Cross-border insolvency proceedings
EU cross-border insolvency procedures to lodge claims will be safer and easier. EU Regulation No. 848 of 20 May 2015 for greater judicial cooperation in civil matters between EU Member States has taken into effect. The Regulation allows companies to restructure their debt more easily and facilitates the lodging of claims.
The Regulation:
- Recognises judgments of the courts of Member States in the field of cross-border insolvency;
- Solves conflicts of competence between jurisdictions on national rules to be applied for lodging cross-border claims;
- Allows judges to evaluate the practice of “forum shopping.” A judge can assess the change of residence of the debtor to another country shortly before having deposited a declaration of insolvency and determine that it is not an attempt to protect assets against the legitimate claims of creditors;
- Sets out the rules for managing primary and secondary insolvency proceedings. Those entitled may request the opening of secondary insolvency proceedings in a Member State where the debtor has a legal residence;
- Provides for the management of the bankruptcy assets of the debtor by joining the procedures to restructure the debt in a cross-border context, without causing damage to the local creditors and vice versa.
- The rules for the coordinated restructuring of debt of a group of companies make the procedures for EU cross-border insolvency more effective and facilitate the rescue of a group of undertakings.
By 2019, the bankruptcy registers of every EU country will be networked together. The creditors who have residence, domicile or registered office in the EU must be informed of the opening of insolvency proceedings concerning the assets of their debtor. Therefore, the enforcing court and the liquidator/judicial factor of an EU Member State must follow EU criteria and foreign creditors can participate more easily in the insolvency proceedings.
Glossary:
Collective proceeding: winding-up, creditors’ voluntary winding-up, administration. These are judicial proceedings permitted when a commercial undertaking is insolvent, i.e., unable to pay its debts to creditors.
Debt restructuring proceedings: flexible instrument to reduce the debt exposure of a company, through an agreement between at least 60% of the creditors
Secondary insolvency proceedings: An Italian judge, for instance, can declare the bankruptcy of a company provided that the latter has at least a secondary establishment (e.g., in Italy).
General body of creditors: Holders of claims vis-à-vis the debtor
Bankruptcy assets: Movable and immovable property subject to bankruptcy
