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Changes to EU insolvency rules 08/12/2014 EU Justice Ministers have agreed to modernise insolvency rules to make it easier for businesses to restructure and for creditors to get their money back

Changes to EU insolvency rules

EU Justice Ministers last week agreed to modernise insolvency rules that they believe will make it easier for businesses to restructure and for creditors to get their money back, as well as ensuring that procedures for cross-border insolvencies are effective and efficient.

The modernised Regulation will replace the former European Insolvency Regulation (Regulation (EC) No 1346/2000 on insolvency proceedings), which has applied since 31st May 2002. It will bring:

  • A broadened scope:  The rules will cover a broader range of commercial and personal insolvency proceedings, such as the so-called Spanish scheme of arrangement, the Italian reorganisation plan procedure and the Finnish consumer insolvency procedures. Overall, the reform will allow 19 new national insolvency procedures to benefit from the Regulation.
  • Legal certainty and safeguards against bankruptcy tourism: If a debtor relocates shortly before filing for insolvency, the court will have to carefully look into all circumstances of the case to see that the relocation is genuine and not abusive.
  • Interconnected insolvency registers: Businesses, creditors and investors will have easy access to any national insolvency register on the European e-Justice Portal. This system has already been piloted for seven Member States.
  • Increased chances to rescue companies: The new rules avoid secondary proceedings in other Member States being opened, while at the same time guaranteeing the interests of local creditors. It will be easier to restructure companies in a cross-border context.
  • A framework for group insolvency proceedings: With increased efficiency for insolvency proceedings concerning different members of a group of companies, there will be greater chances of rescuing the group as a whole.

"The new rules will give viable businesses a much-needed second chance and will improve the effectiveness of EU insolvency proceedings,” said Věra Jourová, EU Justice Commissioner.

The Council of Ministers is due to formally adopt the Regulation in March 2015, and it will then be formally adopted by the European Parliament (the Legal Affairs (JURI) committee and plenary) in April or May 2015. The Regulation will enter into force 24 months later.

 

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