The future of harmonisation of directors' duties in the European Union: The Preventive Restructuring Directive and group insolvencies

Abstract

The European Union (EU) Preventive Restructuring Directive seeks to harmonise directors' duties with the goals of promoting early responses to financial distress and rescuing viable enterprises. However, due to the persistent differences in substantive laws and traditions of EU Member States – most notably concerning the recognition of group interest in company and insolvency law, general and imprecise wording of the Preventive Restructuring Directive and its insufficient attention to group insolvency, additional steps need to be taken to achieve these important goals. (i) This article maps the European debate on group interest, observes its emergence in bank resolution and points out the divergent approaches to its acceptance at the national level. (ii) It examines the recent work and recommendations of UNCITRAL on directors' obligations in the period approaching insolvency in enterprise groups, and (iii) critically analyses the approach of the Preventive Restructuring Directive. (iv) Finally, it discusses the alternative normative framework for further harmonisation of insolvency-related directors' duties in the EU. It suggests that instead of focusing on the interests of all stakeholders, it is far better to encourage reasonable steps to preserve and maximise the value of the debtor company. This could include consideration of the wider group environment and group interest, which should not make debtor's creditors worse off (group-mindful “no worse off” standard). It also endorses the adoption of guidelines and tools supporting the decision-making process in a crisis situation, creating ex-ante certainty and discouraging opportunistic behaviour.