On 7 December 2022, the European Commission proposed new measures to further develop the EU’s Capital Markets Union (CMU), including a proposal for a Directive harmonising certain aspects of Insolvency Law.

The proposal for a Directive targets the three key dimensions of insolvency law: (i) the recovery of assets from the liquidated insolvency estate; (ii) the efficiency of proceedings; and (iii) the predictable and fair distribution of recovered value among creditors. 

The proposed Directive is divided into nine titles: general provisions (Title I), avoidance actions (Title II), pre-pack proceedings (Title III), duties of directors (Title V), simplified winding-up proceedings for microenterprises (Title VI), creditors’ committee (Title VII) sets out provisions on the creditors’ committee, measures strengthening transparency of national laws on insolvency proceedings (Title VIII) and final provisions (Title IX).

For example, the Proposal includes rules on actions to preserve the insolvency estate (i.e. avoiding actions by debtors that would reduce the value that creditors can get), on creditors’ committees to ensure a fair distribution of the recovered value among creditors; on so-called “pre-pack” proceedings (i.e. where the sale of the business is agreed before the insolvency starts) and on the duty on directors to timely file for insolvency to avoid that the value of the company deteriorates. It also introduces a simplified regime for microenterprises to lower the costs of winding them down and to enable the companies' owners to be discharged from debt, granting them a fresh start as entrepreneurs.

For more information, please see the Proposal available here.
Source: European Commission

Have your say!

The Proposal for a Directive harmonising certain aspects of insolvency law (COM(2022) 702 final) is open for feedback for a minimum period of 8 weeks (08 December 2022 - 03 February 2023  (midnight Brussels time)). Please note however that the eight-week feedback period is being extended every day until the adopted proposal is available in all EU languages.

INSOL Europe members contributions are very important as all feedback received will be summarised by the European Commission and presented to the European Parliament and Council with the aim of feeding into the legislative debate. 

You can write in any official language of the EU (including English) by a free text (4000 characters maximum) or by adding an attachment (files must be less than 5MB). Please be aware that feedback received will also be published on the site of the European Commission.

To have your say, you will need to adhere to the feedback rules and to register or login using your account here.

INSOL Europe's second 'Annual Congress' of the year took place in its usual Autumn slot at the Rixos Hotel in Dubrovnik from 6-9 October with over 360 delegates in attendance, report Myriam Mailly and Paul Omar.

With opening remarks welcoming delegates to Dubrovnik on Friday 6 October 2022, two keynotes in quick succession were delivered by Bojan Fras (Vice-Governor, HR National Bank) on the NPL situation in HR and possible connection between NPL ratios and insolvency in HR. Continuing the theme of precarity, José Garrido (Legal Dept, IMF) spoke on the role of the IMF in maintaining international financial stability and insolvency law as a critical element of robust financial frameworks. Delegates were then taken through four plenary sessions, the first on “Designing the New European Restructuring Plans”, with panellists dissecting issues around a group case study across their jurisdictions, particularly dealing with recognition and enforcement frameworks.

For the breakouts immediately following, the Norwegian Air case, managing risky businesses from the frontline, asset-tracking and recovery in the EECC as well as healthcare industry cases all featured to challenge and inform delegates. The second plenary session on “Recognition of Insolvency(-related) Decisions” picked up the recognition and enforcement theme looking at the dynamic around relevant texts, ranging from the European Insolvency Regulation, Preventive Restructuring Directive and other conventions and model laws of possible application. The third plenary, on “Harmonisation of Transactions Avoidance Law” offered an insight into a Model Law, devised by Reinhard Bork (University of Hamburg DE) and Michael Veder (RESOR; Radboud Nijmegen NL), to address the cross-border situation of transactions avoidance, which might feature in the forthcoming Insolvency III initiative. Ending the first day, the fourth plenary on “Anti-Fraud Forum: The Dangers of Cyber-Attacks” offered a fascinating insight into a contemporary challenge to business operations with notable statistics including the fact 1 in 5 businesses reporting cyber-attacks with an insolvency risk.

