) Information on the content and method of drawing up restructuring plans, especially adapted to the needs of micro, small and medium-sized enterprises, is publicly available on the e-Bulletin board of the courts, in Croatian and English. (6) The establishment of an early warning system for small business entities is ensured by the ministry responsible for entrepreneurship and trades. (7) The Minister responsible for judicial affairs, with the prior consent of the Minister responsible for entrepreneurship and trades and the Minister responsible for finance, will regulate the system from paragraph 1 of this article, the method of its use and the method of publishing information from paragraphs 4 and 5 of this article. Article 5. Article 12 is amended to read: »(1) Court documents shall be delivered by publishing the documents on the website of courts, unless otherwise stipulated by this Act. (2) As an exception to paragraph 1 of this article, delivery of documents between the court and the Financial Agency as a body that undertakes actions in accordance with the provisions of this Act and acts according to the decisions of the court is carried out through the unique information system. (3) The delivery referred to in paragraph 1 is deemed to have been made at the end of the eighth day from the day of the publication of the letter on the e-Bulletin Board of the Courts website. (4) The publication of a letter on the e-Notice Board of Courts website is considered proof that delivery has been made to all participants and those for whom this Act prescribes special delivery, except in the case of delivery to the Financial Agency from paragraph 2 of this Article. (5) In each court, a register of letters submitted via the e-Notice Board of courts website will be kept separately for each debtor in electronic form according to the order of publication. The witness's written record is public and must be available to interested persons during the entire working hours of the court. (6) The register of documents referred to in paragraph 3 of this article shall contain information on the basis of which the identity of the debtor can be determined, the number of cases, the type of court document and the date of publication of the document on the e-Board of Courts website. (7) Documents that the Financial Agency, as a body that undertakes actions in accordance with the provisions of this Act, submits to the court through the e Notice Board unified information system shall be authenticated with the Financial Agency's electronic seal.

An examinership procedure was introduced in 2015 with an amendment to Cyprus' Companies Law (Chapter 113). The Law 62(I)/2015 amending the Companies Law is adding Part IVA 'Appointment of Examiner'.  The examinership procedure allows a company risking insolvency, or a creditor or a contingent or a prospective creditor (including an employee) of that company, to apply for examinership. The application must be accompanied by a rescue plan. An examinership procedure envisages the appointment of an examiner (an expert in insolvency), under the court's supervision, who is in charge of evaluating the rescue plan. If the rescue plan is considered viable the court allows for the start of rescue operations. For the plan to take effect, the creditors' committee must agree with the plan, too. During examinership, which can last up to six months (including extension), the assets of the company are protected from the enforcement of individual claims. The examinership ends by order of the court when insolvency problems are resolved or when no rescue operation is deemed possible by the examiner. In the latter case the court may order the company to be wound up. Another rescue procedure is receivership (Companies Law, article 97 and 222-225), which allows for a creditor to claim their due but also allows for the continuation of the operations of the company. The court decides to appoint a receiver when it deems necessary to protect the creditor's claims. The receivership procedure puts the company's operation in the hands of the receiver who can decide how to recover the amount of the claim by selling, in whole or in part, the company's assets. The receivership procedure ends when the debtor's claim is satisfied. The receivership procedure should allow a company to return to its regular business operations once the debt is paid. On the 1st of January 2020, the Department of Insolvency began its operation, based on the new relevant legislation. The management of the affairs of the Official Receiver and the Insolvency Service (as described in the aforementioned Companies Law) were transferred to the Department of Insolvency (as a result, in 2021 the Department of the Registrar of Companies and Official Receiver was renamed into the Department of the Registrar of Companies and Intellectual Property). According to the Insolvency Legal and Regulatory Framework, among the main purposes of the Department and its procedures is to formulate and cultivate a culture of survival and second chances (as opposed to bankruptcy and liquidation), to aid with the rescue and restoration of business activity and the reconstruction and preservation of viable businesses through the establishment of a corporate debt restructuring mechanism, and to safeguard the viability of natural and legal persons, through the provision of appropriate tools and framework for restructuring their loans.

The application for insolvency can be made either by the insolvent company or by the creditors. Three options are available in case of insolvency: reorganisation, debt relief and bankruptcy. Reorganisation, according to the Act No. 182/2006 Coll., aims to satisfy creditors' claims while allowing the company to continue its business. Conditions for permission of reorganisation by the court are:

• the total annual net turnover of the debtor for the last accounting period preceding the insolvency petition has reached at least CZK 50,000,000 (about €1,850,000), or
• the debtor employs at least 50 employees, or
• the reorganisation plan has been adopted by at least half of all secured creditors counted according to their claims and at least half of all unsecured creditors.

Debt relief is another measure that must be agreed by the creditors (provided that creditors receive no less than 30% of the amounts due) and approved by the court. If the two options above are not feasible, the court proceeds with bankruptcy measures. The reorganisation can be done mainly through the following measures:

• Restructuring the claims of creditors, consisting in the remission of the debts of the debtor, including their accessories or delay their maturity;
• Selling the entire estate or part thereof, or sale of debtor's business;
• Issuance to creditors of the debtor's assets or transfer of these assets to a newly formed legal entity in which creditors have a stake;
• Merger of the borrower - legal entity with another person or transfer its assets to a partner to maintain or change the rights of third parties concede;
• Issuance of shares or other securities of the debtor or a new legal entity;
• Providing funding for the debtor's business;
• Change the founding document or statutes or other documents regulating the internal affairs of the debtor.

If the court approves the reorganisation, the insolvency administrator is also appointed by the court. The insolvency administrator shall exercise supervision over the activities of the debtor and perform tasks such as surveying of the estate and its inventory, leading incidental disputes, compiling and adding a list of creditors. In addition, the insolvency administrator shall regularly inform the bankruptcy court and creditors' committee about the results of his/her activities.

The Danish Bankruptcy Act (Konkursloven, LBK nr 11 af 06/01/2014) distinguishes between three different types of insolvency. These are bankruptcy, restructuring, and debt relief. Bankruptcy and restructuring are applicable to both legal and natural persons, while debt relief is reserved for natural persons. Aside from these judicially regulated insolvency proceedings, other non-judicial rescue procedures can be utilised, as long as the creditor agrees to it.  Restructuring proceedings can be opened through an application by either the debtor or a creditor, which then needs to be approved by the bankruptcy court. The requirement for opening restructuring proceedings is that the debtor is considered to be insolvent.  An administrator and an accountant are appointed by the bankruptcy court for the restructuring process. Although the debtor maintains control of his/her assets when entering into restructuring proceedings, he/she is required to obtain the approval of the administrator for certain large transactions. The administrator will propose a restructuring plan, which the creditors then vote on.  Restructuring proceedings generally end with one of three options:

1. The debtor recovers from the financial strains and is able to continue operating the business,
2. a compulsory composition is carried out, or
3. the debtor faces bankruptcy.

Compulsory composition (tvangsakkord) is a legally regulated restructuring procedure, in which either the amount of debt that the debtor has to pay to the creditors is reduced, or the debtor's property, or part of it, is distributed to the creditors, or the timeframe for repayment can simply be extended. A mixture of the aforementioned alternatives can also be utilised. The debtor can apply for the commencement of compulsory composition proceedings. The aim of a compulsory composition is either to enable the company to continue operating, or to free the debtor from the remaining company so that the debtor can set up a new company without the burden of the old one. After several amendments to the bankrupcy law a new law was implemented 25. december 2022 (LBK nr 1600 af 25/12/2022). On 9 June 2022, the Danish Parliament adopted a number of amendments to the Bankruptcy Act, which entered into force on 17 July 2022. The amendments to the law are based on the Bankruptcy Council's two reports (no. 1578 and 1579 issued in 2022) and implement EU directive 2019/1023 of 20 June 2019. There is a completely new section in the Bankruptcy Act on preventive reconstruction. A debtor can be taken under preventive restructuring if the debtor is either insolvent or is likely to become insolvent. There is minor adjustments to the rules on reconstruction. Among other things, there have been changes in the rules on voting on a reconstruction proposal, and as something new, there are rules that overdue claims for B-tax and advance tax are covered by compulsory agreements. The rules on debt restructuring have been changed, among other things with the aim of improving entrepreneurs' opportunities to start a new business after bankruptcy. The Minister for Business has been authorized to lay down rules on early warning. The purpose of launching early warning measures is to help companies become aware "in time" that a company is in financial trouble. In this way, the company can act on the early financial problems and hopefully avoid bankruptcy.

The Estonian legal framework for insolvency envisages two options: liquidation or reorganisation. A debtor may file for both liquidation and reorganisation while a creditor for liquidation only. The reorganisation act regulates the reorganisation proceedings for enterprises aiming at protecting the interest and the rights of the creditors of the company and of third parties in the course enterprise's reorganisation. Reorganisation can occur if:

• the company is likely to become insolvent in the future;
• the enterprise requires reorganisation;
• the sustainable management of the enterprise is likely after the reorganisation.

The court shall commence reorganisation proceedings by a ruling within seven days after the receipt of the reorganisation application. The ruling must contain:

• information on the person who has been designated as a reorganisation adviser;
• the deadline for the acceptance of the reorganisation plan;
• the deadline by which the reorganisation plan must be submitted to the court for approval;
• the amount which the company must pay to cover the remuneration of and expenses relating to the reorganisation adviser as a deposit to the account prescribed for that purpose;
• the date by which the company must pay the amount specified in clause 4).

The court also appoints a reorganisation adviser. The duty of a reorganisation adviser is to inform the obligees and the court of the economic situation and reorganisation possibilities of the enterprise in an impartial and competent manner, to advise and assist the company in the course of reorganisation proceedings and to verify the lawfulness of the claims of the creditors and the purposefulness of the transactions of the company. Reorganisation proceedings stop upon revocation of the reorganisation plan, implementation of the reorganisation plan before the due date or upon expiry of the term for implementation of the reorganisation plan which is set out in the reorganisation plan.

