Discharge and entrepreneurship in the preventive restructuring directive

Varona, F. Javier Arias; Niemi, Johanna; Hupli, Tuomas

doi:10.1002/iir.1369

Cited by 5 publications

(4 citation statements)

References 6 publications

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“…142 As a result, the line between entrepreneurship and salaried work is weakening when self-employed professionals work by themselves for a few clients and each contractual relationship resembles an employment relationship without the benefits of salaried work. 143 In such cases it is therefore difficult to justify that qualifying as an entrepreneur, or as a non-entrepreneur would have far-reaching consequences in the event of insolvency.…”

Section: Entrepreneurs Versus Non-entrepreneurs? Quid Directors and P...mentioning

confidence: 99%

“…190 The Directive recognises that facilitating a discharge of debt for entrepreneurs would help to avoid their exclusion from the labour market and enable them to restart entrepreneurial activities, drawing lessons from past experience. 191 As a result, effective second chance provisions may stimulate the willingness to opt for self-employment 192 and have a positive influence upon entrepreneurship 193 and employment. 194 Overall, allowing honest entrepreneurs to benefit from a second chance after overcoming bankruptcy is crucial for ensuring a dynamic business environment and promoting innovation.…”

Section: And the Role Of Dischargementioning

confidence: 99%

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Natural person ltd.: Towards a unified discharge regime for entrepreneurs and consumers

Vandenbossche

2023

Intl Insolvency Rev

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Personal insolvency proceedings are increasingly fulfilling an economic function, aimed at the rehabilitation of the debtor. The idea of the fresh start and second chance, including an early discharge of residual debts, is an important illustration thereof. Despite the fact that this evolution is noted in all personal insolvency procedures, both with regard to entrepreneurs and consumers, debt discharge used to be easier to justify and more readily granted to entrepreneurs (traders) than to non‐entrepreneurs. Clear examples of the discomfort legislators seem to have with discharging unpaid debts of consumers are the EU Member States that differentiate between commercial and consumer insolvency procedures. In addition, the narrative of promoting entrepreneurship is now driving EU insolvency reforms. That (narrow) focus leads Directive 2019/1023/EU to make the same distinction between insolvent individual entrepreneurs and other natural persons, offering the former a full discharge of debt after a reasonable period of time, while providing no mandatory discharge principles for the latter. This means that not all natural persons are equal when it comes to the possibility of having a second chance, despite compelling evidence that shorter discharge periods lead to more productive individuals. The question therefore arises as to whether EU Member States should run separate discharge systems for entrepreneurs and consumers, and whether this is justified in relation to its purpose. Focusing on natural persons in an insolvency context, this article argues that the objectives of providing a fresh start and second chance, by promoting debt discharge, are as relevant for consumer debtors as they are for entrepreneurs.

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Section: Entrepreneurs Versus Non-entrepreneurs? Quid Directors and P...mentioning

confidence: 99%

Section: And the Role Of Dischargementioning

confidence: 99%

Natural person ltd.: Towards a unified discharge regime for entrepreneurs and consumers

Vandenbossche

2023

Intl Insolvency Rev

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“…The analysis of the discharge procedure under the Directive has already attracted scholars' attention. 10 This article focuses on the problems related to the provision of a fresh start for insolvent entrepreneurs and compares the relevant provisions of the Directive with the rules of personal bankruptcy established in the US Bankruptcy Code which served as the inspiration for the adoption of the Directive. Thus, the goal of this article is to assess the key aspects of the discharge procedure, analyse whether it would contribute to the effective solution of entrepreneurs' insolvency and provide a fair balance between the interests of a debtor and creditors.…”

Section: Introductionmentioning

confidence: 99%

Discharge of Debts of Insolvent Entrepreneurs Under the Restructuring and Insolvency Directive

Jokubauskas

2023

Utrecht Journal of International and European Law

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The article focuses on the discharge procedure for entrepreneurs as prescribed in the Directive on restructuring and insolvency. It analyses the elements of the discharge procedure for entrepreneurs that are harmonised with the Directive and whether it ensures a proper balance between the interests of the debtor and creditors. The author assesses how the concept of an 'entrepreneur' should be perceived under the scope of the Directive, the requirements of commencement of discharge of debt procedure and whether it indeed provides a fresh start for entrepreneurs after the end of this procedure. Where relevant, the article focuses on the comparison between the discharge procedure in the Directive and the rules of personal bankruptcy established in the US Bankruptcy Code (Chapters 7 and 13) which served as an inspiration to the Directive. Comparison of the relevant rules on the discharge procedures established in the Directive and the US Bankruptcy Code allows us to better understand the aims and goals of certain provisions of the discharge procedure in the European Union insolvency law and provide a conclusion on whether the proposed model of discharge procedure is effective. The author discusses whether the discharge procedure in the Directive managed to establish a fair balance between the interests of the debtor and creditors and whether it will improve entrepreneurship conditions in the European Union.

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“…Recently, the European Council adopted the "Preventive Restructuring" directive (EU/ 2019/1023) on June 20, 2019. This new directive focuses on the proper functioning of the internal market (Arias Varona et al, 2020). Mainly, this EU directive focuses on several aspects such as preventive restructuring frameworks, the discharge of debt and disqualifications and measures to enhance the efficiency of procedures regarding restructuring, insolvency and discharge of debt.…”

Section: Introductionmentioning

confidence: 99%

Financial distress prediction in private firms: developing a model for troubled debt restructuring

Mehmood,

De Luca

2023

JAAR

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Purpose This study aims to develop a model based on the financial variables for better accuracy of financial distress prediction on the sample of private French, Spanish and Italian firms. Thus, firms in financial difficulties could timely request for troubled debt restructuring (TDR) to continue business.Design/methodology/approach This study used a sample of 312 distressed and 312 non-distressed firms. It includes 60 French, 21 Spanish and 231 Italian firms in both distressed and non-distressed groups. The data are extracted from the ORBIS database. First, the authors develop a new model by replacing a ratio in the original Z”-Score model specifically for financial distress prediction and estimate its coefficients based on linear discriminant analysis (LDA). Second, using the modified Z”-Score model, the authors develop a firm TDR probability index for distressed and non-distressed firms based on the logistic regression model.Findings The new model (modified Z”-Score), specifically for financial distress prediction, represents higher prediction accuracy. Moreover, the firm TDR probability index accurately depicts the probabilities trend for both groups of distressed and non-distressed firms.Research limitations/implications The findings of this study are conclusive. However, the sample size is small. Therefore, further studies could extend the application of the prediction model developed in this study to all the EU countries.Practical implications This study has important practical implications. This study responds to the EU directive call by developing the financial distress prediction model to allow debtors to do timely debt restructuring and thus continue their businesses. Therefore, this study could be useful for practitioners and firm stakeholders, such as banks and other creditors, and investors.Originality/value This study significantly contributes to the literature in several ways. First, this study develops a model for predicting financial distress based on the argument that corporate bankruptcy and financial distress are distinct events. However, the original Z”-Score model is intended for failure prediction. Moreover, the recent literature suggests modifying and extending the prediction models. Second, the new model is tested using a sample of firms from three countries that share similarities in their TDR laws.

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Discharge and entrepreneurship in the preventive restructuring directive

Cited by 5 publications

References 6 publications

Natural person ltd.: Towards a unified discharge regime for entrepreneurs and consumers

Natural person ltd.: Towards a unified discharge regime for entrepreneurs and consumers

Discharge of Debts of Insolvent Entrepreneurs Under the Restructuring and Insolvency Directive

Financial distress prediction in private firms: developing a model for troubled debt restructuring

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