Insolvency 2024

The new Insolvency 2024 guide features close to 40 jurisdictions. The guide provides the latest legal information on the broad legal framework for insolvencies, the role of creditors, out-of-court and statutory restructuring processes, statutory insolvency and liquidation procedures, cross-border insolvency issues, the duties and liabilities of directors and officers, claims to set aside or annul a transaction.

Last Updated: November 14, 2024


Authors



Fieldfisher is a European law firm with more than 1,800 people across 24 international offices in 12 countries. As an entrepreneurial, pragmatic and socially conscious firm, Fieldfisher embraces its purpose as a trusted, client-focused corporate citizen. Fieldfisher’s Netherlands office is in Amsterdam, where a team of twenty-five lawyers and civil law notaries advise national and international clients on all types of legal, regulatory and compliance issues relevant to organisations in the Netherlands and the EU. Fieldfisher’s Amsterdam team is highly specialised in corporate and M&A, finance, regulatory, data protection, IT, intellectual property, insolvency, dispute resolution, employment law and notarial law. As part of its service, Fieldfisher Amsterdam advises and assists businesses and their management, or other parties confronted with (impending) insolvencies, on matters such as (cross-border) restructurings, directors’ and officers’ liability, insolvency proceedings, and disputes with insolvency trustees.


The Insolvency Guide 2024 aims to provide legal and non-legal professionals with a concise overview of the main restructuring and insolvency law topics in various jurisdictions. The experienced authors on restructuring and insolvency law describe the rules and practices applicable in their jurisdictions, as well as the latest (upcoming) developments. To provide an outline of the main elements, this guide discusses the different liquidation, restructuring and insolvency procedures in each jurisdiction, as well as the main statutory officers and other actors within the systems.

Many businesses are now operating in several jurisdictions, so there is often a cross-border dimension to liquidation, restructuring and insolvency procedures. Therefore, this guide also considers how different jurisdictions deal with international aspects, such as recognition of foreign judgments, or co-operation between the various actors in the event of cross-border procedures. Furthermore, the guide covers the obligations of directors and officers, and under which circumstances they can be held personally liable. Finally, the possibilities to set aside transactions that preceded a restructuring or insolvency procedure will be discussed.

The (national) rules and practices of insolvency law have been evolving for years, decades or centuries; at the same time, there are developments that have come up only recently or have come from other legal systems or continents. Such developments always take place in a legal, political, and socio-economic context. Some of the global developments and practices that came to the surface in 2024 will be discussed below.

Globalisation

Today’s economy faces constant change and uncertainties. Globalisation, technology and geopolitical shifts increase the interdependence of national economies. Globalisation offers companies new opportunities to prosper through cross-border trade, investment and collaborations. On the other hand, these developments can also lead to companies failing to survive due to a lack of adaptability to change or a lack of financial resilience. Because of the interdependence of economies, financial problems or bankruptcies in one economy can have severe financial consequences for another. A striking example is the recent insolvency proceedings of the Signa Group, which was part of a network of approximately one thousand companies and employed around forty thousand people worldwide, all of whom suddenly faced job insecurity.

The ongoing process of opening economic, political, technological and social borders is one of the most discussed phenomena of recent decades. Businesses today operate not only in their domestic markets but increasingly enter international markets with their goods and services. With customers, suppliers, employees, shareholders, and other lenders spread across different continents, this presents companies with global growth opportunities. However, as companies grow more complex, so too do the insolvency procedures they must undergo if they face financial distress.

Globalisation has led to increased specialisation among companies and a rise in exports, which has, in turn, expanded the role of the logistics sector. One consequence is that certain products are no longer produced domestically but instead must be imported from other countries. This therefore provides many opportunities for companies to operate more efficiently and internationally but can also painfully expose how interdependent companies and economies have become. This was clearly demonstrated in March 2021, when a container ship blocked the Suez Canal, bringing EUR9 billion in daily trade to a sudden halt. This incident caused delays for thousands of freight containers, which, in turn, disrupted manufacturing as factories experienced delays in receiving essential raw materials and assembly parts. The effects of this event persisted, with the global distribution of containers remaining disordered for a significant period afterward.

Another effect of technological globalisation is the intensifying competition from businesses that no longer need a physical presence in a given country to operate there. Technological advances allow companies to offer goods and services more cheaply, quickly, and efficiently. For companies that do not invest in these innovations, there is a real risk of declining revenues. The rapid technological developments such as automation, artificial intelligence and digital platforms are threatening traditional business models, as reflected by the increasing number of bankruptcies in the retail and taxi industries. However, companies that do invest in cutting-edge technology find themselves increasingly reliant on it, with all the associated cyber risks. The scale of this dependence was evident in July 2024, during one of the largest IT outages in history. A flawed update to cloud-based security software from a top global cybersecurity firm triggered a malfunction across millions of Microsoft Windows devices, impacting businesses and governments worldwide. This disruption affected airlines, banks, broadcasters, hospitals, and ATMs, reportedly costing over USD 1 billion.

A final aspect of globalisation worth mentioning is the impact of cryptocurrency. This relatively new, borderless form of payment has presented lawmakers and regulators with significant challenges as they try to understand and manage its risks. The ease with which public trust can be manipulated, as in the FTX scandal, along with the severe consequences of security breaches like the Mt. Gox hack, and the potential for money laundering and terrorism financing, all underscore the need for caution. At the same time, cryptocurrencies offer a unique global speculation mechanism, bypassing traditional financial institutions and regulated exchanges.

