Preventive Restructuring in Practice: Expert Discussion Held with the Support of EU Project Pravo-Justice

On 30 October, an expert discussion ‘Preventive Restructuring in Practice’ took place. The event was organised by the Safe Ukraine 2030 Foundation within the framework of a grant provided by EU Project Pravo-Justice implemented by Expertise France. The discussion was attended by insolvency officers, judges, including those of the Supreme Court, representatives of the legal and business community alongside international experts from France, Germany, Belgium, and Croatia. The participants discussed the experience of implementing the preventive restructuring procedure in various EU countries and the scope of its effective application in Ukraine.

Olena Sukmanova, President of the Safe Ukraine 2030 Foundation, stressed that the adaptation of European norms to Ukrainian realities required a well-balanced and professional approach.

"The European integration course is not just a political choice, but the basis for our further development, in particular in the legal and economic spheres. We cannot simply “copy and paste” European legislation. Ukraine has its own legal, mental, and business environment. Our main task is to implement Directive 2019/1023 so that it actually works and brings results,” said Olena Sukmanova.

Iryna Zharonkina, Enforcement and Protection of Property Rights Component Lead at EU Project Pravo-Justice, stressed that the Project had been supporting the development of the draft law on preventive restructuring and was currently actively promoting the study of its practical application and the introduction of preventive restructuring in Ukraine.

“Only five years have passed since the adoption of Directive 2019/1023, but today we can already assess its effectiveness to some extent and see the first challenges and opportunities. The first cases have also started to appear in Ukraine, so the exchange of experience and best practices with EU member states is extremely valuable,” said Iryna Zharonkina.

Nataliia Tyshchenko, Member of the Board at the Ukrainian National of Insolvency Trustees Association, stressed that preventive restructuring was not just a new chapter in the Bankruptcy Code, but a real business support tool that should be launched in Ukraine. Therefore, it is important to explore best practices of its application by international partners.

“Together with the speakers, we had the opportunity to review key aspects – from the effectiveness of the procedures to the criteria of bona fide debtors and the role of the court. We also discussed how preventive restructuring works in different European countries,” said Nataliia Tyshchenko.

Christophe Tevenot, French insolvency practitioner, founder of THEVENOT PARTNERS, said that in France, the preventive restructuring procedure had been in place for almost two decades, long before the adoption of Directive 2019/1023.

“In our country, the success rate of preventive restructuring is about 70% of court-approved plans. This really helps to save businesses and jobs. This procedure works best for medium-sized companies that apply for help in time,” said Christophe Tevenot.

In his turn, Pierre-Yves De Harven, judge and President of the Chamber of Companies in Difficulty at the French-speaking Commercial Court of Brussels, noted that in Belgium, the preventive restructuring procedure was more often used by medium and large businesses, but the success rate was still lower than in France.

At the same time, Maja Praljak, Judge of the Intellectual Property and Bankruptcy Chamber of the Zagreb Commercial Court, noted that in Croatia, about 1500-2000 cases of preventive restructuring were considered annually, of which 25% resulted in approval of the plan, but only 10% of companies continued to operate successfully in the longer perspective. According to her, the success of preventive restructuring depends on how early a company recognises its problems. Therefore, it is important to show that this procedure is not a sign of failure but a way to recovery.

Arne Engels, attorney at law, German expert in banking and market law and restructuring, said that in his country, the Directive on Preventive Restructuring had been implemented immediately after its adoption, but its practical application was slow to develop.

“In our country, this procedure is quite complicated and expensive, especially for small businesses. However, the main pre-condition for its success is trust. Without trust, no law will work. Creditors should understand what is happening and have confidence in the process,” emphasised Arne Engels.

The panellists concluded that the effective implementation of the provisions of EU Directive 2019/1023 into Ukrainian legislation should become not only a legal reform, but also a practical tool for preserving business, supporting employment and developing Ukraine’s economy in the context of European integration.

It is worth mentioning that the event is a part of a series of expert meetings of the Safe Ukraine 2030 Foundation aimed at supporting the implementation of the provisions of EU Directive 2019/1023 into national legislation and raising awareness of key stakeholders about preventive restructuring procedures.

This initiative is being implemented within the framework of a grant provided by EU Project Pravo-Justice, implemented by Expertise France, and includes a number of analytical, training, and communication activities designed to ensure the effective implementation of the new instrument for restoring the solvency of debtors at an early stage.