Insolvency Developments in Transition Countries Michel Nussbaumer, Chief Counsel Legal Transition Programme Thursday 23 October 2014

Where we operate 2

Focus areas for EBRD policy dialogue 3 Secured transactions Infrastructure regulation Concessions/PPP Insolvency Corporate governance INVESTMENT Securities markets Judicial capacity Public procurement

EBRD Approach to Insolvency 4 The EBRD virtuous circle of legal reform STANDARD SETTING Preparing and promoting international standards of best practice STANDARD SETTING Preparing and promoting international standards of best practice ASSESSMENT WORK Assessing quality and effectiveness of legal systems ASSESSMENT WORK Assessing quality and effectiveness of legal systems OUTREACH Disseminating the experience gained so as to stimulate future reforms OUTREACH COUNTRY PROJECTS Providing technical cooperation to countries of operations COUNTRY PROJECTS Providing technical cooperation to countries of operations

Next outreach event 5 Agenda This invitation only, interactive workshop explores the role of the insolvency office holder and draws on the results of the EBRD’s comparative assessment into the insolvency office holder profession in 27 of the jurisdictions. Issues covered will include: What is most effective model for regulation? How can the best candidates be incentivised to become insolvency office holders? On what basis should office holder fees be determined and by whom? How effective are office holders at recovering assets from the debtor’s estate? What is the role of the courts in managing insolvency cases (and insolvency professionals)? How autonomous are insolvency office holders in practice? To what extent is the profession truly indispensable?

6 Law in transition online

Insolvency Law Developments in the EBRD Region 7 Reorganisation Insolvency Pre-insolvency Trend No 1: Encouraging reorganisation

Insolvency Law Developments in the EBRD Region Trend No 2: Strengthening “cram down” procedures Definition of cram down: Any procedure through which a debtor and/or the majority of its creditors (or a class of creditors) can drive the acceptance of a composition plan despite the objections of a dissenting minority of creditors Issue: how do you treat secured creditors? 8

Insolvency Law Developments in the EBRD Region Trend No 3: “Tackling the Non-Performing Loans Problem” NLPs as a percentage of total loans as of Q Source: CESEE Bank Lending Survey, EIB, December

EBRD Insolvency Office Holder Assessment 27 countries covered by the assessment Little comparative research to date Examined seven “pillars” of the profession Authorisation to act Qualification and training Regulation, supervision and monitoring Work standards and ethics Powers and duties Appointment system Remuneration Insight into role and activities of key players in insolvency frameworks: court, creditors and office holders 10

Insolvency Office Holder Assessment 11

EBRD Insolvency Office Holder Assessment Group 1 countries (self-regulation) Group 2 countries (regulation by a dedicated body for IOHs/ bankruptcy) Group 3 countries (regulation by a government ministry) Group 4 countries (no real regulatory presence) 12

Conclusion/ Points for Discussion High level of insolvency law reform in Western Europe and in the EBRD Region Common theme: reorganisation and greater opportunities for business rescue Specific challenges for transition countries: weak judicial capacity, developing profession of insolvency office holders and lack of cooperation and trust within the banking sector EBRD goal: to help build a restructuring culture 13