Pursuant to EU Directive 1023/2019, Member States may establish provisions allowing their judicial or administrative Authorities to approve debt restructuring plans without the consent of all creditors, provided that specific requirements are met; at the same time, judicial Authorities are required to reject plans deemed unsuitable to prevent debtors’ insolvency and ensure the economic viability of businesses. In this system, three different debt restructuring strategies are outlined: the first may be implemented based on some creditors’ consent alone; the second requires the vote or consent of some creditors; the third is based on the vote of creditors and allows for the so-called “cross-restructuring” (ristrutturazione trasversale), which is binding for dissenting creditors, whose position differs from that of consenting ones. The Author discusses the legal harmonization process of “restructuring plans” in the European context, pointing out that the Italian legislature is currently addressing the existing issues by amending the “preventive agreement on a going concern basis” (concordato preventivo in continuità).

Keywords: debt restructuring – approval – cram down – cross-restructuring.

1. The prevailing nature of EU Directive no. 1023/2019 Under EU Directive no. 1023/2019, Member States may pass provisions allowing their judicial or administrative Authorities to approve debt restructuring plans lacking the consent of all creditors, provided that specific requirements are met. Moreover, pursuant to the Directive, judicial Authorities have to reject plans deemed unsuitable to prevent debtors’ insolvency or to ensure business viability. [1] The preamble to the Directive provides that restructuring should only be binding on the concerned creditors involved in the proposed agreement, while Member States may decide how to treat those creditors affected by the restructuring procedure but not involved in it. Only creditors who expressed no intention to the proposing debtor after being asked to submit an opinion about the plan should be included in this latter group. [2] This has been taken into consideration by some legal commentators, who mentioned the clear contrast with the aforementioned EU Directive no. 2019/1023 (published on the Official Journal of the European Union 26 June 2019, no. L 172). [3] No attempt is made here to discuss whether it is appropriate for a European Directive which has not yet come into force to prevail over national principles – such a difficult task may be tacked in other works. However, an analysis of the EU provisions will be provided, in order to show how different from domestic regulations they are. [4] The EU Directive no. 1023/2019 outlines three types of debt restructuring: the first one may be implemented under the consent of some creditors; the second one may be adopted based on the vote or consent of some creditors; the third one is based on the creditors’ vote, which allows for the so-called “cross-class cram-down” and is also binding for dissenting creditors. [5] In order to gain a more thorough understanding of the “cross-class cram-down” legal principle, or the “non-discrimination rule”, some preliminary clarifications are needed. Under art. 11 of the Dir. no. 1023/2019, a restructuring plan which is not approved by affected parties is to be confirmed by a judicial or administrative Authority, provided that the condition outlined in letter (c) is fulfilled, i.e. that “dissenting voting classes of affected creditors are treated at least as favorably as any other class of the same rank and more favorably than any junior class”. Despite the fact that art. 11 generally favors the relative priority rule, [6] it should be interpreted taking into consideration both a “cross-class cram-down” in which the dissenting classes of affected creditors are treated at least as favorably as the other classes of the same rank, and a relative priority rule (in the strictest meaning of the term), in which dissenting classes are treated more favorably than junior classes”. [7] European [continua..]