The Finnish judicial system recognises three types of insolvency. These are bankruptcy (konkurssi), reorganisation of an undertaking (yrityssaneeraus), and adjustment of the debts of a private individual (yksityishenkilön velkajärjestely). For companies and other legal entities attempting to avoid bankruptcy, the proceeding known as reorganisation is the only option, as the adjustment of debts proceeding is reserved for natural persons. The general requirement for being able to apply for reorganisation proceedings is, as of May 2022, not for the debtor to be insolvent but threatened with insolvency (maksukyvytön). Reorganisation can also be initiated through a joint application submitted by the debtor and two creditors, who together have a claim on a minimum of 20% of the debtor's debts. Reorganisation is generally available to any kind of company, except for certain companies subject to stricter regulation, such as financial institutions. Both the debtor and the creditor have the authority to apply for the commencement of the proceedings. If it is clear that a reorganisation will not be enough to save the company, or if it is considered that the debtor will not be able to cover the costs resulting from the proceedings, the application for reorganisation can be rejected. A liquidator is appointed by the court to supervise the debtor's business operations and compose a proposal for the planned reorganisation, which is then approved by the court. The debtor has the right to make suggestions about the reorganisation programme. The court can also appoint a committee of creditors to assist the liquidator, which also have a right to comment on the programme. However, the committee of creditors is only appointed if there is an explicit need for one. If the company regularly employs 50 people or more, the employment authorities may appoint a representative as a non-voting member to the committee of creditors. The liquidator's remuneration is paid by the company (employer) being reorganised. The company is also responsible for any costs incurred during the reorganisation. Members of the committee of creditors are remunerated by the creditors in question, unless otherwise agreed. The reorganisation programme can cover things such as the adjustment of debts and a transfer of the undertaking, as well as changes to staff arrangements, management, and operational activities. There is no set expiry date for a reorganisation programme: the programme is in effect until the obligations have been met. The debtor is freed from paying any debts that exceed the amount specified in the programme if he/she fulfils his/her obligations. If the debtor significantly fails to comply with the programme, or if the debtor is declared bankrupt, the reorganisation proceedings are terminated. 

There are 4 possible paths that can be followed if a company is in financial difficulty: mandat ad-hoc, sauvegarde, conciliation and redressement judiciaire. The choice depends on the financial situation the company is facing. Procedure de mandat ad-hoc (ad-hoc procedure): This is open to companies where there are some financial difficulties but still fully operational. The court appoints a legal representative who assists the company's CEO but does not take its place. The procedure can be stopped at any moment if the company thinks the procedure reached its goal. Safeguard procedures (procédure de sauvegarde): This is open to companies approaching a situation where they will have to stop payments. The safeguard procedure can be triggered by the CEO upon reaching the first serious set of difficulties. Unlike conciliation, it is a real judicial procedure that is publicised: the opening judgement is mentioned in the commercial register or in the trades directory and published in the Official Bulletin of Civil and Commercial Announcements (Bodacc) and in a legal notice journal. It lasts 6 months at the maximum. Once there is a plan in place, the tribunal can stop the safeguard procedure and ask the company to enact the plan. The plan might entail the closure or sale of certain activities. The duration of the plan cannot exceed a 10 years' timeline. Moreover, if the company has more than 150 workers and/or a total turnover of more than €20 million, creditors are represented by two committees: one which represents the credit institutes and one that represents the suppliers. Conciliation: If a company is in a situation where payments have stopped for less than 45 days, the tribunal can start a conciliation procedure upon request of the CEO. The company has to present a full report on its credits and debts, its securities and obligations, its annual reports for the past 3 years, a presentation of the financial situation highlighting difficulties and financial support needs. The company must also present a document containing reflections and an initial assessment on the situation and a way forward to improve the situation. The conciliation procedure aims at reaching a friendly agreement between the company and its creditors. The tribunal can proceed with a 'simple order' to stamp the agreement and its details are kept confidential by the parties. Otherwise an 'approval' procedure can be enacted by the tribunal and in this case the case is made public (with the aim of offering more guaranties to the creditors). Judicial reorganisation proceeding (redressement judiciaire): this is the final step that can be taken to rescue a company. It includes cases where the criteria for the previous steps are not applicable and the company has stopped its payments for longer than 45 days. Under the law, the call for a 'redressement judiciare' can be done by the company or by a creditor. In this case the tribunal announces the opening of reorganisation and liquidation. Then, the CEO is assisted by a legal representative whose mandate is to make sure that creditors' demands are satisfied. The court may also appoint a judicial administrator (required if the company has more than 20 employees and more than €3 million of revenues), whose mission is to assist the CEO for some or all acts of management. The procedure can last for a maximum of 18 months after which there are two possible solutions: repay the debts and implement a continuation of activities plan; or, if debt cannot be repaid, an external buyer can be sought or liquidation of assets can be implemented.

Under certain conditions, a company which can no longer pay its creditors and is deemed illiquid can be granted three months' time for developing a restructuring plan. During these three months the company does not have to pay its creditors; rather the creditors shall be involved in the process leading up to the restructuring plan. The legal requirements are:

• the company makes its request for the opening of insolvency proceedings with the insolvency court on grounds of imminent insolvency or over-indebtedness,
• it requests debtor-in-possession management which implies that the management of the insolvency process is not handled by a foreign agency or consultant,
• the company provides certification by a tax advisor, accountant or lawyer with experience in insolvency matters or a person with comparable qualifications which gives evidence of the imminent insolvency or over indebtedness but also shows that the debtor is not already insolvent and that the intended restructuring does not manifestly lack the prospect of success.

The insolvency court, without external inputs from the creditors, takes a decision depending on the prospect of success to save the business. A positive decision implies the allowance not to pay the creditors' demands for three months and to develop a plan on how to restructure the business. The insolvency court appoints an insolvency observer, an independent expert who monitors the process of developing the plan. The debtor as well as the creditors have a right to suggest a person to take the position of the insolvency observer. Under the act on the further facilitation of the insolvency procedure (ESUG), communication and cooperation between the debtor and the creditors shall be improved by the establishment of a committee gathering all creditors. Better communication between the two sides and the insolvency monitor shall speed up the drafting of a plan aimed at rescuing the business. The insolvency ordinance (article 67.2), stipulates with respect to ESUG that a worker representative shall be member of the creditors' committee  (Gläubigerausschuss). In case a works council is in place, the worker representative typically is a works council member. There is no legal provision on how the worker representative shall be appointed in other cases.  The law also institutes a 'debt-to-equity-swap' whereby liabilities can be transformed into company shares. Early assessments have largely shown that the new measures are successful. On 1 January 2021, the Act on the advancement of restructuring and insolvency law (SanInsFoG) came into force, including several amendments to the Insolvency Code. In particular, the SanInsFoG has tightened the requirements for court approval of self-administration (270a InsO). Thus, the application must provide for:

• a financial plan for six months for the continuation of business operations and the costs of restructuring,
• a concept for the implementation of the insolvency proceedings in self-administration,
• a description of the status of negotiations with creditors,
• a description of the measures to ensure compliance with the obligations under insolvency law,
• a description of additional or reduced costs in comparison to the standard insolvency proceedings.

With the corporate stabilisation and restructuring act (StaRUG), the SanInsFoG also provides for an independent restructuring procedure to avoid insolvency (implementation of EU Directive 2019/1023).

-Law 4738/2020 (as amended by Law 4818/2021) abolishes Law 3588/2007 (known as Bankruptcy Code) and integrates into the national legislation the EU Directive 2019/1023 on preventive restructuring frameworks, discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency, and discharge of debt (the EU Restructuring Directive). The new Law can be categorised in two sections: Preventive (pre-insolvency) restructuring This includes: *early warning of debtors (both individuals and legal entities) via an electronic mechanism supervised by the Special Secretariat for Private Debt Management, as well as advisory practices provided by Borrower Service Centres and Professional Bodies (i.e.Chambers or Professional Associations). Debtors are classified in three levels of insolvency risk -low, moderate, high. The mechanism is activated upon a request of the interested party and not automatically on the initiative of a third party; extrajudicial settlement of (natural persons and/or legal entities) monetary liabilities to the Greek State, the Financial Institutions (including servicers), and to the Social Security Institutions. The procedure is initiated, either at the request of the debtor through the Special Secretariat for Private Debt Management e-platform, or at the initiative of the creditors by notifying the debtor by a letter. For the restructuring agreement consent criteria, besides the debtor's consent, require the 60% of financial institutions and, at least, the 40% of secured creditors. Upon submitting the restructuring application and during negotiation procedures, financial institutions stay any Code of Conduct action, or any enforcement action (s).State and Social Security Institutions can restructure and write- off debts to them and, most importantly, debtors who have settled, or who have not delayed, for a period exceeding three months, their debts are eligible to a subsidy to repay their loans secured by their main residence, for five years from the date of application. For a debtor to receive the grant, the total amount of debt must be at least €20,000 and the balance of debt not to exceed €135,000 for a single-person household, increased by €20,000 for each additional member, and up to a maximum of €215,000 per debtor. Debtors with >90% to one financial institution are excluded while, debts towards third parties are not restructured under this process; pre-insolvency business recovery process concerning persons with a business activity and providing for debt restructuring, with or without business transfer. The process recognises two categories of creditors -those under a special privilege, and all others (unsecured creditors and creditors with general privileges) affected by the rehabilitation agreement, the conclusion of which, requires a 50% consent (even via electronic voting) of each category, with the possibility of bypassing these majorities under certain conditions.The principle of non-deterioration of the position of creditors is explicitly stated, as it, is the deemed consent under clear conditions of the State and the Social Security Institutions. In cases not covered by the provision on deemed consent, discharge of liability for employees (for public or private bodies), who consent to the rehabilitation agreement, is provided. The rehabilitation process, contrary to bankruptcy, does not constitute grounds for termination of the debtor’s outstanding contracts and as such, it should specify its consequences on employees' employment and earnings, and should not entail employees' claims in precautionary measures except, for a good reason and for a specified time. Bankruptcy proceedings Insolvency capacity, for the first time, is granted to all natural persons regardless of whether they have a commercial status, as well as to legal persons pursuing an economic purpose; the cessation of payments term is defined, as quantitative criteria are provided addressing the debtor categories based on the size of the bankruptcy estate and not on legal capacity – form. As such, large scale insolvencies follow the ordinary insolvency process ending, either in the liquidation of the debtor’s business or parts of it as a “going concern” or in “piecemeal liquidation” using the e-auction mechanism; *the Bankruptcy Officer is nominated in the application for the declaration of bankruptcy, and the Court is provided with the written statement of acceptance of such nomination;

