Is the Relative Priority Rule right for your jurisdiction? A simple guide to RPR

Abstract

The Directive (EU) 2019/1023 on Restructuring and Insolvency provides for a new rule to assess the fairness of the distribution of value under an accepted plan if an affected class of creditors voted against the plan: the European Relative Priority Rule (RPR). At the same time, the Directive allows Member States to adopt a US-style Absolute Priority Rule (strict APR) instead, but mandates exception to this rule (relaxed APR). As a result, all Member States are faced with the choice of either implementing the default RPR option or a version of the APR with more or less exceptions when implementing the Directive into their local restructuring laws. German and Dutch legislation provide first examples of the degree of variations. While APR is a concept that has been a part of US law for 80 years and German law for 20 years, the idea of an RPR is not just new. It has also not yet been explained extensively by scholars. If Member States consider implementing such a concept, they should know how it works. The following quick guide aims at providing this assistance.