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On Wednesday, the Committee on Legal Affairs approved updated rules on supplementary protection certificates designed to boost the competitiveness of EU-based pharmaceutical companies.

The Committee on Legal Affairs confirmed, with 16 to none and 7 abstentions, the agreement reached with Council on a directive that aims to enhance the rescue culture of businesses and to remove barriers to free flow of capital due to restructuring and insolvency procedures in member states.

The insolvency framework covers three main measures:

  • preventative restructuring framework, that allows companies in financial difficulty to negotiate a restructuring plan with creditors, while maintaining their activity and preserving jobs
  • second chance for honest insolvent or over-indebted entrepreneurs, through full debt discharge after a maximum period of 3 years, with safeguards against abuse
  • targeted measures for member states to increase efficiency of insolvency, restructuring and discharge procedures, in particular expedient treatment of procedures

The final text also includes guarantees that workers’ rights, such as collective bargaining and industrial action, right to information and consultation, will not be affected by restructuring procedures.

Requirements on the duties of the company director in insolvency proceedings were also introduced. They include regard to the interest of creditors, other stakeholders and equity holders, taking steps to avoid insolvency and avoiding deliberate or grossly negligent conduct that threatens the viability of the business.

Next steps

Once the directive is formally approved by the full House and EU Council of Ministers, it will be published in the Official Journal of the EU and enter into force 20 days later.

Background information

Today in Europe, half of businesses survive less than 5 years. It is estimated that in the EU, 200 000 firms go bankrupt each year (or 600 a day), resulting in 1.7 million direct job losses. In several Member States, there is a tendency to steer viable enterprises in financial trouble towards liquidation rather than early restructuring.

The Commission presented its proposal in November 2016 and Parliament adopted its position July 2018. The rules complement the 2015 Insolvency Regulation on resolving conflicts of jurisdiction and laws in cross-border insolvency proceedings, and ensures the recognition of insolvency-related judgements across the EU. It does not harmonise insolvency laws across member states.