In an economic environment marked by volatility, financial pressures, and rising financing costs, the debate on early restructuring of companies in distress is gaining strategic importance.

Recently, the World Bank issued recommendations for implementing the EU Restructuring Directive 2019/1023 in the Republic of Moldova. These recommendations place at the center of the discussion a genuine paradigm shift: moving from a culture of failure to a culture of rescue.

Financial difficulties do not automatically mean bankruptcy

The recommendations begin by defining financial distress: the current or anticipated inability to pay due or upcoming debts, and the inability to finance viable projects because of an unsustainable capital structure. These dysfunctions can destroy a company’s value not only through lack of liquidity but also through coordination failures among creditors, shareholders, and other stakeholders.

Restructuring procedures—whether traditional or preventive—pursue two essential objectives:

• Ex-post: maximizing the value of a distressed enterprise by preventing chaotic asset withdrawals, facilitating interim financing, and reorganizing viable firms when restructuring value exceeds liquidation value.
• Ex-ante: creating effective incentives for shareholders and managers, reducing agency costs, and respecting negotiated creditor priorities, thereby lowering the overall cost of financing in the economy.

What is new about preventive restructuring?

Preventive procedures do not differ conceptually from traditional ones, but they stand out through timing: intervention occurs before the onset of actual insolvency.

This approach reflects two major trends:

• strengthening a rescue culture;
• integrating risk management into insolvency policy.

Early reorganization maximizes value for all stakeholders and limits the deterioration of the company’s economic position. Practical evidence—for example, from France—shows high success rates for procedures such as mandat ad hoc and conciliation.

Another major advantage is the reduction of stigma. Initiating a preventive procedure becomes a legitimate managerial decision aimed at preserving value, rather than a signal of imminent failure.

International models: what works and where

• United States – Chapter 11, which can be preventive or traditional, is a dominant model but relies on a sophisticated financial market and specialized courts.
• United Kingdom and Singapore – mechanisms such as schemes of arrangement or Part 26A plans are widely used by large companies or SMEs with complex capital structures.
• European Union – Directive 2019/1023 seeks to harmonize and simplify preventive restructuring frameworks while allowing member states flexibility in implementation.

The French example shows that preventive procedures are widely used and that direct liquidation—although still common—can be significantly reduced through early intervention and adequate tools.

Key factors determining success

Success in preventive restructuring depends on more than legislation. Critical elements include:

Economic factors

Companies with few creditors can negotiate informally. Efficient procedures create a framework that facilitates negotiations “in the shadow of the law,” whether for debt restructuring or for selling the business under optimal conditions.

Cultural factors

Stigma can be reduced through:

• public information and education;
• clear differentiation between preventive restructuring and classic insolvency;
• the availability of confidential procedures.

Information asymmetries

Multidimensional information—from the state, professional organizations, lawyers, accountants, auditors, and courts—is essential. The use of “weak signals” and early‑warning mechanisms can enable intervention before the situation becomes irreversible.

Institutional factors

Necessary elements include:

• licensed administrators specialized in restructuring, negotiation, and confidential procedures mediation;
• effective;
• legislative incentives such as protection for statutory directors who provided personal guarantees, tax facilities for debt cancellation, or limits on the impact on credit access.

A paradigm shift

The central message is clear: preventive restructuring is not a privilege of advanced economies but a modern economic policy tool. It helps preserve enterprise value, stabilize the financial system, and protect jobs.

For jurisdictions undergoing reform, the question is not whether to introduce a preventive restructuring framework, but how to adapt it to local economic and institutional realities.

In an economy where the speed of reaction determines the difference between recovery and liquidation, prevention becomes not just an option but a necessity.

In summary, the World Bank’s recommendations aim to:

• shift the focus from liquidation to prevention;
• strengthen a culture of early restructuring;
• balance creditor protection with real chances of recovery;
• provide a genuine “second chance” for honest entrepreneurs;
• professionalize and modernize the institutional system.

Ultimately, the proposed reform is not merely technical but structural: it transforms the philosophy of insolvency law from a sanctioning mechanism into a tool for economic stabilization.

Irina Selevestru, insolvency expert, PhD in Law, attorney