Social Unrest

As a result of more recent economic developments, such as market fluctuations, geopolitical tensions, and the aftermath of the global COVID-19 pandemic, many businesses are facing new challenges. These may include supply chain disruptions, changing consumer behaviour, inflation, higher interest rates, and labour market tightness. This reveals weaknesses of individual companies and (local) economies.

COVID-19 pandemic

The global pandemic made businesses in almost every sector suffer. Businesses faced a lot of uncertainty: changing consumer expenditure, stalled production chains, and lockdowns. During the pandemic, and just after, directors and financiers expected substantial surges in restructuring and insolvency proceedings. Contrary to expectations, these did not materialise due to, among other things, government support such as grants, loans, or other sector-specific measures, and the generally prudent behaviour of creditors.

In recent years, the number of insolvencies has been greatly affected by measures taken by governments, and policies by other regulators such as the Federal Reserve (the “Fed”) and the European Central Bank (ECB) that have, for instance, reduced borrowing costs. Many businesses have benefitted from these measures, enabling them to secure financing, maintain operations, and stay afloat. Even unviable companies, often referred to as “zombie businesses”, were able to continue operating as long as economic conditions remained stable and deferred obligations, such as taxes, did not fall due.

Uncertain times

Additional uncertainty stems from ongoing geopolitical tensions and rising expectations around ESG. A clear example of geopolitical instability is the Russia-Ukraine conflict, which, beyond its human and political impacts, has profoundly affected the global economy. Countries reliant on Russian energy have faced soaring energy prices and supply chain disruptions, hitting energy-intensive sectors like industry and transport particularly hard. Moreover, non-Russian businesses have also felt the effects of sanctions imposed on Russian-owned entities, such as frozen assets impacting multinational operations.

ESG requirements introduce further challenges, often requiring substantial administrative work, such as ensuring supply chain compliance and reporting on environmental initiatives, as well as significant investment in environmental safeguards. Traditional bank financing for these types of investments is increasingly shifting towards private institutions like hedge funds, private equity firms, and business angels, each with distinct approaches and requirements that can be challenging for companies to navigate.

Furthermore, the upcoming presidential election in the United States is a source of uncertainty. The elections will bring political instability which will lead to higher volatility and turbulence in the economy and financial markets. Post-election, the direction of economic policy under the new administration remains unclear, creating an additional layer of unpredictability.

Trade restrictions also add to this uncertain environment. Whether protectionist measures, such as import duties, or those intended to address national security risks, like restrictions on foreign software usage, such policies can have wide-reaching impacts on businesses and increase uncertainty across the board.

Bankruptcy Numbers

In 2024, as businesses continue their recovery from the pandemic, they face the additional pressures of government demands for repayment of aid, rising inflation, higher interest rates, and a tight labour market. Together with the other aforementioned economic developments, these factors have left many companies struggling financially, driving a noticeable upward trend in restructurings and bankruptcies – a trend widely expected to persist for the foreseeable future.

Forecasts by Allianz-Trade indicate that insolvency rates in Europe will continue to climb, with 70% of countries worldwide projected to surpass pre-pandemic insolvency levels by the end of 2024. According to the United States Courts website, personal and business bankruptcies were up 16.2% in the period to June 2024 compared with the previous year, from 418,724 to 486,613 bankruptcies. Within this, the number of company files increased by 40.3% over the previous year, from 15,724 to 22,060. The sharp rise in 2024 is anticipated to level off, with a modest 1% increase in global bankruptcies expected in 2025.

Insolvency Law

In the field of insolvency law, there is increasing demand for out-of-court restructuring and preventive measures that can rescue companies in financial distress from bankruptcy. In such proceedings, the emphasis is no longer just on settling debts, but also on preserving jobs and economic value that would otherwise be lost.

In light of the above developments, such as ever-increasing globalisation, and the increasing international scope of restructuring and insolvency proceedings, more and more international insolvency law rules are needed. This will allow for more predictable and efficient insolvency proceedings. To this end, a proposal has been made by the European Commission in December 2022. This proposal aims to harmonise certain aspects of insolvency law in the European Union, such as a director’s duty to request the opening of insolvency proceedings and a pre-pack procedure, enabling a business (or part of it) to be sold as a going concern.

Until insolvency law is fully harmonised, a thorough understanding of various legal systems remains essential for those navigating cross-border insolvencies.

Authors



Fieldfisher is a European law firm with more than 1,800 people across 24 international offices in 12 countries. As an entrepreneurial, pragmatic and socially conscious firm, Fieldfisher embraces its purpose as a trusted, client-focused corporate citizen. Fieldfisher’s Netherlands office is in Amsterdam, where a team of twenty-five lawyers and civil law notaries advise national and international clients on all types of legal, regulatory and compliance issues relevant to organisations in the Netherlands and the EU. Fieldfisher’s Amsterdam team is highly specialised in corporate and M&A, finance, regulatory, data protection, IT, intellectual property, insolvency, dispute resolution, employment law and notarial law. As part of its service, Fieldfisher Amsterdam advises and assists businesses and their management, or other parties confronted with (impending) insolvencies, on matters such as (cross-border) restructurings, directors’ and officers’ liability, insolvency proceedings, and disputes with insolvency trustees.