Out-Law News | 09 Dec 2014 | 12:17 pm | 2 min. read
The new Insolvency Regulation, which must still be formally adopted by the European Council and parliament, is expected to come into force in 2017. It would introduce a more "rescue-orientated" approach while modernising and updating the existing cross-border insolvency regime, which has applied since May 2002.
"We have risen to the challenge of the financial crisis and we now will have insolvency rules that will reinforce the single market," said Vĕra Jourovà, the EU's justice commissioner.
"The new rules will give viable businesses a much-needed second chance and will improve the effectiveness of EU insolvency proceedings. With these new rules, we are building solid foundations for boosting growth and jobs in Europe. Workers can know that if their company faces difficulties, there is a bigger chance for it to recover and for their job to survive," she said.
Insolvency proceedings affect an estimated 200,000 businesses employing 1.7 million people each year in the EU, according to figures from the European Commission. Around one quarter of these proceedings have a cross-border element.
Under the proposed new regime, EU rules would be extended to cover an additional 19 national commercial and personal insolvency mechanisms rather than just the liquidation proceedings already covered by the current regulation. They would apply to certain pre-insolvency procedures, such as restructuring at a stage where there is only a likelihood of insolvency and proceedings where the debtor is left fully or partially in control of its assets.
The draft regulation contains a new test for determining a debtors' 'centre of main interests' (COMI); in which the main proceedings for resolving the debtor's insolvency must begin. The results of those proceedings would then apply universally across the EU. Any secondary proceedings could only be brought in other member states in relation to the debtor's assets based in that state. A court that is asked to open secondary proceedings would have to immediately notify the insolvency practitioner (IP) in the main proceedings. The regulation also sets out specific situations in which a court should be able to postpone or refuse the opening of secondary proceedings, including on request of the IP in the main proceedings.
Member states would also be required to provide a free, publicly-accessible online register of information relating to insolvency proceedings involving companies, the self-employed and independent professionals. These national registers would be connected to a single, EU-wide online portal. Foreign creditors would be able to submit claims for payment of debts by submitting a standard form within 45 days of notice of the opening of proceedings being published in the insolvency register.
The regulation also contains a set of procedural rules aimed at making insolvency proceedings relating to different companies within the same corporate group more efficient. The Commission has said that this new framework will create "greater chances of rescuing the group as a whole".