• the Electronic Insolvency Registry is established, the data of which (announcements of creditors’ claims, decisions and acts, etc.) are publicly available;
• the declaration of bankruptcy causes the automatic and without cost termination of all pending and permanent contracts of the debtor within 60 days; the creditors' Assembly role is enhanced especially in the context of the tender process ratification, while limiting Court intervention; insolvency proceedings are accelerated, while insolvency is automatically terminated within five years of its declaration; *a simplified and faster process for addressing small-scale insolvencies as the application is submitted electronically through the Electronic Insolvency Registry and run by lower courts (District Civil Court -”Eirinodikio”). Targeted debtor audience consists of consumers/natural persons (with assets up to €350,000), entrepreneurs and smaller enterprises (with total assets: €350,000, net turnover: €700,000, average number of employees during the period: 10 persons).

-The bankruptcy code provides for two proceedings that are relevant to the restoration of a failed enterprise to financial health; the recovery procedure that precedes bankruptcy and the reorganisation plan, which is considered after the declaration of bankruptcy. Pre-bankruptcy recovery procedure A debtor either in cessation of payments or in a situation of imminent cessation of payments may file for the ratification of recovery agreement already reached with the qualified majority of creditors (60% of the total claims, 40% of which should be secured). In addition, any debtor that is not in cessation of payments or in a situation of imminent cessation of payments can be subject to the recovery procedure, provided that the court considers it probable that the debtor will become insolvent, and insolvency can be lifted through implementation of the recovery procedure. The agreement may consists of a prepack sale of all or part of the business, a disposition of assets, a debt-equity swap, or a change of the term of existing obligations, such as a write-down of the debt, extension of the repayment date, alteration of the interest rate or replacement of the obligation to pay interest by the obligation to provide the creditor with a share of the profits; such changes to liabilities may also be accomplished through a refinancing of existing debt or through the issue of a bond loan that may also include a convertibility feature. From the submission of the recovery agreement to the Bankruptcy Court until its decision there is an automatic uphold for a four-month period on all individual and collective enforcement measures against the debtor. Such automatic moratorium is granted to the debtor only once. In case the court’s decision is not published within the four-month period, the court may grant a suspension on all individual and collective enforcement measures against the debtor or any other preventive measure. Before the submission of the recovery agreement, a moratorium may also be granted - at the request of the debtor or the creditors - if a creditors’ declaration in writing of 20% of the total claims is submitted, provided that there is an imminent danger. Such uphold can be granted by the court only once and for a maximum period of four months. There are three main criteria for the ratification of an agreement reached by the debtor and the qualified majority of creditors as set out above. First, it must result in a viable business and lift the debtor out of cessation of payments (or prevent it from reaching this state). Second, it must not leave any non-consenting creditors in a less favourable position than they would be in bankruptcy liquidation. Third, each non-consenting creditor may not be treated less favourably than any other creditor of the same rank or priority. The Bankruptcy Court will not examine the debtor’s viability if the following conditions are met:

• contracting creditors agree with the content of the business plan;
• the recovery agreement contains listing of contracting and non-contracting creditors,
• the claims of which are expected to be effected from the materialisation of the recovery agreement; and the recovery agreement along with the business plan were served to all non-contracting creditors;
• the claims of which are effected from the recovery agreement, as for instance, when the recovery agreement, as for instance, when the recovery agreement provides for their write-off or for an extension of the repayment date.

A pre-bankruptcy recovery agreement will be judicially ratified if:

• it is signed by creditors representing a majority of 60% of the total claims, 40% of which should be secured; it renders the debtor viable;
• non-signatory creditors receive at least as much as they would receive through bankruptcy liquidation;
• it does not violate any mandatory legislation, such as competition law, or is the result of fraud conducted by the debtor or any creditor or any third party;
• creditors of the same class are treated equally and any exceptions are justifiable by important business or social reasons;
• and it lifts the debtor out of cessation of payments.

The reorganisation plan Any debtor may propose a reorganisation plan either along with its bankruptcy petition or within three months of being declared bankrupt. The three-month period may be extended by the reporting judge only once and up to one additional month if it is proved that the extension is not detrimental to creditors’ interests and the plan will be accepted by the creditors. The proposed reorganisation plan must include:

• information relating to the current financial situation of the debtor;
• at least one proposed form of reorganisation; and information relating to payments to creditors. The latter is subject to one restriction: the proposed debt settlement must not prejudice creditors’ classification.

The plan must mandatorily provide for secured creditors, general preferential creditors, unsecured creditors and subordinated creditors. Employee claims constitute a particular class. Claims of unsecured creditors that are of diminished value may be classified separately. Within a particular class, more than one group of creditors may be provided. The plan must provide equal treatment among creditors of the same class, or among creditors of the same group. The plan shall be approved by a majority of creditors representing 60% of the debtor’s debt, at least 40% of which represent secured debt. With respect to a recovery agreement, pursuant to the provisions of the GBC (Greek Bankruptcy Code), a guarantor’s or co-debtor’s liability is limited to the value of the claim against the debtor, as such claim was reduced in accordance with the ratified agreement and provided that the relevant creditor consented to the reduction. There is a similar provision with respect to a reorganisation plan.

In 2021, Act 64 of 2021 on restructuring was enacted in order to harmonise with EU law. A company can also apply for bankruptcy or liquidation under Act 49/1991 with provisions in the law for voluntary reorganisation. A company facing financial difficulties might apply for voluntary reorganisation. The reorganisation agreement must include the following (Act 49/1991, Articles 19-21):

• a list of creditors participating in the reorganisation agreement, their classification, the sums of their registered claims recognised or uncontested and the size of their voting rights;
• the settlement and restructuring programme approved by the creditors and the method of implementation and supervision;
• any modification of performance deadlines, any waiver or assumption of claims and all other factors deemed necessary for the purpose of restoring or preserving the debtors’ solvency; and
• the name and mailing address of each creditor, and regarding creditors' committees and creditors' representatives, the specifics of their scope of representation.

If the court, taking into account the creditors' claims, agrees with the reorganisation plan, the company can continue its preparations under the supervision of an appointed administrator. The creditors do not have a say in this decision. Employees must be notified and the announcement published in the Official Companies' Gazette (Cégközlöny). If the voluntary reorganisation plan is not concluded within 120 days from the date of this publication, the court proceeds with the regular bankruptcy proceedings. Under a change from August 2020 in Act 49/1991, Article 84/A (1)b-c, the state is authorised to practice pre-emption rights in the purchase of companies it recognises as strategically important.

A company may enter examinership once its director(s) can prove that the company can no longer pay its debts. Successful applicants then have 100 days during which they are protected from creditors. This gives time for the company to try to obtain new forms of funding, or to make agreements with their creditors about alternative forms of repayment or new repayment schemes, which are not as hard on the company. Examinership differs from receivership in that the company itself applies for such restructuring measures. Under receivership protocol, the creditors apply to have a receiver appointed, which can lead to liquidation and redundancies as its primary focus is to recoup money for the creditors.  A temporary arrangement was introduced in 2020 as a result of the COVID-19 pandemic, which permits an extension of time from 100 days to 150 days. This remained in effect until 31 December 2022.

In September 2017, a new law covering bankruptcy and insolvency procedures was approved and put into force by Legislative decree 12 January 2019, n. 14. The new law lists three indicators which should alert the company about an upcoming insolvency risk and prompt it to take action:

• lateness in paying workers' wages;
• lateness in paying suppliers;
• budget indexes not in line with the ones established by the national council of business consultants (Consiglio nazionale dei dottori commercialisti).

These alerts should prompt the company to take action and undergo negotiations with its creditors to enable the company to go back to normal. Only if these negotiations fail or if there is a clear evidence that the company is not willing to negotiate, the matter can be taken to court after 60 days. In this case the statutory auditors need to inform OCRI (Observatory for companies rescue). A second system of alerts is external:

• Taxes: the revenue Agency is obliged to report those cases in which the VAT liability is equal to at least 30% of the turnover for the period in which the last liquidation refers
• Contribution and social security: National Institute of Pensions (INPS) has to report when there is failure to pay, for over 6 months, social security contributions amounting to more than half of those due in the previous year, and above the threshold of €50,000
• Credits: when the company has overdue credits exceeding the time limit of 90 days and exceeding the amount of € 500,000 for sole traders and €1 million for companies, an agent is nominated to rescue those credits

The entrepreneur needs to present a plan containing:

• causes of the crisis;
• strategies and actions planned to achieve a good financial standing again;
• list of creditors and amount of credits being renegotiated;
• new funding streams;
• timeline for the new plan.

An auditor can be called upon to certify that company's financial information is correct and that the plan is feasible from an economic and legal point of view. An agreement must be reached with creditors representing at least 60% of the credits being renegotiated. There is a possibility to agree with creditors which represent only 30% of the credits but the plan must not envisage:

• a suspension of other creditors' payments;
• the entrepreneur must not request protection of assets.

