THE PLACE OF PREVENTIVE RESTRUCTURING IN THE INSOLVENCY LEGAL SYSTEM

Abstract

European Commission has performed a review of Member States’ insolvency law systems, with the conclusion that there are still several Member States where restructuring is not an option for companies facing financial struggles without being insolvent. Furthermore, there are more legal differences regarding regulation in the insolvency area, which has a negative effect for the smooth development and efficient performance of the EU domestic market. As a result, the European Directive on restructuring was introduced with the aim of aligning insolvency law in Member states. One of the goals of the Directive on restructuring is the creation of preventive restructuring systems, but the document does not present a definition of preventive restructuring nor a guideline for the implementation of these systems. This article aims to describe the key features and attributes of the preventive restructuring system and to analyse the conditions of the application of preventive restructuring. In this article, the preventive restructuring system is compared with pre-insolvency and informal restructuring procedures, defining their similarities, differences, and advantages. Lithuania has implemented part of the provisions of the Restructuring Directive by legislating changes in the insolvency law of Legal persons, and a preventive restructuring system was established by a by-law. Based on the conclusions derived in the research regarding the concept and essence of the preventive restructuring system, this article aims to answer the question of whether current legislation will allow the goals of Directive to be achieved, and whether the legislation in Lithuania establishes a proper preventive restructuring system.

Keywords

• preventive restructuring framework
• pre-insolvency proceedings
• early warning
• starug