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European Insolvency Regulation: New EC Proposal

The Commission is proposing to modernise the current rules on cross border insolvency which date from 2000. The proposal, published on 12 December 2012 and which incorporates detailed proposed amendments, states:  “Benefitting from ten years of experience, the new rules will shift focus away from liquidation and develop a new approach to helping businesses overcome financial difficulties, all the while protecting creditors' right to get their money back.”

The elements of the proposed reform of the Insolvency Regulation can be summarised as follows: 

  • Scope: The proposal extends the scope of the Regulation by revising the definition of insolvency proceedings to include hybrid and pre-insolvency proceedings as well as debt discharge proceedings and other insolvency proceedings for natural persons which currently do not fit the definition; 
  • Jurisdiction: The proposal clarifies the jurisdiction rules and improves the procedural framework for determining jurisdiction; 
  • Secondary proceedings: the proposal provides for a more efficient administration of insolvency proceedings by enabling the court to refuse the opening of secondary proceedings if this is not necessary to protect the interests of local creditors, by abolishing the requirement that secondary proceedings must be winding-up proceedings and by improving the cooperation between main and secondary proceedings, in particular by extending the cooperation requirements to the courts involved; 
  • Publicity of proceedings and lodging of claims: The proposal requires Member States to publish the relevant court decisions in cross-border insolvency cases in a publicly accessible electronic register and provides for the interconnection of national insolvency registers. It also introduces standard forms for the lodging of claims; 
  • Groups of companies: The proposal provides for a coordination of the insolvency proceedings concerning different members of the same group of companies by obliging the liquidators and courts involved in the different main proceedings to cooperate and communicate with each other; in addition, it gives the liquidators involved in such proceedings the procedural tools to request a stay of the respective other proceedings and to propose a rescue plan for the members of the group subject to insolvency proceedings.

What a wonderful Christmas present for European cross-border practitioners!
 

 

 

Date: 14th December, 2012
Author: Chris Laughton

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