Changes to a plan can be made, but agreement from creditors must be reached. Both the amended plan and the attestation must be published in the business register (article 58) and the debtor is charged by giving notice to creditors who, in turn, can lodge an opposition within the term of 30 days. This set of operations is excluded from penal law consequences (except in cases where there is malevolent intent) and tends to favour solutions which can ensure business continuity as well as debts repayment. The law no.75 of March 3, 2022, from the Ministry of Justice, established an electronic register for entities responsible for managing business crisis and insolvency procedures. The register, accessible online, is divided into ordinary and OCRI sections. Registrants must meet specific professionalism and integrity requirements. The registration application must be submitted to the Department for Judicial Affairs of the Ministry. The Law no. 83 of 17 June 2022 integrated EU Directive 2019/1023 into Italian law, focusing on preventive restructuring, disqualification, and insolvency procedures as part of the National Recovery and Resilience Plan. This law amended existing decrees to enhance the framework for managing business crises and insolvencies. It introduced mandates for entrepreneurs to establish structures for early crisis detection and emphasized improved consultation processes with unions. Significant changes included a shift towards negotiated compositions for business crises, streamlined access to crisis and insolvency management tools, and enhanced creditor involvement in judicial liquidation processes. The law also prioritized business continuity over liquidation in corporate group insolvencies and aligned the roles of commissioner liquidators with curators. The second part of the law revised and revoked certain provisions from previous legislative decrees, updating the Code. The law was started to take effect on July 15, 2022. The law no.103 of August 10, 2023, converted the decree-law of June 13, 2023, no. 69, which contains urgent provisions related to European Union obligations. A key provision, Art. 1-bis, introduces transitional measures on business crisis in line with the directive (EU) 2019/1023, aiming to ensure adequate protection for creditors and to ensure consistency with the objectives of the National Recovery and Resilience Plan.

The purpose of the insolvency law is to support a debtor in financial difficulties to fulfil the obligations and, where possible, to renew solvency. The law describes the insolvency process and the phases of the legal protection procedures. Three procedures are envisaged by the insolvency law if an enterprise or an individual is in financial difficulty:  1. legal protection procedures (LPP) and extrajudicial legal protection procedures - aimed at renewing the ability of a debtor to settle their debt obligations if a debtor has come into financial difficulties or expects to do so; 2. insolvency procedures of a legal person - the claims of creditors are settled from the property of a debtor in order to support the debtor to fulfil the obligations; 3. insolvency procedures of a natural person. Legal protection procedures are applicable to debtors - legal persons, partnerships, individual merchants, persons registered in a foreign country who perform permanent economic activity in Latvia, and to the producers of agricultural products. They are not applicable to insurance companies, insurance brokerage companies, investment brokerage companies, investment management companies, credit unions, credit institutions, private pension funds and other legal persons as defined by law. The law suggests several compliance methods to use during LPP; for example, postponement of payment settlement, the transfer of the ownership of property rights (alienation), increase of share capital, replacing claims with shares, and reorganisation. The methods used in the LPP can be extended to an employee's wage claims if the employee agrees. Where an employees' trade union has been formed or employees' authorised representatives have been elected, and where the LPP involves the dismissal of at least 25 per cent of the employees, it is only applicable if the employees' representatives agree.   LPP start when a debtor submits an application to a court and the court decides to initiate a case of the legal protection procedures. This decision has the following effects: * compulsory execution of other court decisions is suspended, except in cases concerning wage recovery and other employee claims arising out of or in connection with the employment relationship; * secured creditors are prohibited to claim sale of pledged property; * creditors are prohibited to submits an application to a court to initiate the debtor’s insolvency proceedings; * liquidation of the debtor is prohibited; * accumulation of contractual penalty, late payments and delayed tax claims are suspended; * accumulation of interest exceeding interest set by law is stayed. The law specifically provides that the debtor is obliged to inform the employees' representatives, if an employees' trade union has been formed or employees' authorised representatives have been elected, of the initiation of the LPP. The debtor then has to draw up the legal protection procedures plan. This plan should include: * all the payment and other obligations of the debtor; * schedule for payment settlement; * planned income and expenses; * LPP methods; * list of property needed during the LPP; * the time period for the implementation LPP; * procedures for informing and consulting employee representatives and the impact of the plan on the employment of the debtor's employees, such as information on redundancies or short-term employment; * other measures defined in section 40 of the law. A forecast of the cash flow has to be attached to the plan. Approval of the LPP plan by creditors requires at least half of the unsecured creditors (from total of claims) and two thirds of secured creditors (from total of claims). The plan has to be drawn up, coordinated with all the creditors, and submitted for approval to the court not later than two months from the day when the court has initiated the LPP.   The plan is in effect from the day when it has been approved by court. It is binding also to creditors who have not given their consent. The supervisor’s duty is to monitor the implementation of the plan. The plan may be amended if the majority of creditors agree and the court approves the amendments. The law defines that the time period for implementation of legal protection proceedings is two years, which may be extended by additional two years if the majority of the creditors agree.   The person supervising the LPP may be either an administrator with a university degree in economics, management or finance, or a certified auditor, or a natural person who has the right to reside and be employed in Latvia for the duration of the LPP. An administrator who does not have a university degree in economics, management or finance may act as the person supervising the remedy proceedings if a financial professional with a university degree in the relevant field is brought in. The law also sets limits for a natural person wishing to become the LPP supervisor (Section 12.3 of the Insolvency law). These exceptions include, but are not limited to:  * people who has been convicted of an intentional criminal offence; * people who are involved in insolvency processes; * people who are suspended on the basis of the disciplinary decision from the post of general or specialised civil servant and similar (removed from the post of administrator, excluded from attorneys at law or their assistants etc.); * people who have previously been suspended from LPP by court; * people who, in accordance with the legal system of the home country, are deprived of the right to take up a post similar to that of a person responsible for legal protection; * people who are involved in the specific LPP. The person supervising the LPP is chosen by the majority of creditors, and appointed by the court. If the candidate for the position of supervisor is indicated in the plan, the court immediately decide on his/her appointment as a supervisor. Section 166 of the insolvency law defines that the amount of the remuneration of the supervising person and the procedure for payment is determined by agreement between the person and the creditors.   Since the insolvency law was introduced (2010) the insolvency register is maintained. The purpose of the insolvency register is to ensure public access to information about LPP, and legal and natural person insolvency proceedings. The current version of the law prescribes that the insolvency register records information about the administrator, the person supervising the LPP, and the progress of LPP or insolvency proceedings. The published information contains name or title of the subject of process, registration number, type of the process, and journal of events during the process. From May 2017 the information is also available on the e-Justice portal. On 1 July 2018, the electronic insolvency registration system was introduced. The goal of the system is to facilitate the performance of the tasks of the Insolvency Control Service, the preparation and publication of information specified in the law, the circulation of information between people and institutions involved in insolvency proceedings and the fulfilment of duties and rights of administrators and LPP supervisors. The information in the system is classified as restricted access information, but part of it is published in the website of the Insolvency Control Service.   The insolvency law prescribes also an extrajudicial legal protection procedure (ELPP). ELPP is intended for the debtors with good perspective for reaching an agreement with a majority of creditors, and where there is no risk that individual creditors with individual treatment against the company could seriously jeopardise the implementation of the LPP plan. If a majority of creditors approves the LPP plan, the court decision allows it to become binding on minority creditors as well as to obtain protection under the LPP. As soon as the LPP plan is approved by the court, the general provisions of the insolvency law on LPP apply to its execution.  

New Law No XIII-2221 on insolvency of legal entities of the Republic of Lithuania entered into force in Lithuania on 1 January 2020, amending and merging the previous Law on enterprise bankruptcy of the Republic of Lithuania and the Law on restructuring of enterprises of the Republic of Lithuania. The main purpose of the Law on insolvency of legal entities is to create conditions for an effective insolvency process of legal entities, while ensuring a balance of interests of creditors and legal entities (article 1). The law defines the insolvency of a legal entity as the state of the legal entity when it is unable to discharge its property obligations in time or the obligations of the legal entity are in excess of the value of its assets (article 2). According to the law, the right to initiate insolvency proceedings (restructuring) is vested in the head of a legal entity and a creditor whose claims on the legal entity exceed 10 minimum monthly wages (MMWs) approved by the government of the Republic of Lithuania (article 4). In July 2021, the MMW was €642, in 2022 - €730, in 2023 - € 840 in Lithuania). With regard to the initiation of insolvency of a legal entity, article 10 of the law provides for the possibility for the legal entity to agree on assistance with creditors. The agreement on assistance is an agreement between a legal entity and a creditor(s) for the provision of assistance by the latter to the legal entity to overcome financial difficulties. Assistance for the legal entity in overcoming financial difficulties may take a form of postponement of the term of discharge of obligations, waiver of claim to discharge obligations or any part thereof, replacement of one obligation with another one. It is important to note that the submission of a proposal for the conclusion of the agreement is a prerequisite before bringing insolvency to court (both for initiating bankruptcy and restructuring proceedings). This creates preconditions for the legal entity and its creditors to reach an agreement that would become a kind of 'lifeline' for the insolvent legal entity. The process of restructuring of legal entities is regulated in chapter IV of the law. This process is defined as the totality of procedures which aim to overcome entity's financial difficulties, preserve its viability and avert bankruptcy by obtaining creditors' assistance to overcome financial difficulties through economic, technical, organisational and other means. A legal entity is considered to be in financial difficulties when it is insolvent or there is a substantial likelihood for it to become insolvent within the next three months (article 2). In compliance with article 31 of the law, restructuring proceedings shall be initiated if all of the conditions below are met: * a legal entity is in financial difficulties; * a legal entity is viable; * a legal entity is not under liquidation due to bankruptcy (bankruptcy proceedings are initiated if a legal entity is insolvent and not subject to restructuring proceedings). Legal concept of the probability of insolvency has been introduced together with Law No XIV-450 of June 29, 2021 (came into foce from 15 June, 2021) amending Law No XIII-2221 on insolvency of legal entities of the Republic of Lithuania. The probability of insolvency is understood as the situation of a legal entity in which there is a realistic probability that it will become insolvent in the next three months, and the law has been amended to provide for the right to initiate the insolvency proceedings in the event of the probability of the insolvency of the legal entity (Article 2(7-1)). Also rights of employee representatives are provided for, including information and consultation in the process of preparation and implementation of the restructuring plan. The restructuring plan must include, among other information (amendments to Article 104(2)): a description of the situation of the employees, the number of redundancies to be made; the general consequences of structural changes in the organisation of work, such as the application of short-time working, etc.; the procedure for providing information and consulting the employees' representatives, in accordance with the provisions of the Labour Code; and the information on the creditors affected by the restructuring plan and the creditors who are not, stating why these creditors are not affected by the restructuring plan. The entity under restructuring shall prepare a restructuring plan in accordance with the requirements set out in article 104 of the law. The duration of the implementation of the restructuring plan shall not be longer than four years from the date of approval of the restructuring plan by the court (article 105). The Law on insolvency of legal entities also provides for the possibility for legal entities to transit from bankruptcy to restructuring proceedings, and vice versa. This requires a court ruling to discontinue bankruptcy proceedings on the grounds of initiating restructuring proceedings (article 78). Government Resolution No 1125 of 14 October 2020 "On Amendments to Government Resolution No 924 of 4 September 2019 "On the Implementation of the Law on Insolvency of Legal Entities of the Republic of Lithuania" established the conditions for the operation of the early warning system in Lithuania. Such a system is designed to help businesses facing financial difficulties.

