Harmonising EU Insolvency Regimes: Padome’s Key Stance

Summary:

Padome agreed on key elements in a proposed directive harmonizing certain aspects of insolvency law across EU member states. The aim is to encourage investment in the EU by making its insolvency regimes more investor-friendly, reducing the current disparities faced by cross-border investors. Key aspects include:

1. Apstrīdēšanas prasības (Appeal Proceedings): To ensure creditors recover the maximum value from a liquidated company, member states are urged to adopt certain appeal proceeding rules. These prevent insolvent entrepreneurs from reducing the value recovered by creditors through fraudulent actions before bankruptcy procedures begin.

2. Aktīvu izsekošanas paredzumi (Asset-Tracing Provisions): Member states must nominate courts or authorities to access all member states’ centralized bank account registers and search for assets linked to an insolvent debtor. The proposal also ensures insolvency administrators have access to key registers and databases.

3. Director’s Duty: To increase recovery value for creditors, member states must align with certain rules on director’s duty to promptly start insolvency proceedings. Directors must initiate proceedings within three months of knowing the company’s financial difficulties, unless specific actions taken aim to protect creditors.

4. Improving Predictability of Insolvency Procedures: Member states must provide a factsheet with practical information on their insolvency procedures, enhancing predictability for investors.

5. Next Steps: Further discussions on remaining elements will continue during Poland’s presidency.

Proposed in December 2022, the directive aims to address the persistent barrier of diverse insolvency regimes for cross-border investments. A harmonized insolvency law would enhance legal certainty, reduce costs for foreign investors, and improve recovery rates and predictable distribution for creditors.

Title: Maksātnespējas tiesības: Padome Vienojas Par Nostāju Attiecībā Uz Pamata Kapitāla Tiru Svienību Tiesību Aktiem

Introduction

Maksātnespējas tiesības, or insolvency rights, are a crucial aspect of bankruptcy law that govern the legal process when an individual or a company becomes unable to repay their debts. In the context of the European Union (EU), the Insolvency Directive (2014) aims to harmonize national insolvency laws to facilitate cross-border insolvency procedures. This article will delve into the recent decision by the Council of the EU (Padome) to agree on its position regarding the proposal for a regulation on preventive restructuring frameworks, second chance, and measures to increase the efficiency of restructuring, insolvency, and discharge procedures (hereafter ‘the proposal’).

Background

The EU’s goal is to improve the effectiveness of insolvency proceedings and encourage companies in financial distress to seek restructuring rather than immediate liquidation. The proposed regulation seeks to improve the functioning of the EU’s internal market by creating a predictable and efficient insolvency framework that respects national specificities.

Key Aspects of the Proposal

1. Preventive Restructuring: The proposal encourages early intervention by introducing preventive restructuring proceedings. These proceedings allow debtors to restructure their debts voluntarily or, if necessary, with the support of a court, before the company becomes insolvent.

2. Second Chance: The proposal aims to give debtors a ‘second chance’ after insolvency by providing for discharge from debts, i.e., releasing the debtor from certain debts following a successful restructuring or insolvency procedure.

3. Efficiency of Restructuring and Insolvency Procedures: The proposal seeks to increase the efficiency of insolvency proceedings by introducing minimum standards for the appointment and remuneration of insolvency practitioners, improving court cooperation, and harmonizing rules on the ranking of claims.

Padome’s Position

On June 16, 2021, the Council of the EU (Padome) agreed on its position regarding the draft regulation. The agreement builds on the work done by the Belgian Presidency of the Council, which held negotiations with the European Parliament and the European Commission. Here are some key aspects of Padome’s position:

• Preventive Restructuring: Padome supports the introduction of preventive restructuring proceedings, allowing companies to address financial difficulties early. However, it proposes some flexibility to ensure that national insolvency systems can function effectively.

• Second Chance: Padome agrees with providing debtors with a fresh start following successful restructuring or insolvency proceedings. However, it proposes specific rules to prevent abuse and ensures fairness towards creditors.

• Efficiency: Padome supports measures to increase the efficiency of insolvency proceedings but seeks to avoid one-size-fits-all approaches that could hinder national insolvency systems’ effectiveness.

Next Steps

Having agreed on its position, Padome will now enter into trialogue negotiations with the European Parliament and the European Commission to find a common approach to the proposal. Once agreement is reached, the proposal will have to be adopted by both the Council and the European Parliament before it can enter into force.

Conclusion

Maksātnespējas tiesības (insolvency rights) are essential for ensuring the smooth functioning of the EU’s internal market. Padome’s agreement on its position regarding the proposal for a regulation on preventive restructuring, second chance, and measures to increase the efficiency of restructuring, insolvency, and discharge procedures demonstrates the EU’s commitment to improving these critical aspects of EU law. The proposed regulation seeks to create a balanced framework that respects national specificities while promoting predictability, efficiency, and fairness in insolvency proceedings across the EU.