“Second Chance in Europe: Lessons learned from theassessments on policy progress in the implementation of the recommendations of theSmall Business Act”
Olivia-Kelly LONKEU
Manager – Economic development & Innovation
July 2019
PwC
A Small Business Act for Europe (SBA)
2
10 July 2019Lessons learned from the SBA Second Chance Principle
Access to finance
Single market
Skills & innovation
Environment
Internationalisation
State aid & public procurement
‘Responsive administration’
‘Second Chance’
Entrepreneurship
Think Small First
The European Commission’s flagship policy to support SMEs, composed of the following 10 principles:
SBA for Europe
Source: European Commission
PwC
Rationale for a second chance policy in the EU
Lessons learned from the SBA Second Chance Principler
1.7 millionjobs are lost in the EU due to bankruptcy
European Commission
200,000EU businesses facing insolvency every year
European Commission
50%of new businesses close in the first 5 years of operation. 40% close in the first three years.
European Commission
55%of Cypriots would not start a business if it might fail compared with 38% at EU level
Global Entrepreneurship Report
Companies founded by re-starters have higher turnover and employment growth. European Commission
10 July 2019
3
PwC
Small Business Act -Principle 2:
"Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance"
PwC10 July 2019
Lessons learned from the SBA Second Chance Principle
4
promote a positive attitude in society towards
giving entrepreneurs a fresh start
enable the completion of all legal procedures
to wind up a business, in the case of non-
fraudulent bankruptcy, within a year
ensure that re-starters are treated on an equal
footing with new start-ups
EU recommendations: SBA principle Second Chance
Source: European Commission
PwC
EU SME Performance Review
European Commission’s main tool to monitor and assess countries' progress in implementing the Small Business Act
Lessons learned from the SBA Second Chance Principle 10 July 2019
5
SBA Country
Fact Sheets
Annual Report on
EU SMEs
Background document
of the Annual Report
on EU SMEs
PwC
EU MS performance under SBA ‘Second chance’ recommendations
Lessons learned from the SBA Second Chance Principle 10 July 2019
6
Are legal bankruptcy
procedures completed
within a year and is
discharged from
bankruptcy in maximum
three years?
Is there the possibility of
automatic discharge for
honest entrepreneurs
after liquidation (or fast-
track and specific
procedures in place for
SMEs)?
Are there early warning
and help-desk
mechanisms in place to
prevent entrepreneurs
from going into
bankruptcy?
Are re-starters treated
on an equal footing with
new start-ups?
10 MS 15 MS11 MS 13 MS
Source: European Commission, 2018 EU SBA Fact Sheet & Scoreboard
PwC
Policy progress per SBA Principle (2011-2018)Second chance Principle: the lowest degree of policy activity
Lessons learned from the SBA Second Chance Principle 10 July 2019
7
0 100 200 300 400 500 600 700
1. Entrepreneurship
2. Second Chance
3. Think Small First
4. Responsive admin
5. State aid & Public procurement
6. Access to finance
7. Single market
8. Skills & innovation
9. Environment
10. Internationalisation
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
SBA policy progress for EU-28 (2011 – 2018) Policy measures implemented (2011 – 2018)
16%
3%
7%
12%
5%17%
2%
23%
6%
9%
1. Entrepreneurship
2. Second Chance
3. Think Small First
4. Responsive admin
5. State aid & Public procurement
6. Access to finance
7. Single market
8. Skills & innovation
9. Environment
10. Internationalisation
Source: European Commission, 2018 EU SBA Fact Sheet & Scoreboard
PwC
addd
SBA policy measures at EU-28-level for ‘Second chance’(2011 – Q1/2018)
10 July 2019Lessons learned from the SBA Second Chance Principle
8
2011
/2012
2012
/2013
2013
/2014
2014
/2015
2015
/2016
2016
/2017
2017
/2018
Promote positive attitude
towards restarters4 5 1 2 1 1 2
Ensure bankruptcy
procedures take just 1
year
4 0 3 4 1 4 4
Limit discharge time and
debt settlement to 3 years1 1 1 4 3 1 0
Ensure restarters are
treated equally1 2 0 1 1 2 1
Other 11 2 10 6 7 4 7
Source: European Commission, 2018 EU SBA Fact Sheet & Scoreboard
0
5
10
15
20
25
30
35
40
45
50
Promote positive attitudetowards restarters
Ensure bankruptcyprocedures take just 1 year
Limit discharge time anddebt settlement to 3 years
Ensure restarters aretreated equally
Other
Chart Title
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
SBA policy measures - EU-28
No
. of
ado
pte
d/i
mp
lem
en
ted
po
licy
me
asu
res
PwC
Title of the measure Country
• Insolvency Amending Law • Austria
• Federal: Corporate insolvency measures
• Federal: Business continuity reform to make businesses more efficient and effective
• Regional (Wallonia): Early warning scan
• Belgium
• Unemployment benefits for independents • France
• Debt solutions to Social Security Institutions
• Simplified debt settlement procedure of companies not exceeding in total the amount of fifty thousand euros (50.000 €) under their
affiliation to Law 4469/2017
• Extrajudicial Debt Settlement mechanism for enterprises and other provisions
• Greece
• Early restructuring and second chance • Hungary
• Reform of the rules on corporate crisis and insolvency procedures • Italy
• The new qualification exam of bankruptcy administrators • Lithuania
• Access to public aid for SMEs in restructure
• Early Warning!
