A stay of individual enforcement actions under directive 2019/1023 : is a viability test essential?

Abstract

The provisions of the restructuring Directive 2019/1023 were drafted after the EU Commission presented a recommendation back in 2014 of a “new approach to business failure and insolvency”. Since then, a new path has been laid across Europe, encouraging MS to introduce suitable preventive measures for a business to survive with substantial room of flexibility, which are analogous or identical to the Directive. In the first part of this dissertation, the author will focus on Article 6 and 7 within the EU Directive 2019/1023 which relate to the concept of a stay of individual enforcement actions. The Directive provides the minimum requirements which Member States are obliged to implement within their restructuring regimes. This will include a discussion of the effects that such application of a stay will have particularly in terms of executory contracts, ipso facto clauses and creditor protection. The second part of the dissertation will involve an analysis on how the provisions of the Directive have been implemented in the UK’s Corporate Insolvency and Governance Act and how this is an improvement from the moratorium under previous restructuring mechanisms. Reference will be made to the Maltese Companies Act and its specific provisions on the restructuring of companies through the application of the Company Recovery Procedure and its imposed moratorium. The author will then move on to discuss who is to benefit from the application of a stay through the potential inclusion of a viability test. The author will analyse those countries that employ some form of eligibility criterion to decide whether a company should be granted access to its restructuring procedure. This must be seen in light of the fact that currently, Malta ranks last in Europe company rescue procedure and therefore, it can possible benefit from an eligibility criterion that would enable companies to apply a moratorium.. The Author will conclude the dissolution by proposing recommendations on the way forward which can be implemented when Malta implements the Directive.