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Report: EU to pursue insolvency early warning system to prevent bankruptcies

Ina draft proposal that will be unveiled Oct. 25, the European Commission isproposing an insolvency early warning system for troubled companies in a bid toreduce and prevent bankruptcy problems in the eurozone, Reuters reported Oct. 5.

Based on EU data, there was an increase in corporatebankruptcies in Europe following the 2007-2008 financial crisis.

The EC intends to soften insolvency rules across the EU toaid struggling companies in restructuring their business and prevent them from shuttingdown. According to the proposal, companies will be allowed to skip paying theirdebt and tax repayment plans for four months while they go through the processof restructuring, the report noted.