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COVID-19 Response – Business Insolvency and Restructuring Policy Assistance



TCRS Number:


Business sector:

Corporate information

Notice type:




PSD disclosed:

21 May 2020

Project Description

The COVID-19 crisis has already had a major impact on economic activity around the globe and is still unfolding. According to the OECD’s latest estimations, many economies will fall into recession. There is even discussion of a global economic depression. The IMF has forecast a sharp contraction of -3 percent in 2020 of the global economy, much worse than during the 2008–9 financial crisis. There is widespread recognition that SMEs are especially vulnerable, due to their smaller operating margins and lack of reserves to survive for months without assistance. This vulnerability has been intensified by a lack of digital transformation, a problem that was highlighted even before the crisis.

Businesses require a breathing space, free from creditor pressure, to deal with liquidity pressures as a result of COVID-19 and this requires statutory support. Some countries in the EBRD Region (the “CoOs”) have suspended enforcement and insolvency procedures or have introduced moratoria on loan repayments. Others have relied on forbearance by banks. While a statutory standstill will, inevitably, be abused by some businesses, it is necessary to contain the otherwise uncontrolled impact of COVID-19 on the economy. A standstill will also buy time for countries to put in place urgent long-term legislative measures.

New emergency liquidity is essential for the survival of many businesses hit by the COVID-19 crisis and will depend on a combination of support from local banks and international financial institutions. Any lending will be provided in a distressed context, but it will be challenging to give new financing the super priority status that is generally expected. This is because in some countries, the enforceability of subordination agreements between creditors is uncertain and/or security cannot be shared efficiently among creditors through a security agent structure. New financing transactions and, in particular, new security granted in favour of such transactions may also be at risk from insolvency law avoidance provisions that are triggered when a company later enters into a liquidation procedure. Immediate reforms will be needed to ring-fence COVID-19 emergency financing and to encourage lending to businesses in a distressed environment.

Insolvency regimes in many CoOs are weak, both in terms of financial restructuring and overall creditor recovery. Without insolvency law reform to promote financial restructuring, there is significant risk of insolvent liquidation of many good businesses and long-standing damage to the economy. There are numerous examples of obstacles to financial restructuring in formal insolvency procedures in CoOs, including reluctance of legislators to affect secured rights within a formal restructuring procedure, as part of a majority creditor approved restructuring plan. In some countries, secured creditors are able to enforce their security, despite the commencement of a restructuring procedure and the convention that in a restructuring procedure, there should be a standstill on all creditor recovery actions to give the debtor the time and opportunity to restructure. Insolvency law reform must overcome a number of implementation challenges to be effective. Most insolvency procedures around the world are overseen by courts, which we expect will be overwhelmed once any emergency standstill or lockdown measures are lifted. Any reform programme will need to include an accelerated insolvency procedure that reduces court involvement where possible and alleviates the burden on the court system. As a minimum, accelerated procedures should be available for micro and smaller businesses, which have a simpler debt structure. Insolvency cases should be managed by a specialist group of judges with the right expertise, skills and training. Large-scale investments in digital infrastructure are also needed for efficient management of court proceedings.

The objective of the proposed TC Project in a selected number of CoOs:

1. New Financing Support will include the following activities:

(i) a high level paper setting out the rationale for protection of new financing and focusing on the main legislative support needed, including intercreditor and security agent arrangements and insolvency avoidance provision support;

(ii) policy dialogue with country authorities on any gaps in the secured transactions and insolvency law framework;

(iii) drafting legislative provisions relating to the recognition and validity of subordination arrangements among creditors and the security agent structure; and

(iv) drafting amendments to insolvency avoidance provisions in liquidation procedures to ring-fence any COVID-19 new financing and security.

2. Financial Restructuring Support will comprise the following activities:

(i) drafting changes to existing legislative frameworks, guided by the recent EU Directive 1023/2019 on preventive restructuring and other relevant international benchmarking, such as the UNCITRAL Legislative Guide on Insolvency Law and consultations with local stakeholders, including through ASB networks and Investment Councils;

(ii) drafting a paper on specialisation of judges and courts in the area of insolvency and advising CoOs on specialisation of judges to manage insolvency cases;

(iii) delivery of training to a selected group of judges on business financial restructuring and any reforms introduced pursuant to (i) above; and
(iv) outreach activities for businesses to share and promote information on financial restructuring tools. This will involve the preparation of standard guidance and delivery of at least one national conference.

This Project will contribute to the EBRD COVID-19 policy response by focusing on initiatives:

(i) with a short term timeframe, to support new financing and co-financing, by international financial institutions and national banks, through secured transaction reforms that recognise the validity of intercreditor and security agent structures and ring-fence new financing and security from insolvency avoidance provisions (“New Financing Support”); and

(ii) with a medium to longer term timeframe, to help businesses, particularly SMEs, through a challenging period of financial and operational distress by strengthening (pre)insolvency restructuring procedures and their implementation (“Financial Restructuring Support”). 

Any competitive selections for business opportunities relating to this project will be published on the EBRD's website: Consultancy Procurement Opportunities.

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email to get guidance and more information on IPAM and how to submit a request.

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