European and UK Insolvency Law
The Supreme Court’s decision in Rubin v Eurofinance, its possible approach in the Eurosail case and a Question Time style debate on the European Commission’s proposed changes to the European Insolvency Regulation, were at the heart of a stimulating and thought provoking Insolvency Lawyers’ Association conference on 2 March 2013.
Meeting old and new lawyer friends from the UK, offshore and Europe in and around the sessions at Trinity Hall, Cambridge added to the richness of the proceedings, with enquiry and debate spilling well beyond the lecture room.
As a panel member alongside representatives of academia, the judiciary and government, I was able to explain the accountant IP’s perspective of the practicalities of cross-border insolvency proceedings subject to the European Insolvency Regulation.
Firstly, the UK has to decide whether to opt in to the revising regulation. It seems likely that it will – there being strong support for doing so from all stakeholders (I think it must opt in to avoid huge damage to UK business interests) – despite the current political sensitivity amongst UK politicians about European legislation.
Schemes of Arrangement
One proposal is that more hybrid and pre-insolvency proceedings be brought within the scope of the Regulation. A European perspective is that Schemes of Arrangement under the Companies Act should therefore be included in Annex A, which will be the definitive list of the procedures to which the Regulation applies. Not only do UK restructuring professionals firmly believe that Schemes work well as they are and should be kept out of the Regulation, many argue that Schemes do not qualify as they are not necessarily collective proceedings. The danger is that some European Courts may be less inclined to recognise Schemes, especially those involving non-UK companies (as has already happened in some cases).
A third way
My suggestion, which appeared to be well received, is that we establish a new procedure in the UK – it should be similar to a Scheme but designed to fit within the Regulation. Its jurisdiction would be based on COMI and it should be collective and may need to exclude varying shareholders’ rights. Otherwise it would be a court sanctioned debtor in possession proceeding that facilitates cram downs. My version, perhaps unsurprisingly, would have a monitor in the form of an IP who would, whilst leaving the debtor in possession, oversee the procedure as an officer of the court. That could, of course lead to more COMI-shifts to the UK so that the procedure can be used for foreign companies, which would be good for the UK generally and for its restructuring professionals.
Cooperation and communication
The proposals for both secondary proceedings and groups of companies focus heavily on cooperation between officeholders, between courts and between officeholders and courts. My evidence is that cooperation works well and is the appropriate way forward, even though some courts may find it difficult and some practitioners might benefit from a statutory reminder that they are to act in the interests of all creditors (rather than concentrating on those of their fellow national creditors).
Date: 4th March, 2013
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