• Poland
• New extra-judicial mechanisms for companies recovery • Portugal
• Prevention law • Romania
• Business Health Tool • Spain
• New powers to give greater protection to staff and small suppliers in insolvent businesses • United Kingdom
9
10 July 2019Lessons learned from the SBA Second Chance Principle
Source: European Commission, SME Performance Review, Policy database 2017/2018
Examples of policy measures 2017/2018
PwC
While
is not the worst-
performing SBA
principle at EU-level,
there has been moderate
progress achieved
since 2008
Overview of EU28 MS’ progress per ‘Second chance’ indicators
10 July 2019Lessons learned from the SBA Second Chance Principle
10
Source: European Commission, 2018 EU SBA Fact Sheet & Scoreboard
PwC
Overview of EU-28 MS’ performance and progress over time under ‘Second chance’ SBA principle (2008-2018)
10 July 2019Lessons learned from the SBA Second Chance Principle
11
Source: European Commission, 2018 EU SBA Fact Sheet & Scoreboard
PwC
Ranking of ‘second chance’ enabling environmentsat EU level (2008-2018)
Lessons learned from the SBA Second Chance Principle 10 July 2019
12
Source: European Commission, 2018 EU SBA Fact Sheet & Scoreboard
Focus on Cyprus:A below EU average performancewith moderate progress since 2008
Source: European Commission, 2018 SBA Fact Sheet for Cyprus
PwC
Trends in number of business bankruptcies and other forms of involuntary business cessations in selected MS (2007-2014)
10 July 2019Lessons learned from the SBA Second Chance Principle
14
Source: LE Europe based on Eurostat
PwC
Analysis on the impact of bankruptcy regime on level of entrepreneurship and creation of new businesses (2015)
15
10 July 2019Lessons learned from the SBA Second Chance Principle
• the availability of discharge (yes or no)• time to discharge (i.e. length of discharge period –when no discharge is
possible, the authors use average life expectancy as a proxy)• the generosity of the exemptions • impact on the bankrupt’s civil and economic rights • the level of difficulty a debtor faces in achieving discharge by agreement with
creditors
Punitive bankruptcy regime:• makes if more difficult to re-start after bankruptcy• deters would-be entrepreneurs because of consequences of
potential failure
• Length of discharge period has a substantial (negative) impact on entrepreneurship and the creation of new firms
Finding of the
statistical analysis
Updated Armour
and Cunnings
study (2008)
Features of the national bankruptcy regime of interest:
PwC
What would be the impact of implementing second chance in the EU28 economy?Key findings from the study
10 July 2019Lessons learned from the SBA Second Chance Principle
16
Source: LE Europe based on Eurostat
Percentage increase in the
number of new enterprises
if the discharge period is
reduced to 3 years in
Member States where the
discharge period is currently
greater than 3 years
High impact:
CY, EL, HU, IT, LT, MT, PT, RO
www.pwc.lu
Thank you
© 2019 PricewaterhouseCoopers, Société coopérative. All rights reserved.
In this document, “PwC” or “PwC Luxembourg” refers to PricewaterhouseCoopers, Société coopérative which is a member firm of PricewaterhouseCoopers
International Limited, each member firm of which is a separate legal entity. PwC IL cannot be held liable in any way for the acts or omissions of its member firms.
Olivia-Kelly Lonkeu
Manager
T: +352 49 48 48 4186
M: +352 621 334 186