No. 54 Similarities and Differences Between the EU Preventive Restructuring Framework Directive and the Restructuring Insolvency Proceeding in Colombia

Details

Author(s):
  • Maria Camila Valdes Jaramillo
Publish Date:
August 20, 2021
Publication Title:
European Union [EU] Law Working Papers
Publisher:
Stanford Law School
Format:
Working Paper
Citation(s):
  • Maria Camila Valdes Jaramillo, Similarities and Differences Between the EU Preventive Restructuring Framework Directive and the Restructuring Insolvency Proceeding in Colombia, EU Law Working Papers No. 54, Stanford-Vienna Transatlantic Technology Law Forum (2021).
Related Organization(s):

Abstract

The development of the world-wide pandemic caused by COVID-19 has generated wide interest in developing more tools available to help financially distressed businesses; however, as it is going to be shown, the interest is not new. Among the
globe, legal systems contain provisions regarding proceedings under insolvency law and governed by it, which can be initiated to solve the economic circumstances of a debtor in financial distress. Reorganization and liquidation proceedings are most of the times included in these formal insolvency proceedings, however, there has been growing interest among regulators and legislators in providing another kind of solutions, aiming for effectiveness of businesses’ recovery.

This paper focuses on the analysis of two insolvency frameworks, on one hand, the European Union Directive 2019/1023 on preventive restructuring frameworks (PRF), and on the other hand, the Colombian Insolvency Regulation, focusing almost exclusively on reorganization proceedings. The goal of both regulations is to enable debtors in financial difficulties at an early stage to continue their business, however each has its own approach and requisites. On one hand, the EU Directive establishes a more flexible procedure, providing tools to debtors and creditors, which are seeking reach an agreement and restructure liabilities; on the other hand, the Colombian legislation ensures a financial equilibrium of the
enterprise by establishing an automatic stay on of individual enforcement actions, creating a level playing field in which both, debtor and creditors, are called to negotiate in order to reach an agreement.

By analyzing the characteristics of both frameworks and considering the reported efficacy of the CIR by data provided by official authorities, this paper aims to establish which instruments or tools would be useful in order to make the CIR more effective towards the goal of enabling debtors in financial difficulties at an early stage to reorganize their debts and pursue their business.