This article will focus on explaining the particularities of the EU Directive, the preventive restructuring procedure in the Republic of Moldova, highlight a comparison with the legislation of different countries, and the role of the insolvency practitioner in this procedure. It’s a perfect procedure to save businesses in need and an opportunity to negotiate with creditors while maintaining a good reputation. We believe that everyone should be informed about it.
Purpose: Directive (EU) 2019/1023 of the European Parliament and the Council, dated June 20, 2019, focuses on preventive restructuring frameworks, debt discharge and disqualifications, and measures to enhance the efficiency of restructuring, insolvency, and debt discharge procedures. The primary goal is to support business viability and prevent unnecessary insolvencies while ensuring adequate protection for the interests of creditors and other stakeholders.
The EU Directive 2019/1023, established on June 20 2019, aims to provide a robust framework for preventive restructuring, insolvency, and debt discharge. This Directive is designed to enhance the efficiency of these procedures across Member States, ensuring businesses facing financial difficulties have viable options for recovery. Beyond the Directive, countries such as the Republic of Moldova have adopted and adapted preventive restructuring procedures, aligning with international standards while addressing local economic contexts.

1. The History of Preventive Restructuring Procedure

The concept of preventive restructuring can be traced back to the early 20th century when legal systems began recognizing the need for mechanisms to support financially distressed businesses before they reached insolvency. The goal was to provide companies with an opportunity to restructure their debts and operations in a way that would allow them to continue operating, thereby preserving jobs and economic value.
In the United States, the introduction of Chapter 11 of the Bankruptcy Code in 1978 was a significant milestone. Chapter 11 provided a legal framework for businesses to reorganize under court supervision, allowing them to negotiate with creditors while maintaining control of their operations. This model of "debtor-in-possession" has influenced many other jurisdictions and remains a cornerstone of preventive restructuring today.
In Europe, the approach to insolvency and restructuring has traditionally been more conservative, focusing on liquidation rather than reorganization. However, economic crises and increasing globalization highlighted the need for more flexible and proactive restructuring tools. Several European countries began to introduce preventive restructuring frameworks in the late 20th and early 21st centuries.
For example:
France: In 2005, France introduced the "sauvegarde" (safeguard) procedure, which allowed companies to restructure under court protection without being declared insolvent. This was a significant shift towards preventive measures.
Germany: Germany's insolvency law reform in 2012, known as the "ESUG" (Gesetz zur weiteren Erleichterung der Sanierung von Unternehmen), aimed to facilitate business restructurings and introduced the concept of self-administration, akin to debtor-in-possession.
The EU Directive 2019/1023
The financial crisis of 2008 and the subsequent economic downturns underscored the need for a more harmonized approach across Europe. In response, the European Commission began developing a comprehensive strategy for improving insolvency frameworks across the EU. This culminated in the adoption of Directive (EU) 2019/1023 on preventive restructuring frameworks, insolvency, and discharge of debt.
The Directive, adopted on June 20, 2019, aims to:

• Provide businesses in financial distress with access to preventive restructuring frameworks to avoid insolvency.
• Harmonize key aspects of preventive restructuring procedures across EU Member States.
• Ensure a fresh start for honest entrepreneurs by providing for the discharge of debt.

Key features of the Directive include:

• Early Warning Tools: Mechanisms to alert businesses to financial difficulties early on, allowing timely action.
• Stay of Individual Enforcement Actions: Temporarily suspending creditors' enforcement actions to facilitate restructuring negotiations.
• Debtor-in-Possession: Allowing debtors to remain in control of their business during the restructuring process.
• Cross-Class Cram-Down: Enabling courts to approve restructuring plans even if dissenting classes of creditors object, under certain conditions.

The EU Directive has influenced many countries outside the EU to adopt similar preventive restructuring frameworks, recognizing the benefits of early intervention and the preservation of viable businesses. Countries such as the United Kingdom, Japan, and Australia have implemented or are considering similar measures to align with international best practices.

2. Preventive Restructuring Procedure in the Republic of Moldova

In the Republic of Moldova both the bankruptcy procedure and the restructuring procedure are carried on by the insolvency practitioner,  authorized by The Ministry of Justice. Therefore, the same person can manage both the insolvency and the restructuring procedure. To be more specific and clear, we need to know the legal background regarding insolvency in the RM. We had The Bankruptcy Law from 1996 until 2001 and after that, we had The Insolvency Law from 2001 until 2012. Now we are governed by The Insolvency Law no. 149 of 29.06.2012. The new Insolvency Law applies to all entrepreneurs, including small businesses.
This law includes:

• bankruptcy,
• restructuring in insolvency
• accelerated restructuring as a preventive procedure.

In 2020, the accelerated restructuring procedure was modified and largely corresponds to Directive (EU) 2019/1023 (In 2022, Republic of Moldova obtained the status of a candidate country to join EU).
Debtors in financial difficulty can resort to:

1. Out-of-court negotiation with creditors (the negotiation is carried out only with the affected creditors).
2. Ask the court to offer a moratorium on individual forced executions for a period of 2 months:

              the debtor presents the documents in court proving that he is in financial difficulty.
              during the negotiation period, the court suspends enforcement of the debtor's assets.
If the debtor and creditors negotiate a plan, the debtor can ask the court to initiate the accelerated restructuring procedure.
Important! The person who in the last 5 years has been subject to a restructuring procedure, or is insolvent, cannot request the filing of the procedure.
After filing the accelerated restructuring procedure, creditors submit claim validation requests.
Creditors are divided in 4 classes:

1. secured
2. unsecured
3. tax or social security authorities
4. lower-ranked unsecured - such as claims from connected parties.

