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.
Avoiding Forum Shopping
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.
- A new European approach to business failure and insolvency - COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE - Communication
- Proposal for a Regulation amending Council Regulation (EC) No 1346/2000 on insolvency proceedings - Proposal