Early warning tools at the crossroads of insolvency law and company law


After providing an overview of the regulatory framework for early warning tools and informal non-collective preventive procedures focused on facilitating negotiations with creditors outlined in the draft restructuring directive, issued on November 22, 2016, this Article focuses on the corresponding French and (draft) Italian regimes, which may be referred to as two relevant models for early warnings and informal preventive frameworks. The Article provides an analysis of directors’ duties where insolvency is impending according to the current uneven company-law framework and the harmonizing provisions drafted by the EC and assesses how early warning tools interact with those duties, taking on board the comparative insights that can be drawn from the French experience and the draft Italian provisions. The scope of the provisions on early warnings extends to complementing the regulatory framework for directors’ corporate-governance duties, since—despite some flaws in the coordination of the corresponding draft provisions—there is a clear functional relationship between early warning tools and directors’ creditor-regarding duties where the business is nearing insolvency. Whilst they may theoretically constitute an alternative answer to the question as to how to encourage early restructuring, early warning tools are not in practice overridden by enhanced directors’ duties in the vicinity of insolvency. On the contrary, far from duplicating the remedies available, early warning tools appear as useful complements to the provisions that enhance directors’ duties and heighten their efficacy, particularly where the system for early warnings includes third-party reporting duties. Despite the dubious level of effective harmonization that may reasonably be expected to be achieved by the draft directive (were it to be adopted in its current wording), the French and—even more clearly so—the (draft) Italian regimes provide interesting insights into how a workable notion of the likeliness of insolvency might be drawn up by taking account of the circumstances that trigger reporting duties under a system for early warnings.