Three main options exist in Luxembourg other than bankruptcy to govern restructuring: controlled management, suspension of payments, and a 'scheme of composition' with creditors to avoid bankruptcy.

• A scheme of composition (concordat préventif de faillite) is a protective measure that enables employers or commercial companies in financial difficulty to come to an arrangement with their creditors and to avoid being declared bankrupt. The scheme of composition must be accepted by the court and the creditors. As is the case for a suspension of payments, seeking a composition is a long and complex procedure involving a large number of parties (tribunal, judge, creditors).
• By requesting to be placed under controlled management (mise sous gestion contrôlée), an employer who is temporarily in difficulty can avoid bankruptcy or an immediate cessation of business and also avoid the drawbacks of a suspension of payments or a scheme of composition with creditors. The employer places the management of the assets under the control of one or more administrators (commissaires) in order to restructure the business or sell the assets under the best possible conditions. However, this procedure is not used often in practice.
• The suspension of payments represents an alternative to bankruptcy. It enables an employer to deal with temporary financial difficulties by authorising the employer to suspend his payments to creditors for a given period of time. However, it does not rule out a declaration of bankruptcy in the event that the business meets the conditions for bankruptcy.

The new 2023 legal framework is based on a series of changes to the insolvency procedure. Among these figures for example the creation of a new "detection cell" at the level of the Ministry of the Economy whose aim it is to evaluate company risks and contact the employer to obtain information about the state of affairs of the company. The law also stipulates the creation of an inter-ministerial unit to evaluate companies in difficulties. The employee representatives must be informed if the employer intends to opt for such options, in the framework of the general obligation to information and consult the staff delegation, on the situation, structure and probable development of employment within the company as well as any anticipatory measures envisaged, in particular in the event of a threat to employment.

Maltese law allows for rescue operations under the Companies act. The company, or the board of directors, or more than half of the creditors, can file for an insolvency procedure. During the insolvency procedure the court, taking into account the specific case, may decide to appoint an administrator who looks after the business operations until the court decides to dissolve the company or to dismiss the insolvency procedure and let the company return to normal operation. The Company Recovery Procedure (CRP), detailed in regulation 329B of the Companies act, provides ailing companies with the opportunity for recovery and rescue, rather than proceeding towards liquidation. A court of justice may accept an application for CRP if it is satisfied that:

• the company is unable to pay its debts (or is likely to become so) and
• the order will favour the survival of the company (in whole or in part), or would achieve a compromise or arrangement between the company and its creditors or members.

The company recovery application may be made:

• by the company following an extraordinary resolution;
• by the directors following a decision of the board of directors whenever, following a notice to convene a general meeting in terms of article 329A, the general meeting does not convene, or a quorum is not present at the said meeting, or a resolution with regard to the filing of a recovery application is not passed due to an unresolved tie following a vote; or
• by creditors of the company representing more than half in value of the company’s creditors; or
• by creditors forming part of a class of creditors if such creditors represent more than half in value of the company’s creditors in that class.

In the hearing of an application, the court may, after examining all the circumstances and the options that are available, either dismiss the application or issue a company recovery order, placing the company under the company recovery procedure. The court shall accede to the application, and accordingly place the company under the company recovery procedure and issue an order, only if:

• it is satisfied that the company is, or is imminently likely to become, unable to pay its debts; and
• if it considers that the making of the order would be likely to achieve one of the following purposes:
  • the survival of the company as a viable going concern in part or in whole; or
  • the sanctioning under article 327 of a compromise or arrangement between the company and any of its creditors or members.

In making an order, the court shall take into account:

• the best interests of the creditors, regard being taken to the different classes of creditors, of the shareholders and of the company itself, and the possibility of safeguarding employment as appears to be reasonably and financially possible in the circumstances; and
• the cost that would have to be incurred by adopting the company recovery procedure, particularly the arising fees and charges.

Where the company is in possession of a licence or other authorisation under the laws regulating banking, insurance, investment services, financial institutions or listing of securities on a Maltese regulated market, the court shall not proceed to make an order without first having consulted with the relevant competent authority responsible for supervising that company or any of its activities. The court shall take its decision whether to dismiss the application or to make a company recovery order within not more than 40 working days from the filing of the application. Under the CRP, a special controller is appointed. Special controllers are court appointed, following a due diligence exercise which includes verifying that applicants were not involved in financial crimes and that they have relevant management experience. The list of eligible special controllers is held by an official receiver. The responsibilities of the special controller include, but are not limited to, an examination of the company's finances, the control of the property of the company and the assumption of the powers of the company's directors. The CRP leads to a number of mechanisms meant to safeguard the company until it regains financial health, such as the staying of any winding up application; any resolution for the dissolution and consequential winding up of the company; and the execution of claims of a monetary nature against the company. In addition to the functions and powers entrusted to the special controller by the court, the special controller shall have the power:

• to remove any director of the company and to appoint any individual to serve as a manager;
• to engage persons for the provision of professional or administrative services, and commit the company to the payment of their respective fees or charges; or
• to call any meeting of the members or creditors of the company.

A the end of the original period of appointment or at the end of each extension, the special controller shall submit to the court a comprehensive report in writing on the proceedings of his administration and of his proposals regarding the prospects for the recovery of the company as a viable going concern in whole or in part. The special controller may, if deemed reasonably necessary, together with the said report, present an application to the court for a one-time extension of his appointment for a further period of four months up to a maximum period of appointment not exceeding 12 months. Any creditor or member or the registrar or the official receiver may at any time apply to the court for a declaration of the termination of the recovery procedure.  Legal notice 192 of 2020 entitled 'Companies act company reconstructions fund regulations', 2020, was published to create and regulate the administration of a fund known as the company recovery fund (CRF). This fund totalling €500,000 annually is financed by the Malta Business Registry and is intended to facilitate and compliment the aforementioned company recovery procedures. The CRF shall cover the remuneration and expenses of the special controller for the period of their appointments as stipulated in article 329B. The CRF will also cover other expenses which are deemed necessary for the continuation of the company recovery procedure up to a maximum of €5,000. The maximum cumulative amount claimed from the CRF for each recovery procedure should not exceed ten thousand euro. However, the limits mentioned in this paragraph may be increased by the official receiver acting upon a recommendation of the court, in complex cases, or cases involving cross-border elements. Where the court issues an order for the termination of the company recovery procedure on the grounds that the company has no reasonable prospect of continuing as a viable going concern and will not be in a position to pay its debts regularly in the future, it shall order that the company be wound up by the court.

Three different types of insolvency proceedings are defined in the Dutch Bankruptcy act (Faillissementswet). These are bankruptcy (faillissement), moratorium (surseance van betaling), and debt restructuring (schuldsanering). 

• Bankruptcy proceedings require that the debtor is in a situation where he/she is no longer making payments to creditors because he/she is unable to do so. In this case, the debtor's assets are liquidated and used to pay off the creditors. Bankruptcy is applicable both to legal and natural persons.
• Debt restructuring requires that the debtor is in a situation where he/she can either anticipate not being able to make sufficient payments to creditors in the future, or he/she is no longer making payments to creditors. The debtor's assets are liquidated while at the same time the debtor is required to do his/her utmost in order to generate funds to repay the creditors. Debt restructuring, which is only applicable to natural persons, is seen as a way of giving the debtor an opportunity to start over.
• For moratorium, the aim of the measure is to help an enterprise to survive by weathering current but temporary financial difficulties. In essence, the measure entails a delay in payment by the enterprise to their creditors. A criteria for this type of procedure is that the financial difficulties are short term, and that the enterprise will be able to address these difficulties in the short term. A debtor must make the request to court to enter the moratorium procedure, while a creditor cannot do so. While an enterprise is within the moratorium procedure, they are also assigned a receiver (bewindsvoerder) who governs the finances of the enterprise and has a mandate to negotiate with creditors regarding payments on behalf of the enterprise. Moratorium is not applicable to natural persons, unless they are acting as entrepreneurs. As debt restructuring is not an option for legal persons, moratorium is the only rescue procedure defined in the Bankruptcy act that is available to corporations. The aim of moratorium is to restructure the business and temporarily ease the pressure of outstanding payments so that the company can continue operating. The debtor, in this case the company, applies for moratorium proceedings to be initiated. Creditors do not have the authority to initiate moratorium. A judge and a receiver are then appointed by the court. The judge oversees the case, while the receiver is tasked with supervising the debtor, ensuring his/her compliance, and managing the estate together with the debtor. Moratorium is limited to a maximum period of 18 months, though an extension can be granted under certain situations. Moratorium proceedings can be terminated either at the request of the debtor or through an agreement approved by the court.