Resuming events on Saturday 7 October 2022, delegates were welcomed back to the keynote by Fabris Peruško (CEO, Fortenova) giving some impressive statistics on the case of Agrokor: a EUR 7.8 billion bankruptcy whose debt was equivalent to 15% of Croatia’s GDP. The group was reorganised, though keeping similar trading names, under overall Fortenova umbrella, and today, Agrokor remains the largest regional retailer, beverage group, edible oil producer and meat producer. The fifth plenary session came in two halves, the first featuring Richard Snowden LJ speaking of contemporary developments and changes in “The Restructuring Regime in the UK”, while the second part, titled “To Sanction or not to Sanction, that is the Question” saw contributions from the UK, Croatia and Romania addressing the thorny issue of recognition and enforcement, with public policy, creditor challenges and costs etc. being considerations.

The sixth plenary session on “Hard and Soft Skills” saw contributors talk about the necessity to develop both hard job-specific skills and soft skills including empathy, problem solving, assertiveness and team working through experience and on the job performance. The Seventh Plenary Session on “Energy” addressed the current energy crisis sand the impact on business and consumers. For most, energy dependence was the critical issue with the RU-UA war leading to severe disruption across Europe, even for countries not directly dependent, but who are competing for supplies on the world market. 

Rounding off the day, the final plenary on “Harmonisation of Insolvency Laws in the EU” saw a karaoke Q&A session on progress in harmonisation within the EU with developments canvassed including the progress of transposition of the PRD and key developments in the work of the Experts Group that might be seen in the new Insolvency III initiative. 

Closing remarks were then provided by Frances Coulson (Wedlake Bell UK), Jelenko Lehki (Lehki Law Office HR) and Frank Tschentscher (Deloitte DE). Delegates were bid farewell till the next occasion, whether in May in Vilnius (EECC) or October in Amsterdam (Main and Academic Conferences).

An in-depth report can be downloaded here.

INSOL Europe’s Chief Executive Officer, Paul Newson, was invited to be the opening speaker at FILA’s tenth anniversary event in Helsinki, Finland, from 18-19 August.

The Finnish Insolvency Law Association (FILA) was founded in 2011 and brings together lawyers specializing in insolvency law, as well as other professionals working with insolvency issues. The Association has around 250 members, the majority of whom are attorneys at law who act as administrators in bankruptcies and reorganization cases.

Day 1: Hot topics of the day
The first day of the conference took place at the offices of Castrén & Snellman Attorneys in the centre of Helsinki, attended by over 130 delegates, and was opened by Tuomas Hupli, Chairman of the Board of the Association.

Paul’s presentation was entitled ‘Responding to Change’ and started by giving the delegates a background to INSOL Europe, including how members can get involved at all levels, whether by simply attending events or contributing to one of our many working groups and forums. During what was to be one of the hottest days ever recorded in the city, Paul moved onto some of the hot topics of our profession such as cross-border schemes and plans - how they work in different jurisdictions, and the harmonization of insolvency laws at EU-level. 

Paul then went on to relate the challenges that our profession is facing to the key topics to be discussed at the Annual Congress in Dubrovnik, reminding the audience that “Resilience is the ability to navigate adversity and to grow and thrive from challenges” according to the American psychologist Karen Reivich, and that on account of the current crisis, companies will have to adapt their businesses to cope with rising costs, supply chain challenges, and changing markets to be resilient. The way insolvency and restructuring professionals react to this crisis and aid their clients in dealing with the plethora of issues they are faced with in these uncertain times, will have a profound effect not only on individual businesses and their respective workforces, but on the economy at large.

Finally, Paul invited the delegates to find out more about INSOL Europe and how we are working to get a better understanding of this new landscape and what insolvency and restructuring professionals may be able to offer their clients, what tools they have at their disposal in their respective countries and what is in store in terms of future regulation.
The seminar continued (in Finnish) with a lecture by Jaakko Mikkilä (Supervisory Team Supervisor, Legal Unit, Patent and Registration Board) and a long and detailed history of the most peculiar bankruptcy cases in Finland by the legendary Eero Lyytikäinen, Bankruptcy Ombudsman Emeritus, who is allegedly responsible for creating the bankruptcy industry in Finland. The audience were certainly enthralled by the tales although as Paul’s knowledge of Finnish is very limited, he was unable to join in the jokes!

Rounding off the day’s lectures, FILA scholarships were handed out to recently qualified students before the delegates were released into the fresh air to enjoy some well-earned refreshments.

