Companies and individuals in the EU are increasingly establishing business activities or economic interests in EU countries other than where their core activities are located. If they become insolvent, there may be direct implications on the proper functioning of the internal market.
To establish a common framework for insolvency proceedings in the EU, the Council set up a Regulation on insolvency proceedings.
It establishes common rules on:
- the court competent to open insolvency proceedings;
- the applicable law;
- the recognition of the court's decisions when a debtor (a company, a trader or an individual) becomes insolvent.
The main objective is to avoid the transfer of assets or judicial proceedings from one EU country to another, which can improve the legal position of companies or individuals. The regulation does not apply to Denmark.
The Commission is proposing to modernise the current rules on cross border insolvency which date from 2000. Benefitting from ten years of experience, the new rules will shift focus away from liquidation and develop a new approach to helping businesses overcome financial difficulties, all the while protecting creditors' right to get their money back.
- Proposal for a Regulation amending Council Regulation (EC) No 1346/2000 on insolvency proceedings - Proposal
The Commission insolvency initiative aims at providing tools which would allow viable businesses in distress to be rescued and honest but bankrupt individuals to be given a second chance. The Commission intends to present a legislative proposal on insolvency by the end of 2016.
The public consultation on the insolvency initiative was launched on 23 March 2016. The public consultation will be opened for 12 weeks until 14 June 2016. The consultation seeks stakeholders' views on key insolvency aspects in the EU to ensure that national insolvency frameworks work well, in particular in a cross-border context. The responses to the public consultation will be used to identify the aspects to be possibly dealt with in the Commission's future insolvency initiative. The results of the consultation are without prejudice to any action the Commission may take in this field.
To participate in the consultation, please follow the link below (the questionnaire is available only in English for the moment, but other languages will follow shortly):
Conference: Convergence of insolvency frameworks within the European Union - the way forward
Conference organised under the auspices of the Slovak Presidency of the Council of the European Union
Tuesday 12 July 2016 in Brussels - 09:30-16:30 at Conference Centre Albert Borschette (CCAB), Room 0A, 36 Rue Froissart, Brussels
As a follow up of the Commission Recommendation of 2014 on a new approach on business failure and insolvency, and in line with the 2015 Capital Markets Union action plan, the European Commission is in the process of preparation of a legislative initiative addressing certain aspects of substantive insolvency laws. This event, which hopefully will bring together the representatives of the Member States, European Parliament, national Parliaments, business and household associations, members of judiciary, legal practitioners, entrepreneurs and academics on issues related to insolvencydebt restructuring and second chance, will contribute to the preparatory work of the Commission.
You can find complete information about the programme of the conference, the method of registration and how to get to the conference venue here
In December 2015, following an open call for interest, the Commission set up an Expert Group consisting of 22 independent (non-governmental) experts, mainly legal professionals or academics, who were selected in an open procedure. The Group shall assist the Commission in the preparation of a potential legislative proposal containing minimum standards for a harmonised restructuring and insolvency law in the EU. The Commission may consult the group on any matter relating to this proposal.
More information about the Expert Group, their mandate and their members, as well as the agendas and minutes from meetings:
To assist in the evaluation of impacts of the several policy options considered, the Commission created a group of main stakeholders comprising of representatives of businesses, households and consumers, insolvency practitioners, lawyers, accountants, financial services providers, investors, and think-tanks. The group met three times and the minutes of these meetings can be consulted below:
Study on a new approach to business failure and insolvency
This report, commissioned by the European Commission DG Justice, documents a comparative study on substantive insolvency law throughout the EU. It also includes an analysis of the 2014 Recommendation on a new approach to business failure and insolvency and its implementation in Member States. The report’s findings and analysis were based on data on various insolvency law matters which was provided by national reporters from all EU Member States and two comparator countries, the United States and Norway. The report provides a horizontal cross-cutting analysis of the data identifying areas where disparities in national law create problems that have impacts outside of national boundaries.
Key policy documents
A number of key policy documents highlight the importance of addressing insolvency by reforming the existing framework in order to foster growth and investment and facilitate free flow of capital.
1. Capital Markets Union Action Plan
• Action Plan on Building a Capital Markets Union, COM(2015) 468 final, 30.9.2015 (Insolvency on pp. 24-25)
• Economic analysis accompanying Action Plan on Building a Capital Markets Union - SWD(2015) 183 final, 30.9.2015 (Insolvency on pp. 73-78)
• Feedback Statement on the Green Paper "Building a Capital Markets Union" SWD(2015) 184 final, 30.9.2015 (Insolvency on pp. 59-60)
2. Commission's Communication - Upgrading the Single Market: more opportunities for people and business, COM(2015) 550 final, 28.10.2015 (Insolvency on p. 6)
3. Commission Communication - Towards the completion of the Banking Union", COM(2015) 587 final, 24.11.2015 (Insolvency on p. 10
4. Green Paper on retail financial services – Better products, more choice, and greater opportunities for consumers and businesses, COM(2015) 630 final, 10.12.2015 (Insolvency on p. 25)
5. The Five Presidents' Report: Completing Europe's Economic and Monetary Union, 22.6.2015 (Insolvency on p. 12)
6. Commission's Communication – A new European approach to business failure and insolvency, COM(2012) 742 final, 12.12.2012
7. European Parliament Report with recommendations to the Commission on insolvency proceedings in the context of EU company law, 17.10.2011 (Insolvency on pp. 12-13)
Legal acts and other documents
Legal acts and other related documents describing different aspects and implications concerning insolvency and business failures
1. Recommendation of the European Commission on a new approach to business failure and insolvency, C(2014) 1500 final, 12.3.2014
2. Evaluation of the implementation of the Commission Recommendation of 12.3.2014 on a new approach to business failure and insolvency, 30.9.2015
3. Regulation 848/2015/EU of 20 May 2015 on insolvency proceedings (replacing as of June 2017 Regulation 1346/2000 on insolvency), L 141/19, 5.6.2015
4. European Commission, Directorate-General for Economic and Financial Affairs: The Economic Impact of Rescue and Recovery Frameworks, Ares(2015)3579794, 31.08.2015
5. IMF Staff Papers on Eurozone
• IMF Country Report No 15/204 - 2015 Article IV consultation – Press release; Staff report; and statement by the executive director, July 2015. (Insolvency on p. 22)
• IMF Country report No 15/205 – Euro area policies – Selected issues, July 2015. (Insolvency on pgs. 57-77)