CERIL Executive Statement 2020-1 on COVID-19 and insolvency legislation
The COVID-19 (corona) virus has reached pandemic status. It currently spread over the world is expected to infect a majority of all people within the next month(s), according to health experts. The medical urgency justifies the current extraordinary measures taken by many governments. At the same time, these measures also have devastating effects on businesses.
The Executive of CERIL is deeply concerned with the ability of existing insolvency legislation in Europe to provide adequate responses to the extremely difficult situation in which many companies may find themselves in the COVID-19 (corona) crisis. In the statement, a call is made upon EU and European national legislators to take immediate action and adapt insolvency legislations where necessary in light of the current extraordinary economic situation and to prevent unnecessary bankruptcies of entrepreneurs.
It recommends the following two steps to be taken immediately by European national legislators:
- Step 1: Suspend the duty to file for insolvency proceedings based on over-indebtedness
- Step 2: Respond to the illiquidity of businesses
In addition, the EU and national legislators are urged to consider measures regarding:
- Interim financing;
- Suspending the duty to file based on the inability to pay;
- ‘Hibernation’ (or: winter sleep) for (small) businesses, and
- Supporting the livelihood of entrepreneurs and their employees.
This statement was prepared by:
Reporters: Prof. Stephan Madaus & Prof. Em. Bob Wessels
Associate Researcher: Gert-Jan Boon
The CERIL Executive Statement 2020-1 can be downloaded here.