European Perspective In Brief

Europe has struggled mightily during the last several years to triage a long series of critical blows to the economies of the 28 countries that comprise the European Union, as well as the collective viability of eurozone economies. Here we provide a snapshot of some recent developments regarding insolvency, restructuring, and related issues in the EU.

France—French insolvency proceedings will be significantly overhauled in the near term, as reforms are currently being implemented under the Enabling Law of January 2, 2014. The reforms are designed to strengthen the efficacy of preventive measures and procedures in order to avoid the need for formal public insolvency proceedings. Various new provisions are being contemplated, including the nonenforceability of contractual clauses providing for acceleration of an obligation in the event that mandat ad hoc or conciliation proceedings are commenced with respect to a debtor. It is also anticipated that it will now be possible to implement, in a conciliation agreement, a business plan providing for the sale of a company.

Furthermore, it is anticipated that the rules governing an accelerated financial safeguard procedure (procédure de sauvegarde financière accélérée) will be amended to make the procedure more accessible. Fast-track safeguard procedures would be segmented into two different procedures: one limited to financial creditors, and a second, separate procedure for financial creditors and trade suppliers.

Finally, the reforms are intended to balance the interests of different stakeholders involved in insolvency procedures. The reforms would be less "debtor-friendly" and would introduce a mechanism enabling creditors to be more involved in the process. For example, creditors would have the ability to propose their own restructuring plans. A presiding court would also have the power to order a sale of the controlling shareholders' shares or to appoint a legal representative to vote on a debt-for-equity swap, instead of the shareholders. The possibility of a "cram-down" of equity interests in French reorganization proceedings akin to procedures governing the confirmation of nonconsensual chapter 11 plans in the U.S. will have serious ramifications for the way future out-of-court restructurings are conducted.

The U.K.-On February 24, 2014, the English Court of Appeal ruled in Pillar Denton Limited and Ors v Jervis & Ors [2014] EWCA Civ 180 that an administrator or liquidator must pay the rent...