Day 2: The heat continues in Tallinn
After a short cruise to Tallinn, Estonia, the second day of the conference took place at the Tallink Spa Conference Hotel, in the harbour area of the town, on yet another day with record-breaking temperatures.

Lectures continued in Finnish by Pekka Puolakka, EY Law Baltics Managing Partner, Tallinn on “Bankruptcy and related disputes, the good, the bad and the ugly of the late 1990s and early 2000s”; “Insolvency vs. imminent insolvency in restructuring of enterprises” was covered by Tuomas Hupli (Faculty of Law, University of Turku and Chairman of FILA) and lastly “Self-incrimination protection” by Professor of Procedural Law Mikko Vuorenpää (Faculty of Law, University of Lapland). Tuomas Hupli then closed the day’s proceedings and thanked everyone for attending.
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Paul Newson would like to thank Olli Rantanen (Head of Legal Services, Domestic Financing at Finnvera plc, Oulu Area, Finland; COO of FILA) and Tuomas Hupli (Chairman of FILA) for the opportunity to attend the conference, and Jan Lilius (Hannes Snellman Attorneys Ltd; Country Co-ordinator for INSOL Europe) for facilitating the arrangements and helping with the Finnish translations on the day!

The final scheduled meeting of the EC Experts’ Group on Restructuring and Insolvency took place online on 28 January 2022. In the lead up to the last two meetings that preceded this event, taking place towards the end of 2021, two key documents were released giving an insight into a possible format for a draft text and some indication as to its contents and likely progress.

The first was the Commission Work Programme 2022, adopted on 19 October 2021, which contained over 40 policy initiatives for 2022, focusing on green, digital and post-pandemic resilience issues. It also mentioned the need for fully developed European capital markets to aid recovery from the pandemic, thus requiring massive investment beyond that delivered by public money and traditional bank lending. In this light, action in respect of insolvency is seen as a priority in order to enhance convergence, remove discrepancies, increase efficiency and facilitate cross-border investment. As such, the deepening of the Capital Markets Union (CMU) will feature a harmonisation initiative for 2022 Q3, slightly later than originally anticipated in Q2, the reason being to avoid a legislative logjam and create more of an opportunity to further finetune the proposals.

The second document was a new Communication on the second CMU Action Plan, first announced on 24 September 2020, on 25 November 2021. The action plan builds on the ambition to integrate national markets into a real and effective single market to facilitate cross-border investment. Action 11 in the document sets out the insolvency initiative as one of its key features, the reasoning being to help make the outcome of cross-border investment more predictable. In providing an update on progress on the action plan, the Communication refers to various legislative texts to be formulated for delivery soon as part of the proposed initiative.

Neither document refers expressly to a precise form for the insolvency initiative, which has been the subject of some debate throughout the deliberations of the Experts’ Group. Given the wide-ranging nature of the topics discussed, ranging from substantive to procedural law as well as capacity building issues, various vehicles, ranging from a Recommendation form to a formal Directive text, have already been suggested. In some cases, preferences have been expressed for a particular text form as being more appropriate for certain proposals. The option has also been canvassed for the separation of topics into different texts, if more than one is proposed.

At the 28 January 2022, a number of topics were on the agenda in the shape of sufficiently advanced recommendations and model frameworks for possible harmonisation. In the way the agenda was presented, it seems as if the discussion points anticipate a possible shortlist for the contents of a draft text or texts. The Commission has indicated that it will now prepare a first draft by March for consideration in the first stage of the decision-making process, after which a final version of the text will be agreed before it then embarks on the legislative process. To comfort its eventual decisions, two qualitative surveys have been commissioned that are currently in progress. These have also addressed many of the same issues that appear on the final agenda.

It will not be an easy ride. Throughout, the Experts’ Group has been conscious of the likely objections, whether to convergence or harmonisation or indeed in relation to every topic under discussion. If the text progresses, it will owe much to the calibre of the contributions to the discussions, drafting and deliberations. Many of these came from INSOL Europe members with undoubted expertise and experience derived from practice and academia. Nonetheless, this initiative to harmonise insolvency law is ambitious and much goodwill and good faith may prove necessary to see it through to a successful conclusion.

On behalf of the INSOL Europe EU Study Group led by Barry Cahir, Beauchamps:
INSOL Europe’s Technical Officer Myriam Mailly and Research Co-ordinator Paul Omar