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Viability in Corporate Debt Restructuring Law

Lydia Tsioli

ISBN13: 9781035350254
To be Published: September 2025
Publisher: Edward Elgar Publishing Limited
Country of Publication: UK
Format: Hardback
Price: £105.00



This book constitutes the first holistic and comprehensive analysis of corporate debt restructuring law through the lens of viability. Viability has been a largely unexplored notion in European and English scholarship, and in the US there has not yet been any systematic examination of the Chapter 11 provisions through the lens of viability. Yet, the notion is of pivotal importance because it determines which debtors are worth being rescued.

In this book, Lydia Tsioli conducts an in-depth examination of Chapter 11, English restructuring frameworks and the European Directive on restructuring and insolvency. Through this examination Tsioli uncovers, critically evaluates and makes proposals for the optimal reflection of viability on their provisions, and consequently the increased ‘filtering efficiency’ of such frameworks. These proposals can provide invaluable guidance for both the upcoming review of the European Directive in 2026 and the ongoing development of American and English restructuring law.

Viability in Corporate Debt Restructuring Law explores a notion that constitutes corporate debt restructuring’s most fundamental pillar. It serves as an essential resource for all those working in restructuring and insolvency law globally: scholars, students, policymakers, practitioners and judges.

Subjects:
Insolvency Law
Contents:
Preface x
Table of cases xv
Table of legislation xix
Introduction 1
1 The role of the notion of viability in corporate debt restructuring law
1.1 Importance of the notion of viability generally and for European restructuring law specifically 6
1.2 The meanings of viability 8
1.3 The role of the law in the viability-related discourse 21
1.4 Optimal scope and nature of a formal corporate debt restructuring framework 22
1.4.1 Background of the inquiry 22
1.4.2 The case of the European Directive 23
1.4.3 The proposal for the optimal scope and nature of a European restructuring framework 29
1.5 Optimal structure of the framework 33
1.5.1 The case against conditions of access to the framework 33
1.5.2 Viability assessment throughout the restructuring procedure: filtering mechanisms, filtering tools, filtering safeguards and the role of the relevant players 39

2 The legal basis and policy context of the European harmonisation effort
2.1 2010–2016: The lead-up to the Proposal for a Directive on restructuring and insolvency 41
2.2 The difficult task of harmonisation: one common denominator but various different approaches 44
2.2.1 ‘Rescue culture’ as the common denominator across the EU 44
2.2.2 Divergence of national restructuring frameworks 50
2.3 The proper functioning of the internal market as legal basis of the harmonisation effort (Article 114 TFEU) 55
2.3.1 Relocation/forum-shopping and its impact on the internal market (Article 114 TFEU) 56
2.3.2 ‘Coordination costs’ and their impact on the internal market (Article 114 TFEU) 62
2.4 The policy context of the harmonisation effort 64
2.4.1 Strengthening the capital markets union (CMU) 64
2.4.2 Completing the banking union 75
2.4.3 ‘Saving jobs’ within the internal market 78
2.5 Arguments against the harmonisation effort, counterarguments and the quest for the optimal solution 81
2.5.1 Was regulatory competition likely to happen across EU Member States absent harmonisation? 82
2.5.2 Minimum harmonisation as the optimal regulatory choice 86
2.6 Assessment of the Directive’s expected impact with respect to (a) its legal basis and (b) its policy goals, and the book’s contribution in relation to this assessment 90
3 ‘Models of viability assessment’ and ‘filtering mechanisms’
3.1 Introduction 93
3.2 Models of viability assessment: IP-centred, non-IP-centred and the case of the European Directive 94
3.2.1 IP-centred model: the example of the Part A1 moratorium 94
3.2.2 Non-IP-centred model: the US examples of Chapter 11 and the Small Business Reorganization Act 100
3.2.3 The case of the European Directive 101
3.3 Filtering mechanisms in US Bankruptcy Law: spotlight on 11 U.S.C. §§ 1112 and 362 106
3.3.1 Conversion/dismissal of a Chapter 11 case as a filtering mechanism (11 U.S.C. § 1112) 107
3.3.2 Stay relief as an additional filtering mechanism (11 U.S.C. § 362) 117
3.3.3 The overall role of viability in the Bankruptcy Code filtering mechanisms 124
3.3.4 Temporal considerations in §§ 362 and 1112 and lessons for the European Directive 125
3.3.5 Financial reporting enabling the viability assessment 128
3.4 Achieving filtration: the case of the European Directive on restructuring and insolvency 130
3.4.1 Introduction 130
3.4.2 The article 7(3) filtering mechanism 130
3.4.3 Article 6(9) as a filtering mechanism 134
3.4.4 Financial reporting enabling the viability assessment: reform proposals for the Directive 142
3.5 Conclusion 143

4 Rescue financing as a ‘filtering tool’
4.1 Introduction 144
4.2 Screening role of DIP financing 146
4.3 United States 150
4.3.1 DIP financing statutory model 150
4.3.2 US statutory model: spotlighting filtering efficiency/inefficiency 158
4.3.3 Exercise of creditor control and its implications 164
4.4 United Kingdom 183
4.4.1 Statutory provisions for rescue financing: administration and Part A1 moratorium 183
4.4.2 Market-based model of rescue financing 189
4.5 Preliminary conclusions 194
4.6 Finance documentation/intercreditor agreements, rescue financing and creditor control 195
4.7 European Union 200
4.7.1 Rescue financing, finance documentation and intercreditor agreements 200
4.7.2 Rescue financing under the European Directive 202
4.8 Conclusion 207

5 The role of the court as a ‘filtering safeguard’
5.1 Introduction 208
5.2 United States 209
5.2.1 The ‘feasibility test’ as a Chapter 11 confirmational requirement (§ 1129(a)(11)) 209
5.2.2 The role of the court as a ‘filtering safeguard’ under § 1129(a)(11) 214
5.3 United Kingdom 217
5.3.1 Main focus of the analysis and key argument 217
5.3.2 Scheme of arrangement 222
5.3.3 Part 26A (‘Restructuring Plan’) sanction 228
5.3.4 ‘Relevant alternative’ in the context of CVAs 236
5.3.5 Overall conclusions for English debt restructuring law 238
5.4 European Directive on restructuring and insolvency 239
5.4.1 Introduction 239
5.4.2 Best interest of creditors test as a ‘reflection’ of economic viability 240
5.4.3 Feasibility test under Article 10(3) 241

Conclusion 244
Bibliography 246