insolvency law - corp

Comparative Insolvency law

Legal frameworks regulating across jurisdictions

• early warning

• preventive restructuring

• insolvency prevention

Core aim of insolvency prevention

Early detection of distress to

• preserve enterprise value

• maximise creditor recovery

Early warning systems

Legal mechanisms that identify financial distress before formal insolvency

Preventive restructuring

Procedures allowing restructuring before formal insolvency is triggered

Value preservation principle

Goal of avoiding value destruction by intervening early in financial distress

EU Insolvency Directive 2019/1023

Establishes minimum standards for preventive restructuring and early warning tools

Recital 22 Directive 2019/1023

Emphasises early identification of distress to avoid insolvency or enable orderly liquidation

UNCITRAL insolvency principles

Promote rapid, efficient, and orderly insolvency responses to minimise disruption

Imminent insolvency - Germany

Predicted inability to meet obligations in the near future

Over-indebtedness - Germany

Liabilities exceed assets

First trigger for German insolvency proceedings

Actual insolvency - German

Present inability to pay due debts

Second trigger for insolvency proceedings

German insolvency model

Debtor-oriented

Prognosis-based system allowing anticipatory filing

Prognosis

is the assessment of how a situation is likely to progress over time

Drohende Zahlungsunfähigkeit

Predictive insolvency trigger allowing early restructuring or liquidation

Debtor-only standing (Germany)

Only debtor may initiate proceedings for imminent insolvency

Spanish insolvency trigger

Actual or imminent insolvency defined flexibly under Art. 2 Ley Concursal

Ley Concursal Art. 2

Defines insolvency as actual or imminent inability to perform obligations

Spanish insolvency approach

Judicially flexible, focuses on inability to perform rather than asset depletion

Duty to file insolvency (Spain)

Applies only in actual insolvency, not imminent insolvency

Preventive restructuring (Portugal PER)

Court-supervised negotiated restructuring before insolvency

PER (Portugal)

Process requiring debtor + at least one creditor to initiate restructuring

Slovenian insolvency threshold

Probability of insolvency within one year

Slovenian creditor standing

Creditors holding >20% of claims can initiate proceedings

Going concern horizon (IAS 1)

One-year timeframe used to assess ability to continue operations

French insolvency prevention model

System based on early warning, audit, and multi-actor intervention

French alert procedures

Mechanisms triggering early intervention when signs of difficulty appear

Commissaires aux comptes

External auditors in France with legal alert duties

CSE (France)

Employee representative body that can trigger alerts on economic risk

Minority shareholder alert right (France)

5% shareholders may question management on threatening facts

Groupements de prévention agréés (GPA)

Confidential advisory bodies assisting firms in financial difficulty

President of Commercial Court (France)

May summon directors when company continuity is at risk

Alert procedure (France)

Step-by-step escalation from detection to shareholder meeting and court notice

Audit alert trigger (France)

Facts capable of jeopardising going concern identified during audit work

Italian CCII negotiated settlement

Pre-insolvency procedure based on independent expert-assisted negotiation

Economic-financial imbalance (Italy)

Situation where crisis or insolvency becomes likely but recovery is possible

Independent expert (Italy CCII)

Neutral facilitator ensuring transparency and coherence in negotiations

Preventive restructuring logic (Italy)

Keep entrepreneur in control while enabling early creditor negotiation

Germany vs Spain difference

Germany uses prognosis-based insolvency; Spain uses flexible performance-based test

Portugal vs Slovenia difference

Portugal requires creditor + debtor; Slovenia allows creditor-driven initiation

France vs Italy difference

France is alert-based; Italy is negotiation-based with expert supervision

Temporal threshold divergence

Different systems intervene from “imminent insolvency” to “1-year probability”

Debtor vs creditor initiative split

Some systems rely on debtor (Germany), others allow creditor involvement (Portugal, Slovenia)

France preventive philosophy

Information-driven, multi-actor, and institutionally plural system

German preventive philosophy

Structured prognosis-based legal triggers controlled by debtor initiative

Italy preventive philosophy

Flexible, expert-assisted negotiated restructuring model

Comparative insolvency core idea

Early intervention increases creditor recovery and preserves enterprise value