Dutch companies and policy makers expected another option to become available to businesses when facing insolvency, as the Netherlands' House of Representatives adopted the Continuity of enterprises act I (Wet Continuiteit Ondernemingen I, WCO I) in June 2016. Initially, the expectation was that this law would enter into force in 2017. However, formal parliamentary questions and responses from social partners delayed the acceptance of this law. The senate intends to examine and consult further on this proposed law after a pending ECJ ruling (see more information below), together with the proposal for the law on transferring an enterprise during bankruptcy (Wet overgang van onderneming in faillissement). The act outlines an insolvency rescue procedure known as pre-pack, or 'silent administration', which has already been utilised to varying degrees in the Netherlands. The act would give the practice a statutory basis and ensure uniform implementation across the country. Pre-pack and Continuity of enterprises act I (Wet Continuiteit Ondernemingen I, WCO I) Pre-pack, short for pre-packaged insolvency, is an insolvency proceeding where a restructuring plan is set prior to a company declaring itself bankrupt. A trustee, the silent administrator, is appointed to ensure the creditors are repaid as much as possible of the funds they are owed through, for example, the sale of assets or parts of the company considered viable, before the formal insolvency proceedings are initiated. The act includes stipulations for employee safeguarding, as it requires the works council or staff representation to be involved in the pre-pack proceedings. However, the creditors' interests always take precedence, as the works council or staff representation can be excluded from the proceedings on the basis of this being contrary to the interests of the company and, thereby, the creditors. The act also outlines the inclusion of the employees' voices in the formal bankruptcy proceedings, as it states that a representative from the works council or staff representation is to be included in the creditors' committee, should the court decide to form such a committee. The discussion of WCO I has been postponed by the senate because another bill, the 'Law on transfer of undertaking in bankruptcy' (WOVOF), is in preparation. The bill regulates the position of employees in the event of such a restart. The senators have pointed out that the bills are interrelated and therefore want to discuss them jointly. At the moment, there is only a preliminary ruling procedure pending before the Court of Justice of the European Union. The outcome of that procedure may influence how the WOVOF should ultimately look like. Employer organisations are generally in favour of the WCO I, with the following caveats

• The court should shortly but thoroughly examine whether a pre-pack would be beneficial to creditors, the company and its employees;
• The pre-pack should only be applicable if this is the case;
• It should not be an exclusionary condition if the company filing for a pre-pack is not able to pay current creditors, as this would render the pre-pack obsolete.

Ruling of the European Court of Justice (ECJ) On 22 June 2017, the European Court of Justice (ECJ) made the long-awaited verdict in the Estro case. Questions were raised to the ECJ for a preliminary ruling on the applicability of the labour law rules of transition of company to the pre-pack that has been applied by most Dutch courts since 2011. The Estro case is a well-known example, in which a former childcare company (Estro) with approximately 3,600 employees whose activities were taken over by Smallsteps in 2014 through a pre-pack sales transaction. Smallsteps offered 2,600 employees a contract of employment. Four workers who did not receive a contract of employment, as well as the Federation of Dutch Trade Unions (FNV), have subsequently appealed against Smallsteps, invoking the protection provisions of Directive 2001/23/EC (hereinafter 'Directive'). In summary, the ECJ held that the labour rules of transfer of company apply to pre-pack prepared prior to bankruptcy that is a pre-pack arrangement made prior to bankruptcy with the 'aim' to be declared bankrupt and ensure a restart (including conditions). The ECJ hereby explains article 5 (1) of the directive in such a way that both the 'bankruptcy procedure' and the 'similar procedure' must comply with the conditions of

• the liquidation of assets and
• authorised supervision.

The ECJ then finds that the transaction prepared prior to the bankruptcy implies in fact bankruptcy so that the transaction may fall under the term 'bankruptcy proceedings' within the meaning of the directive. However, according to the ECJ, the other two conditions for applicability of article 5 (1) are not met. The ECJ does not rule out the existence of a certain overlap between the liquidation and continuity objective, but considers that if the main purpose of a proceeding is the maintenance of the undertaking concerned, that proceeding seeks to pursue the activity of the company. Businesses entering pre-pack deals must keep in mind that they will not be able to choose which employees they would like to take, but that all the employees involved in the company are to be included in the transfer. This could make a restart less attractive to a new buyer. After the judgement in the Estro case, the use of pre-packs became very limited, however it is expected to change after the new ECJ-ruling on preliminary questions in that matter, that was given on 28 April 2022. Contrary to Estro case, in the Heiploeg case the pre-pack was instituted for the purpose of liquidating of the assets of the company and was conducted under the supervision of competent authorities. According to the ECJ's judgement, pre-packs should be allowed if they meet the above-mentioned criteria. The ECJ held that national courts need to adopt a case by case analysis while deciding whether the use of pre-packs is carried out with a view of insolvency proceedings. Based on that, the ECJ judgement clarified that it is possible to apply insolvency exceptions to pre-packs, but it also emphasised that pre-pack procedures needs to be regulated in statutory law. This supports the initiative of adopting WCO and WOVOF which will facilitate inscribing pre-packs into Dutch insolvency law, however the amendment procedure was even further delayed by this case. Consequences Currently in 2021, a draft law is being developed and consulted upon, regarding the transition of an enterprise into bankruptcy (Wet overgang van onderneming in faillissement). This would be an adjustment to Continuity of enterprises act I (Wet Continuiteit Ondernemingen I). Some more general changes include the establishment of a central, national insolvency register for enterprises. This central register replaces locally held registers in an effort to make the information collection by courts across the country more efficient. In April 2022 the Insolvency Law Committee gave advise on the preliminary draft of the amendment of Continuity of Enterprises Act I. The Committee suggested limiting the scope of the amendment to promote controlled resolution of bankruptcies of companies with activities of social importance.

The Norwegian regulatory system distinguishes between voluntary debt settlement proceedings ('frivillig gjeldsordning') and compulsory debt settlement proceedings ('tvangsakkord'). These are governed by the bankruptcy act ('konkursloven') and the debt recovery act ('dekningsloven'), both enacted in 1984. The aim of these statutes is to make sure that a company that is (or might become) insolvent reaches a debt settlement scheme with the creditors. The debtor presents a petition to the court to initiate debt settlement proceedings. The petition is to include the following:

• a statement regarding the reasons behind the financial difficulties, and how the debt is to be settled;
• an inventory of the debtor's assets, debts, creditors and security as well as the name and address of the creditor;
• a statement regarding the registration and documentation of the debtor's accounts.

In addition, the debtor has to supply the court with any supplementary documentation the court asks for. Once the court approves the petition, a public announcement of this will be made. In order for the permission to be granted, the debtor must be unable to pay its obligations as they fall due, and the court must judge it likely that either voluntary or compulsory debt settlement will prove to be successful in the debtor's case. In the event of a voluntary debt settlement, all unsecured creditors must consent to the debt settlement proposal being put forward. The proposal is only binding for those creditors who have voted for it or are not affected by it. In the event of a compulsory debt settlement, at least 75% of the creditors who are holding at least 75% of the outstanding debt must approve the proposal if the proposal consists of paying less than 50% of the debt. If at least 50% is being paid, a 3/5 majority is sufficient. Compulsory debt settlement proceedings are binding for all creditors except for creditors with priority claims, secured claims (as long as the claims do not surpass the secured asset's expected value), and claims that can be used as a set-off against the company's counterclaim (as long as the claims do not surpass the counterclaim). During debt settlement proceedings, the court supervises the company through a creditor committee, which is elected by the court. The creditor committee consists of a lawyer (who acts as head of the committee), one to three creditors, and an employee representative (if a request for this is made by a majority of the employees). The creditor committee aides the debtor in coming up with the debt settlement proposal. The aim of debt settlement proceedings is to reach an agreement between the debtor and the creditors regarding the reduction of debts so that the debt can be paid without the company defaulting. If no agreement is reached within six months, or if the court decides not to implement the proposal, the court will initiate insolvency proceedings.

Since the beginning of 2016, the government has been implementing the New Opportunity (Nowa Szansa) policy. The legal framework is set out in the new Restructuring Act and the substantially amended Bankruptcy Act. Both laws entered into force on 1 January 2016 and regulate the situation of insolvent entrepreneurs - both at an early stage of insolvency (the threat of liquidity loss) and at an advanced stage (so-called bankruptcy). This has brought about a significant change in the way companies in financial difficulties are dealt with. The legislator considered that the preferred form of solving insolvency problems is restructuring, the purpose of which is to reach an agreement with creditors and, consequently, the survival of the entrepreneur on the market. Four restructuring procedures have been introduced:

• arrangement procedure * (postępowanie o zatwierdzenie układu)*; accelerated procedure (fast track)
• accelerated (fast-track) arrangement procedures (przyspieszone postępowanie układowe);.
• (ordinary) arrangement procedures (postępowanie układowe); (postępowanie układowe)
• sanation procedure (postępowanie sanacyjne).

An employer may choose the most appropriate procedure for its situation. The Restructuring Act establishes the priority of restructuring over bankruptcy. If a restructuring petition and a bankruptcy petition are filed at the same time, the court will grant the restructuring petition first. The Restructuring Law also contains provisions allowing the employer to obtain public aid. Public aid may be granted for the purposes of the restructuring plan. According to the Restructuring Act, public aid cannot be the sole instrument enabling the debtor to restore its long-term competitiveness on the market. Public aid may be used for the repayment of public debts (social security contributions, taxes) and for the purchase of necessary fixed assets. Arrangement approval procedure (postępowanie o zatwierdzenie układu) This procedure is available to debtors who are able to reach an out-of-court agreement with the majority of their creditors. Under this procedure, the debtor continues to manage its business, but with the involvement of a licensed supervisor (administrator or nadzorca układu), whose role is limited to certain activities related to the procedure, including

• preparing a restructuring plan;
• working with the debtor to prepare composition proposals;
• preparing a list of claims;
• assisting in the voting of the plan;
• Preparing a report on the feasibility of the proposed arrangement.

