36 Lawyer Monthly Legal Awards 2023 LUXEMBOURG In what ways do you think the COVID-19 pandemic and, more recently, high Euro zone inflation rates have influenced or will continue to influence insolvency practices and procedures? Some businesses have accumulated higher levels of debt to weather the economic challenges brought about by the pandemic and inflation can now impact debt dynamics, especially if interest rates keep rising. High inflation will necessitate debt restructuring for businesses struggling with increased borrowing costs. During the pandemic, creditors have been more willing to negotiate and collaborate with debtors to facilitate business rehabilitation. We see this has also been the case when inflation hit last year, which may be one of the reasons we have not seen this wave of restructuring work that everyone’s been predicting since COVID-19. Albeit inflation has slowed in many countries, persistent inflation may, however prompt policymakers to revisit insolvency laws to address new challenges arising from increased costs and financial stress on businesses just like they did during the pandemic. Finally, what are some of the critical challenges and opportunities you see for insolvency law practitioners in the coming years? In terms of challenges, I would say ongoing economic uncertainties and high levels of debt on top of the list. We should not also underestimate the increasing focus on ESG considerations, which may introduce new factors into insolvency proceedings, requiring practitioners to navigate these complex and evolving standards. On the opportunity side, I believe that new technological advancements will present opportunities to enhance efficiency in case management, data analysis and communication, potentially leading to more effective outcomes. We have also seen the development of alternative financing models, such as debtor-inpossession financings, which can be an opportunity to seize. With your experience, what’s your perspective on balancing creditor rights and the potential for business rehabilitation? Balancing these two is a critical but delicate aspect of insolvency laws. Creditor rights are fundamental to the functioning of financial markets and economic systems. Creditors have a legitimate expectation to be repaid for their claims. On the other hand, business rehabilitation is increasingly recognized as a desirable goal in insolvency proceedings. The OECD and the World Bank have been campaigning for years for a general enhancement of insolvency frameworks to support economic renewal and growth. Business rehabilitation can be beneficial not only for the debtor but also in the interest of creditors. A successful rehabilitation will result in higher returns for creditors compared to a liquidation scenario. For most policymakers and legislators, effective insolvency laws should aim to protect the legitimate interests of creditors while fostering an environment that encourages the rescue of viable businesses, thus promoting economic sustainability. That was clearly the goal of the EU Directive of 2019 on preventive restructuring frameworks. Are there any recent developments or changes in insolvency law that you believe are particularly significant for businesses to be aware of? Indeed. Luxembourg recently passed the long-awaited act on business preservation and modernisation of bankruptcy law on 19 July 2023, implementing EU Directive 2019/1023 of 20 June 2019. It became live on November 1st and contains a whole new toolbox of preventive reorganisation procedures, notably (i) conservatory measures (ii) an out-of-court reorganization procedure by mutual agreement and (iii) three judicial reorganisation proceedings with a possibility to cram down dissenting creditors in certain circumstances at a very low threshold, which was a missing feature in Luxembourg proceedings until now. T: +352 26 12 29 47 | F: +352 26 12 29 90 | M: +352 691 12 29 47 E: romain.sabatier@nautadutilh.com | www.nautadutilh.com
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