Commission publishes guidelines for helping troubled businesses
The usefulness of external advice in preventing companies from failing is highlighted in a new Commission report on 'Restructuring, bankruptcy and a fresh start', published on 29 January. The report was produced by experts from the EU, accession countries and Norway, and analyses the ways in which national bankruptcy laws act as a deterrent to business survival and fresh starts. It also assesses the effects of social stigma on entrepreneurs whose businesses have failed, and who decide not to try again. The report's conclusions highlight the contribution of external advice to preventing bankruptcy, and the importance of up to date and predictable insolvency law in order to encourage settlements. Experts also highlighted the need to distinguish between fraudulent and non fraudulent bankruptcies in order to improve the success rates of fresh starts. The Commission hopes that the report will contribute to the reform of bankruptcy laws in EU Member States. The UK and Spain recently updated their legislation in this area, and France, Italy and Portugal are in the process of reforming their insolvency laws. As well as its general conclusions, the report also contains indicators, benchmarks and good practice guides on issues such as early warning mechanisms for struggling businesses, legal systems and insolvency procedures, and social attitudes to business failure.