Accelerated arrangement procedure (przyspieszone postępowanie układowe) This procedure is available to debtors whose disputed claims do not exceed 15% of the total claims. Enforcement proceedings relating to the claims to be covered by the arrangement are suspended by operation of law. The court is more involved in this procedure than in the previous procedure and is obliged to organise a meeting with the creditors. The creditors cast their votes at the meeting (rather than in writing as in the arrangement approval procedure). In general, the debtor continues to manage its affairs throughout the procedure. However, the procedure involves the appointment of a court supervisor (nadzorca sądowy), who is given supervision over the management of the debtor's affairs. In exceptional cases, an external manager (zarządca) may be appointed to take over the entire administration of the debtor's estate. Settlement procedure (postępowanie układowe) This option applies in cases where the disputed claims exceed 15% of the total claims. Although more formal, this procedure is similar to the accelerated arrangement procedure in terms of its impact on the debtor's management rights and protection from creditors. Sanation procedure (postępowanie sanacyjne) This is the most advanced restructuring procedure. It provides the debtor with a relatively high level of protection from creditors and includes more tools for restoring the company's stability. Typically, in such procedures, the debtor's business is managed by an administrator (zarządca), although in exceptional cases where the debtor's involvement is necessary and only if the debtor guarantees proper management, the court may leave the management to the debtor-in-possession. This procedure corresponds to the former bankruptcy with the possibility of a composition. The Law on Restructuring provides for the establishment of a central register for restructuring and bankruptcy. It will contain a search engine for restructuring and bankruptcy cases, a list of syndicates, restructuring advisors, experts and model forms required for the procedures. The main purpose of the register is to centralise information on all insolvency and restructuring cases. The registry will be operational from February 2018.

The special process of revitalisation (PER) can be started by a company in financial difficulties or facing imminent insolvency. The special revitalisation process is intended to allow the debtor to prove that, even if in a difficult economic situation or imminent insolvency, there are ways in which the business could be recovered. If permission is given, the company can establish negotiations with its creditors in order to plan a restructuring process. The special process of revitalisation begins with a written declaration to enter into negotiations with at least one creditor, leading to the adoption of a recovery plan.  The debtor must immediately report to the court that the company wants to start restructuring negotiations. The debtor must make available a list of its creditors, its accounts’ documents and remaining information and documentation as required under the relevant provisions of the insolvency and business recovery code (CIRE). Once the rescue procedure starts, the enforcement and insolvency proceedings that may have been brought against the debtor are suspended (insofar as no decision of insolvency has been declared by the court). In addition, it is not possible to bring enforcement and insolvency proceedings against the debtor for as long as the rescue procedure is running. Once the application is received, the court immediately appoints a provisional judicial administrator and issues a judicial order which is published in the litigation portal run by the government which is known as 'Citius', and, by registered letter, notified to the debtor and to the creditors. The creditors who did not sign the negotiation agreement initially submitted to the court are granted 20 days as of the publication of the said judicial order to claim their credits and the provisional judicial administrator must prepare a provisory list of credits within 5 days. This list is published in Citius and may be challenged within 5 business days, after which the judge has another 5 business days to decide on the challenges submitted. Once the term for challenging the credits elapses, the debtor and the creditors have two months to conclude the negotiations. This deadline may be extended for an additional one month by prior written agreement between the appointed provisional judicial administrator and the debtor. The provisional judicial administrator participates in the negotiations, guiding and supervising the works and their adequacy, and must ensure that the parties do not adopt any actions that delay the negotiation process or that are useless or prejudicial for its progression. The recovery plan must be approved by the same majority required for the approval of the insolvency plan: the creditors who represent at least 1/3 of the total receivables with voting rights must participate in the approval and the approval votes must represent more than 2/3 of the total of the votes cast and more than 1/2 of the votes cast corresponding to non subordinated credits, abstentions not being considered. The judge must validate the approval of the plan within 10 days as of receiving the documentation evidencing the respective approval. The validation of the approval may be refused in accordance to the same rules applicable to the insolvency procedure. Extrajudicial Recovery Procedure (Law 8/2018 of 2 March) If creditors represent at least 15% of the debtor non-subordinated debt, they may, together with the debtor, subject negotiations to a extrajudicial recovery procedure (Regime Extrajudicial de Recuperação de Empresas - RERE), signing for this purpose a memorandum of negotiation. With RERE, the intervention of IAPMEI in the negotiation process is no longer required. The negotiations may now take place between the debtor and the creditors. However, a business recovery mediator (Law 6/2018 of 22 February) can be appointed to provide assistance to the debtor, particularly in the negotiations with the creditor. A declaration from a statutory auditor certifying that the debtor is not the subject of insolvency proceedings, on the date the agreement is executed, and confirming the total liabilities of the debtor, has to be attached to the restructuring agreement. If the restructuring agreement is currently or eventually subscribed by creditors that represent the majorities required by the special revitalisation procedure, the debtor has the possibility of initiating this proceedings in order to obtain the restructuring agreement’s approval by the court. The extrajudicial recovery procedure (Regime Extrajudicial de Recuperação de Empresas, RERE) is a mechanism that replaces the out-of-court business recovery system (Sistema de Recuperação de Empresas por Via Extrajudicial, SIREVE) and seeks to enable entities in a difficult financial situation or that are in a situation of imminent insolvency to negotiate a restructuring agreement with their creditors, in order to guarantee their economic recovery. This procedure is part of the 'Capitalizar Programme'. RERE applies to all entities that may be subject to insolvency procedures (with the exception of natural persons who are not holders of companies), thus having a wider scope of application than SIREVE, which only applied to companies and to sole traders with organised accounts. Exceptionally, and only during the first 18 months of RERE implementation, entities that are already in a situation of insolvency may also make use of these legal regime.

Companies in financial difficulty may be subject to a process of economic recovery and insolvency prevention. Thus, the debtor in difficulty may request the court to designate them an ad hoc administrator, the purpose of which is to achieve, within 90 days of designation, an agreement between the debtor and one or more of the creditors, in order to overcome the state of financial difficulty the debtor is in, to safeguard him/her, to keep jobs and to cover debts against the debtor. Another possible recovery attempt is the use of a scheme of arrangement, which is a court-approved agreement between the company in financial difficulty and creditors holding at least 75% of the claims in terms of value. The scheme of arrangement offer made by the company in difficulty to its creditors (who can either accept or reject the offer) includes: 1. a list of the company's assets and liabilities, certified by an accounting expert or, as the case may be, audited by an auditor authorised by law; 2. the causes of the financial difficulty and, if necessary, the measures taken by the debtor to overcome it until now; 3. projection of the financial and accounting evolution over the next 24 months. Based on this information, the company will follow a recovery plan, which shall include at least the following measures:

• the reorganisation of the debtor's activity through measures such as restructuring of the debtor's management, modification of the organisational structure (organisation chart of staff), staff reduction or any other measures deemed necessary;
• the ways in which the debtor tries to overcome the financial difficulty, such as increase of the share capital, conversion of some claims into shares, bank loans, loans of the shareholders, establishment or dissolution of some branches or work places, sale of assets, etc.

If the recovery fails, insolvency proceeding will take place. According to article 5 (29) of Law no. 85/2014, insolvency is characterised by insufficient funds available for the payment of certain debts. The debtor is presumed insolvent if, after 60 days from date of payment, the debtor has not paid their debt to the creditor (this presumption is relative, i.e. it is a rebuttable presumption). Insolvency is considered imminent if it is proved that the debtor will not be able to pay the due debts with the available funds. In case of an employer's insolvency, salary claims are privileged in comparison to other claims, being covered with priority. In addition, as any creditors, employees whose salary was not paid may trigger insolvency procedures. Employees can apply for the opening of insolvency procedures of the employing company if each individual's claim is higher than six gross average monthly salaries in the economy. At the creditors' meeting, the employees of the debtor company may delegate a representative who will vote for the full value of the claims representing the salaries and other monetary rights to which they are entitled. After the opening of the insolvency procedures, dismissal of the debtor's staff will be done in a speedy manner by the judicial administrator/liquidator. The judicial administrator/liquidator will only give dismissed personnel the legal notice (and no other entitlements, such as compensatory payments). In collective redundancies (at least 10 employees, if the employer has more than 20 employees and fewer than 100 employees; at least 10% of the employees, if the employer has at least 100 employees and fewer than 300 employees; and at least 30 employees, if the employer has at least 300 employees), the length of the information and consultation procedure provided by the Labour Code is cut down by half. Law no 216 /14 July 2022 amends and supplements Law no. 85/2014 on insolvency prevention and insolvency proceedings. The new amendments are a restructuring of Law 85/2014 and a long-awaited regulation of insolvency proceedings in view of EU Directive 2019/1023.One of the important changes is the abolition of the ad hoc mandate and its replacement by the restructuring agreement procedure. Other amendments regards the redefinition of the scope of the law, the main beneficiaries of the previsions of the law (in the case of the liberal professions, the procedures laid down in the law concern their undertaking and not their professional status) and new concepts are introduced. In addition, certain terms specific to insolvency proceedings are redefined, early warning procedure is introduced. The procedure specified that certain professionals are alerted by the tax authority to non-fulfilment of obligations and are provided with information on the remedies free of charge via a website. The aim is to give companies an early warning of a situation which, perpetuated in the absence of remedial measures, would have the potential to lead to default. The previsions from the law concerning the insolvency prevention procedure are modified.

