The position of shareholders in the restructuring proceedings of distressed companies: From a shareholders' veto power to their duty to enforce (Aufopferungs‐ or Duldungspflicht) a restructuring plan

• DOI: http://doi.org/10.1002/iir.1391
• Published date: 01 December 2020
• Author: Lorenzo Benedetti
• Date: 01 December 2020

RESEARCH ARTICLE

The position of shareholders in the

restructuring proceedings of distressed

companies: From a shareholders' veto power to

their duty to enforce (Aufopferungs- or

Duldungspflicht) a restructuring plan

Lorenzo Benedetti, assistant professor

Law Department, University of Florence, Florence, Italy

Correspondence

Lorenzo Benedetti, University of

Florence, Florence, Italy.

Email: lorenzo.benedetti@unifi.it

Abstract

This article addresses the problem of the position of

equity holders in restructuring proceedings, tackling a

new issue in the overall European scenario of insol-

vency law, where innovative rules have been intro-

duced on this topic in Germany (ESUG), France (loi

Macron), Spain (ley concursal), besides the new provi-

sions laid down by the EU Preventive Restructuring

Directive. Overall, these rules target the same outcome,

while relying on different tools, namely, to overcome

the veto power of shareholders in the enforcement of

an approved and confirmed restructuring plan. Share-

holders can in fact resort to their veto power pursuant

to company law when dealing with structural opera-

tions having an impact on the property structure of a

distressed company, that is, a debt-equity-swap. This

article focuses on the rules governing the position of

shareholders as laid down in Article 163, paragraph

5 and Article 185, paragraph 6 of the Italian Insolvency

Law (IIL), in force since 2015, which will be probably

amended in September 2021 by Articles 90 and 118 of

the new Italian Crisis and Insolvency Code (ICC). The

DOI: 10.1002/iir.1391

© 2020 INSOL International and John Wiley & Sons Ltd

322 Int Insolv Rev. 2020;29:322–345.wileyonlinelibrary.com/journal/iir

article ultimately provides a comparison with the legal

framework in other European countries as well as in

the EU Preventive Restructuring Directive. Many issues

arise from the new Italian regulation, in particular

regarding its field of application, its relationship and its

coordination with company law and the protection of

shareholders' property in the shares.

1|THE NEW RULES ON THE POSITION OF SHAREHOLDERS IN

THE EU PREVENTIVE RESTRUCTURING DIRECTIVE

Before considering the specific domestic rules, including the Italian,

1

it should be noted that

European policy in this area has been led by the developments in the EU Preventive Res-

tructuring Directive (EU Directive). The need to prevent shareholders from unreasonably

blocking the approval of restructuring plans that would restore a distressed company's viabil-

ity is one of the targets underlying the EU Directive (see Article 12 and Recital 29) and the

EU Commission Recommendation of March 12, 2014 (2014/135/EU: see Recital 29 and Arti-

cle 12, paragraph 1). The aforementioned EU Directive provides for a specific article

addressing the position of shareholders in restructuring proceedings: Article 12 of the EU

Directive states that:

“Where Member States exclude equity holders from the application of Articles 9 to

11, they shall ensure by other means that those equity holders are not allowed to

unreasonably prevent or create obstacles to the adoption and confirmation of a

restructuring plan.

Member States shall also ensure that equity holders are not allowed to

unreasonably prevent or create obstacles to the implementation of a

restructuring plan.”

The position of shareholders outlined in the directive shows a strong influence of the provi-

sions of the German ESUG.

2

This rule is clearly aimed at writing off any veto power that might

prevent the adoption or implementation of a restructuring plan able to restore the undertaking

going concern. According to Recital 29 of the EU Directive:

“While shareholders' or other equity holders' legitimate interests should be protec-

ted, Member States should ensure that they cannot unreasonably prevent the adop-

tion of restructuring plans which would bring the debtor back to viability. Member

States can deploy different means to achieve this goal, for example by not giving

equity holders the right to vote on a restructuring plan and not making the adop-

tion of a restructuring plan conditional on the agreement of the out-of-the-money

equity holders, namely equity holders who, upon a valuation of the enterprise,

would not receive any payment or other consideration if the normal ranking of liq-

uidation priorities were applied.”

BENEDETTI 323