The EU Insolvency Regulation (EC No 1346/2000) remains the template for issues of jurisdiction, applicable law, recognition, enforcement, and co-operation arising in EU cross-border insolvency matters. On 15 November 2011, the European Parliament adopted a Resolution recommending the harmonisation of specific aspects of national insolvency laws, including certain conditions for the establishment, effects and content of restructuring plans. In October 2012, the EU Commission undertook to modernise EU insolvency rules to better facilitate the survival of businesses and present more of a second chance approach to entrepreneurs.
This was followed in early December 2012 with an EU Commission “Communication on New Approach to Business Failure & Insolvency”. This Communication highlighted differences arising between EU Member States’ insolvency laws which hampered the establishment of an efficient internal market. It also noted that the creation of a more level playing field would lead to greater confidence in the systems of other Member States for companies, entrepreneurs and private individuals alike as well as improving access to credit and encouraging potential new investment opportunities.
On 9 January 2013, the EU Commission adopted the “Entrepreneurship 2020 Action Plan” which invited Member States to reduce, where possible, the discharge time and debt settlement for honest entrepreneurs after bankruptcy to a maximum of three years by 2013 and to also offer greater support services to businesses for early restructuring advices by way of seeking to prevent insolvencies and to assist small and medium enterprises to restructure and re-launch.
The EU Commission then published its “Recommendations on a New Approach to Business Failure and Insolvency” which recommended focusing on the framework and process of restructuring for viable businesses and on reducing the negative effects of personal bankruptcy for entrepreneurs to afford them a second chance. The Recommendations also request Member States to provide the EU Commission with annual statistics on restructurings and invite Member States to implement its Recommendations.
The Recommendations have no legislative force nor do they constitute a binding requirement on Member States to adopt or amend domestic legislation.
On 5 February 2014 the European Parliament voted in favour of the main elements of the EU Commission’s Recommendations specifically regarding:
- Expanding the rules to cover rescue proceedings
- The creation of an EU-wide system of web-based insolvency registers
- The possibility of avoiding the opening of multiple proceedings
- The rules dealing with the insolvency of groups of companies
The Recommendations advocate the new approach to be adopted in respect of business failures and insolvency. They provide for minimum standards regarding preventative restructuring frameworks and discharging the debts of bankrupt entrepreneurs. The Recommendations aim in particular to:
- Reduce the costs of assessing the risks of investing in another Member State
- Increase recovery rates for creditors
- Remove the difficulties in restructuring cross-border groups of companies
The Recommendations, once finalised, will invite Member States to implement minimum standards contained in the Recommendations within twelve months from its adoption. The Commission will also assess whether additional measures to consolidate and strengthen the approach reflected in the Recommendations require to be proposed.
Contributed by Delia McMahon
