PREVENTIVE RESTRUCTURING AND EARLY WARNING OF INSOLVENCY: EXPERIENCE OF THE BALTIC AND CENTRAL-EASTERN EUROPEAN COUNTRIES

Abstract

The article examines early warning tools for insolvency in selected European Union member states representing similar legal systems. The research focuses on the implementation of Directive (EU) 2019/1023, which shifted the European approach from liquidation procedures to preventive measures aimed at preserving viable businesses and employment. The study analyzes the legal regulation of insolvency procedures in Croatia, Hungary, Romania, Bulgaria, Latvia, Lithuania, and Estonia. The adaptation of European legislation provisions by each country is examined, specifically investigating the criteria for determining “likelihood of insolvency”, early warning mechanisms (including digital platforms and advisory services), moratorium features, criteria for forming creditor classes, and voting on restructuring plans. Particular attention is paid to the “cross-class cram-down” mechanism that enables overcoming resistance from individual creditor classes. The balance between the “debtor in possession” principle and the level of judicial intervention in each jurisdiction is investigated. Despite the common harmonization objective, significant differences exist in the degree of flexibility of out-of-court mechanisms and accessibility of preventive procedures, particularly for micro, small, and medium-sized enterprises (MSMEs). The research findings have substantial theoretical and practical value for tracking the evolution of insolvency law regulation, identifying universal and specific national instruments, and determining the most effective experience in overcoming financial difficulties and insolvency that may be considered when reforming Ukrainian legislation in the context of European integration. It has been established that Central and Eastern European and Baltic countries, unlike Western, Northern, and Southern European countries, implemented the Directive without established traditions of market culture for preventive restructuring. This necessitates further testing and evaluation of the reforms undertaken to determine effective paths for harmonizing European legislation while considering the national characteristics of post-socialist legal systems.