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First Steps towards a New European Insolvency Instrument announced

The European Commission has announced the first steps in a possible new instrument in the insolvency law field. Building on the success of the European Insolvency Regulation (Recast) 2015 and the recently…

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Coronavirus (COVID-19) Tracker of Insolvency Reforms

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News

First Steps towards a New European Insolvency Instrument announced
The European Commission has announced the first steps in a possible new instrument in the insolvency law field. Building on the success of the European Insolvency Regulation (Recast) 2015 and the recently introduced Preventive Restructuring Directive 2019, DG Justice is taking the lead in a project arising from the work of the Experts Group on Restructuring and Insolvency and has identified possible avenues to pursue towards the convergence of insolvency law rules within the EU.
 
Areas of interest for this initiative include the prerequisites for when insolvency proceedings should be commenced (including a definition of insolvency and entitlement to file for insolvency); the conditions for determining avoidance actions and the effects of claw-back rights; asset-tracing frameworks, including in the context of avoidance actions; a focus on directors’ duties in the vicinity of insolvency; the position of secured creditors in insolvency and the right balance between secured creditors and the need to protect other creditors (e.g. employees, suppliers); as well as the issue of court expertise and the training of judges.
 
The rationale for the initiative is the view that efficient insolvency laws are one of the key criteria for cross-border investors. The confidence in cross-border financing that would result from closer integration of insolvency law is believed ultimately to boost the European Union’s capital markets. This initiative has been designed to address what are perceived as the main discrepancies in national corporate insolvency laws (outside the banking sector), that many have recognised as potential obstacles to a well-functioning Capital Markets Union.
 
As part of this first phase of consultation, feedback on a “Roadmap” (or “Incept Impact Assessment”) has been sought by DG Justice. The feedback will help determine the scope of the project, its proposed content, the methodology of adoption (soft-law, Recommendation or Directive) as well as any ancillary considerations. The feedback will also help determine the pathway for progress and the further development and fine tuning of the initiative. It will also inform the next phase, likely to involve wider public consultation of stakeholders and interested parties, for which the European Commission will summarise any input received in a synopsis report explaining how this has informed the shape of the project.
 
This is a golden opportunity to help determine the shape of future insolvency law in Europe as well as the desirability of the proposals outlined by the European Commission. To this end, INSOL Europe members in all jurisdictions, but especially those in recent EU accession and candidate countries, can help by filling out the online questionnaire, which is available, together with the “Roadmap”, on which views are sought, at the European Commission website at: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12592-Enhancing-the-convergence-of-insolvency-laws-.
 
NB. Please note, the roadmap is open for feedback for a limited period (deadline Wednesday 9 December 2020)
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