However, only creditors who requested the claims within the deadline are included. The law does not mention late claims and claims that appear after the opening of the preventive restructuring procedure, are claims paid on a priority basis.
The preventive restructuring procedure aims to provide businesses with the tools necessary to overcome financial distress before reaching insolvency. This procedure allows companies to negotiate with creditors, restructure debts, and implement recovery plans without the stigma of formal insolvency proceedings. Despite these provisions, the uptake of preventive restructuring in Moldova has been limited. One reason is the lack of awareness among entrepreneurs about the benefits and processes involved. Additionally, the availability of informational resources such as guides and brochures is scarce, hindering widespread adoption.

3. (Non) alignment with the Directive 2019/1023

As follows, it will be presented a legal analisis of what our Insolvency law has, what should have and what are the proposals in the context of the Directive 2019/1023.
We have: The insolvency law of the Republic of Moldova applies to all entrepreneurs, including small businesses without making a difference between the procedures.
We don’t have: Consumer Insolvency Law. Facilities for SMEs compared to large corporations.
Proposals: Development of consumer insolvency law. Development of facilities for SMEs, especially regarding debt forgiveness, or easier access to the early warning procedure.
We have: Debtors in financial difficulty can resort to:
- Out-of-court negotiation with creditors
- Suspension of individual forced executions for a period of 2 months during the negotiations.
We don’t have: Sufficient information for debtors regarding early warning tools, for example on a website or a web page, as recommended by the Directive. We have the Moldinsolv Training center, which, using its own resources, publishes information and relevant articles for debtors. Also the possibility of an informal restructuring based on contractual agreements, similar to the ad hoc mandate in Romania. Therefore, the possibility of resorting to extrajudicial agreements is limited.
Proposals: Developing methods to inform the debtor, textbooks and helpful instructions, developing an official web page, organizing courses for entrepreneurs to help them understand that they are in financial difficulty and the inclusion of the ad hoc mandate, or the possibility of out-of-court negotiation with subsequent confirmation of the agreement by the court.

4. The Role of the Insolvency Practitioner

 In any preventive restructuring process, the insolvency practitioner plays a vital role. During the restructuring period, the debtors retain control over their assets and their current business activity. The appointment of an IP in the field of restructuring can take place, but not necessarily, at the stage of negotiations (during the 2 months). After the opening of the accelerated restructuring procedure, it is mandatory to name an IP. The involvement of the IP is limited to supervising the execution of the restructuring plan. The IP can be proposed by the debtor or later it can be elected by the assembly of creditors from the list of IPs given by the Ministry of Justice. Their responsibilities include:
 

• Advisory Services: Providing expert advice to debtors on the restructuring options available and helping to formulate viable recovery plans.
• Mediation: Acting as intermediaries between debtors and creditors to facilitate negotiations and ensure fair treatment of all parties.
• Supervision: Overseeing the implementation of restructuring plans and ensuring compliance with legal and contractual obligations.

Sufficient remedies are provided to sanction the dishonest IPs. It’s done by:

• disciplinary liability (assured by a Commission formed by the Ministry of Justice),
• administrative liability (assured by the court),
• criminal or contraventional liability.

IPs are continuously trained by the Union of Authorised Insolvency Practitioners.

5. Comparison with Legislation in Different Countries

A comparison of Moldova's preventive restructuring procedure with legislation in other countries reveals both similarities and differences. For instance:
Germany: The German insolvency law emphasizes early restructuring, similar to Moldova. However, Germany provides a more structured framework, including the role of a court-appointed insolvency practitioner from the outset.
France: French law allows for "safeguard" proceedings, which closely resemble preventive restructuring. These proceedings enable companies to negotiate with creditors under court supervision, ensuring greater oversight.
United Kingdom: The UK’s Corporate Insolvency and Governance Act 2020 introduced measures akin to preventive restructuring, such as the moratorium on creditor actions and flexible restructuring plans. The UK’s approach is highly adaptable and provides significant protections to companies during restructuring.
In contrast, Moldova's procedure is more flexible but lacks the same level of formal support and supervision found in these countries. This flexibility can be advantageous for companies that prefer less intrusive measures, but it may also result in inconsistent outcomes due to varying levels of expertise among practitioners.

6. Conclusion

The preventive restructuring procedure, as outlined in the EU Directive 2019/1023, offers a lifeline to businesses facing financial difficulties. While countries like the Republic of Moldova have made strides in adopting these procedures, there remains room for improvement in terms of awareness and formal support structures. By comparing Moldova's approach with other countries and highlighting the essential role of insolvency practitioners, it becomes clear that a well-informed and supported preventive restructuring framework can save businesses, protect creditors, and sustain economic health.