New EU Insolvency Rules – A ‘Win-Win’ solution for businesses and their creditors?
In December 2014 the EU announced new regulations that are aimed at recovering and rescuing struggling businesses, rather than allowing them to fail.
EU Justice Commissioner, Věra Jourová, confirmed that the new rules will give “viable businesses a much-needed second chance” and commented that the agreement is “an important milestone…in creating the best possible environment for growth and investment in Europe”.
The rules will assist companies involved in potential cross-border proceedings by simplifying the process for restructuring and by limiting the possibility of secondary insolvency proceedings in other member states. The interests of local creditors will still be protected by virtue of unilateral undertakings provided by the liquidator in the main proceedings, to the effect that when distributing the proceeds, they will treat local creditors exactly as they would be treated under secondary proceedings.
Another important aspect of the new rules, particularly from the perspective of creditors, is that they restrict ‘forum shopping’, whereby failing businesses attempt to choose the court that they feel will provide the most positive outcome for them.
These developments certainly reflect the fact that the EU is moving towards a culture of rescue and recovery and this can only be a positive development for the businesses concerned, their creditors and the economy. If a company is able to remain in business (eventually becoming a profitable concern once more) then they are more likely to be able to repay their debts in full. This will also preserve the jobs of their employees and lead to a stronger economy, contributing to the overall economic recovery in Europe.
The new rules will be effective from May 2015 onwards but will not fully come into force until 2017. We will provide more information in relation to these regulations as the situation develops. If you require any advice in relation to cross-border insolvency, from the point of view of debtor or creditor, then please do not hesitate to contact either myself or our Head of Business Services team: Maria.Koureas-Jones@breezeandwyles.co.uk.
Business Services Department
Breeze & Wyles Solicitors Ltd
Tel: 01992 558411