According to the Act, a company at risk of insolvency,  or a creditor of a company at risk of insolvency, may decide to file for reorganisation or for bankruptcy if the insolvency is considered imminent. If there is a filing for reorganisation, the company has to submit a reorganisation plan to the court and the court will appoint a trustee who is in charge of inspecting the plan and giving an opinion to the court. If the opinion is positive, i.e. the company has reasonable probabilities of getting out of insolvency, the court authorises the start of restructuring no later than 15 days after the presentation of the plan. The company's assets are then protected from individual claims to allow for normal continuation of operations. During the restructuring, it is not allowed to carry out organisational changes at the debtor such as a merger, fusion or split off. If the opinion is negative, the court orders the termination of the reorganisation proceedings. Creditors have a role too, as the reorganisation plan must be approved by the majority of each group of secured and unsecured creditors within 90 days of the start of the proceedings. If the creditors' committee rejects the plan, the reorganisation is converted into a bankruptcy procedure. The reorganisation proceedings are terminated by order of the court on indication of the trustee. The reorganisation might have a positive outcome, i.e. the company is able to return to normal business operations, or a negative one where further bankruptcy procedures will follow. Once the reorganisation plan is completed a notice is published in the Official Business Journal. On 1 January 2016, amendments to the Act No. 7/2005 (Article 10a) introduced a new tool that may mitigate the work of bankruptcy trustees. This is the public Insolvency Register (Register úpadcov) - an information system providing comprehensive information on all ongoing bankruptcies in the country.

The process of preventive restructuring can be applied to debtors – small, medium and large companies (i.e. to companies with more than 10 employees) which are deemed at risk of becoming insolvent within a one year timeframe. The intention of the preventive restructuring procedure is to enable the debtor who may become insolvent within a period of one year to carry out appropriate measures aimed at restructuring its financial liabilities and other part of its business necessary to eliminate the causes of eventual future insolvency. The procedure can only be started by the company on the basis of a restructuring plan, agreed on by at least 30% of the creditors (holding at least 30% aggregate value of financial claims listed in the debtor’s list of financial claims and certified by an auditor). The restructuring plan has to include:

• restructuring measures, timetable and other conditions for restructuring the company’s financial liabilities and other parts of the business to avert insolvency,
• other mutual rights and obligations regarding the financial restructuring,
• debtor’s list of financial claims, certified by an auditor.

At least 30% of the creditors can demand the refusal of a restructuring plan. The court decides upon the commencement of a preventive restructuring proceeding within eight days. There is no appointed administrator in this process. During the preventive restructuring proceeding a standstill applies for the claims of creditors. The procedure of preventive restructuring is not allowed:

1. if it is filed before the expiration of two years from the date when the earlier preventive restructuring was concluded,
2. if the debtor is a subject of a compulsory settlement proceeding,
3. if it is filed before the expiration of two years from the date when the debtor fulfilled all obligations from the previous compulsory settlement, or
4. if the debtor is a subject of a bankruptcy proceeding.

However, exceptions apply to cases 1 and 3 if 75% of creditors agree to join the preventive restructuring procedure. The company has to present an 'master restructuring agreement' within three months (for small and medium-sized companies) or five months (for large companies) agreed on by at least 75% of all creditors unless the restructuring plan stipulates a higher quota. This period can be extended for two or three months respectively. Debtor and creditors may freely agree on whatever measures enacted in the agreement, but finally the agreement must be approved by a certified auditor. The court’s confirmation of the 'master restructuring agreement' simultaneously extends the validity of the agreement to the financial claims of those creditors who have not given their consent to the agreement. However, the mandatory effects of the court-confirmed agreement only extend to the restructuring measures.

A company or an individual person may apply for insolvency procedures before reaching the stage of insolvency ('concurso voluntario'). If the company is already insolvent, the procedure before the court can be started by the company, a creditor or a shareholder ('concurso necesario'). The court responsible for the judgement is the court of the district ('juzgado mercantil') where the debtor is registered (not applicable if the debtor has moved its residency/registration in the previous six months). A company must file for insolvency within two months from reaching insolvency, that is, the condition of being not able to pay creditors. The company must present a set of documents to the court:

• declaration stating that the claimant has the right to appeal to the court;
• balance sheets and financial report;
• inventory of the debtor’s assets;
• a list of the creditors.

Once the procedure is open, the judge appoints an administrator who must ensure collaboration with the judge, protection of the creditors' interests and, where possible, the return of the company to a normal activity regime. There are two possible solutions to an insolvency procedure: agreement or liquidation. If the company reaches an agreement with the creditors, the debt reduction must be no more than 50% and the timeline no longer than five years. If the agreement is not fulfilled, the company can be wound up. The second solution is liquidation which may imply sale of assets, winding up, or acquisition by third parties. The insolvency declaration must be published in the Official state journal ('Boletín Oficial del Estado') and registered with the Registry for insolvency procedures ('Registro de Procedimientos de Insolvencia'). The Insolvency Law (Law 22/2003 of 9 July 2003) was reformed in 2015 (Law 9/2015), introducing clauses aiming to make the transmission of the business activity, or part of it, of the company that is under insolvency procedure more flexible. The goal of these clauses is to facilitate viable companies to maintain their activity or at least some sections, after the insolvency agreement.  In May 2020, the Royal Decree 1/2020 repealed chapters 1 and 2 of Insolvency Law (Law 22/2003 of 9 July 2003) and the Law on urgent measures on insolvency proceeding (Law 9/2015 of 25 May 2015) in order to establish the new insolvency law. This new regulation introduces modifications on appeals against the rejection of the insolvency application, extension of the judge's powers and the possibility of modifying the judicially approved liquidation plan (as well as a description of the necessary formalities). In 2022, Law 16/2022, of 5 September, on the reform of the consolidated text of the Insolvency Act, transposed Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 into Spanish law, on preventive restructuring frameworks, debt waivers and disqualifications, and on measures to increase the efficiency of restructuring, insolvency and debt waiver proceedings. Among the most noteworthy innovations are: the introduction of restructuring plans and the abolition of refinancing agreements and out-of-court settlements; the reform of insolvency proceedings through a single insolvency procedure (to increase efficiency and facilitate the approval of an agreement); and the reform of the second chance procedure.

The Bankruptcy act (1987:672) defines insolvency as a situation where the debtor is not able to duly pay his or her debts, and this inability is not of a temporary nature. Both natural and legal persons who are insolvent can be declared bankrupt. Both natural and legal persons are also able to enter into voluntary arrangements with creditors with the intention of reducing their debts and in this way avoiding bankruptcy.  In addition to bankruptcy, legal persons can apply for reorganisation, which is regulated in the Company reorganisation act (2022:964), while natural persons can only apply for debt restructuring. Reorganisation is an option for companies which are under a severe financial strain, but for which continuing operations is still considered a feasible option. Either the debtor, that is the company, or a creditor can apply for reorganisation proceedings. An administrator is appointed by the court to review the company's situation, to determine whether continuing operations is a viable option, and to determine whether an agreement could be reached between the debtor and the creditors. The administrator supervises the company during the reorganisation period and must give the debtor permission for certain activities, such as payment of debts or transfer of any substantial assets. The debtor retains the rights of disposition of his/her assets under the reorganisation procedure. However, the disposition of assets cannot be used to pay debts, to make new commitments or to transfer ownership of assets of substantial importance without the administrator's consent. No distribution to creditors may take place while the procedure is ongoing. The goal of the reorganisation proceedings is to come to an agreement with the creditors on how much of the outstanding debts it would be feasible for the debtor to pay while avoiding bankruptcy. An agreement can be reached both through voluntary and compulsory means. If a voluntary settlement is not achieved, the court can enforce a public settlement. Reorganisation proceedings take place over a three-month period, after which the proceedings can be extended for another three months at a time. However, reorganisation proceedings are limited to a maximum period of one year. As long as proceedings are ongoing, the debtor cannot be declared bankrupt. However, if there is a reason to believe that the creditors' rights are being threatened to a substantial degree, this may warrant declaring the debtor bankrupt in the midst of reorganisation proceedings. Workers employed by an employer undergoing business restructuring are sometimes eligible for wage guarantee. The maximum amount per employee for 2021 amounts to around €18,600 (SEK 190,400). The administrator determines if the company is able to pay wages. If it is, employees are not entitled to wage guarantee. The new Company reorganisation act (2022:964) was instituted in order to comply with the EU Directive on restructuring and insolvency. In order to avoid, among other things, that company reorganisation is decided without justification, the new law contains a stricter requirement that the company must have viability. The court is to examine the application for company reorganisation on the basis of a viability test, which focuses partly on the prospects of achieving a successful company reorganisation and partly on the possibility for the company to survive even after the reorganisation has been carried out. In practical terms, this means that greater demands are placed on the content of the application for company reorganisation, which, in order to be granted, should contain, among other things, circumstances that mean that the viability of the business can be secured, a description of how the reorganisation will succeed and concrete proposals on how the company will overcome its financial problems. The application should also show that the company applying for reorganisation can pay at least 25% of the total amount of its debts (if the reorganisation requires a debt settlement with the creditors to be successful). The company must also be able to prove that its accounts are in order. Another new feature is that the reorganisation company can terminate certain contracts (but not employment contracts) with three months' notice. In this way, the reorganisation company can "get out" of unprofitable contracts with long contractual periods, e.g., in cases where there is a need to close parts of the business, which may mean that some existing contracts become redundant. Additionally, the new law also means that not only a financial settlement, but also the other measures needed to address a company's financial problems can be set out in a reorganisation plan with binding effect. Examples of reorganisation measures that can be included in a reorganisation plan are debt settlement, which can also include non-priority creditors (as opposed to composition under the previous law, which only included non-priority creditors), conversion of a creditor's debt into shares and increase or decrease of the share capital. The plan may also propose measures to change the board of directors or the managing director.