On 20 March 2020, the Executive of CERIL (Conference of European Restructuring and Insolvency Law) expressed its deep concern with the ability of existing (European) insolvency legislation to provide adequate responses to the extremely difficult situation in which many companies find themselves as a result of the spread of the COVID-19 (corona) virus. It therefore calls upon EU and European national legislators to take immediate action and adapt insolvency legislations, in order to prevent unnecessary bankruptcies of entrepreneurs.
The Executive of CERIL recommends the following two steps to be taken immediately by European and national legislators:
- STEP 1: Suspend the duty to file for insolvency proceedings based on over-indebtedness (see e.g. Germany)
- STEP 2: Respond to the illiquidity of businesses (see the Temporary Framework)
In addition, the EU and national legislators are urged to consider measures regarding:
- Interim financing;
- Suspending the duty to file based on the inability to pay;
- ‘Hibernation’ for (small) businesses, and
- Supporting the livelihood of entrepreneurs and their employees.
The entire statement can be downloaded here. Recommended reading.
Insolvency law used to be the enemy of businesses. Let’s make it an ally.