The European Union has a complex framework for insolvency regulation, but it's essential to understand the basics. The EU's insolvency regulation is governed by the Insolvency Regulation (EC) No 2001/2003, which sets out the rules for cross-border insolvency cases.
This regulation aims to provide a harmonized approach to insolvency proceedings across the EU member states. The regulation applies to all EU member states, ensuring a consistent framework for dealing with insolvency cases.
The Insolvency Regulation provides for the recognition of insolvency proceedings in other EU member states, making it easier to deal with cross-border insolvency cases. This means that if a company becomes insolvent in one EU country, it can be declared insolvent in other EU countries as well.
The regulation also sets out the rules for the coordination of insolvency proceedings, ensuring that multiple EU countries are involved in the same insolvency case. This coordination is crucial for ensuring that the insolvency case is handled efficiently and effectively.
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European Regulation (EIR)
The European Insolvency Regulation (EIR) is a crucial aspect of insolvency proceedings in the European Union. It was recast in 2015 with Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015.
The EIR has undergone several amendments, including Regulation (EU) 2018/946 of the European Parliament and of the Council of 4 July 2018, which replaced Annexes A and B to the Regulation. Additionally, Regulation (EU) 2017/353 of the European Parliament and of the Council of 15 February 2017 made further changes to the Annexes.
The EIR provides standard forms for use in insolvency proceedings, such as the Notice of insolvency proceedings and the Standard claims form, which can be accessed through Commission implementing Regulation (EU) 2017/1105.
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Purpose
The European Regulation (EIR) aims to inform and assist in insolvency law reform, providing a reference tool for national authorities and legislative bodies.
The EIR is designed to balance the need to address a debtor's financial difficulty efficiently with the interests of creditors and other stakeholders.
A key objective of the EIR is to achieve a balance between different interests, including employment and taxation.
The EIR provides a comprehensive statement of the key objectives and principles that should be reflected in a State's insolvency laws.
This balance is crucial for ensuring that insolvency laws are effective and fair for all parties involved.
The advice provided in the EIR aims to address a debtor's financial difficulty as quickly and efficiently as possible.
European Regulation (EIR)
The European Insolvency Regulation (EIR) is a crucial framework for insolvency proceedings across the European Union. It's a comprehensive regulation that has undergone several updates, with the latest recast being Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings.
This regulation has been amended several times, with notable updates including Regulation (EU) 2018/946 of the European Parliament and of the Council of 4 July 2018, which replaced Annexes A and B to Regulation (EU) 2015/848 on insolvency proceedings. Another update was Regulation (EU) 2017/353 of the European Parliament and of the Council of 15 February 2017, which also replaced Annexes A and B to Regulation (EU) 2015/848 on insolvency proceedings.
To facilitate the application of the EIR, standard forms have been established. These forms are available on the European Union's website and are used for various purposes, including informing known foreign creditors of the opening of insolvency proceedings and lodging claims. Some of the standard forms include:
- Notice of insolvency proceedings to be used to inform known foreign creditors of the opening of insolvency proceedings (Annexe 1)
- Standard claims form which may be used by foreign creditors for the lodgement of claims (Annexe 2)
- Objections of insolvency practitioners appointed in respect of group members with regard to group coordination proceedings (Annexe 3)
- Request for access to information concerning natural person contained in insolvency registers (Annexe 4)
The EIR also requires member states to provide information on domestic legislations and registers. This information is available on the European Union's website and includes data on national insolvency proceedings, outcomes, and texts dealing with the concrete application of the EIR 2015 (recast).
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Group Companies and Relevance
Group companies are increasingly conducting international trade and finance through interconnected groups of corporations, found in both emerging and developed markets.
The Recast Regulation introduces a framework for group insolvency proceedings, aiming to improve efficiency and encourage cooperation across the group.
Currently, each insolvent debtor company is subject to separate insolvency proceedings in the place of its COMI, but under the new framework, insolvency practitioners will be obliged to cooperate to facilitate the effective administration of proceedings.
Strong and effective insolvency regimes are essential for States to prevent or limit financial crises and facilitate rapid and orderly workouts from excessive indebtedness.
The Recast Regulation also introduces group coordination proceedings, which may be requested by the insolvency practitioner appointed to any group company to propose a comprehensive set of measures for an integrated approach to the resolution of the group members' insolvencies.
Insolvency practitioners in other member states may choose not to participate in proposed group coordination proceedings, making them only effective where they are consensual.
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Key Provisions and Content
The EC Regulation on Insolvency Proceedings 2000 was passed on 29 May 2000 and came into effect on 31 May 2002.
It applies between all member states of the European Union, with the exception of Denmark, which has an opt-out from the EU's Area of freedom, security and justice.
The Regulation focuses on creating a framework for the commencement of proceedings and for the automatic recognition and co-operation between the different member states.
Unlike other European regulations, it does not seek to harmonize insolvency laws between the different member states.
The EC Regulation employs the concept of a centre of main interest (COMI), which is left to member states in their implementation of the Regulation.
The definition of the COMI is: 'The "centre of main interests" should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.'
If the COMI of an entity is outside of the European Union, the insolvency proceedings are not subject to the Regulation.
In relation to companies, there is a presumption that the registered office will be the COMI of the company, but this presumption can be rebutted.
The EC Regulation does not define insolvency, but it does define insolvency proceedings as being 'collective insolvency proceedings which entail the partial or total divestment of a debtor and the appointment of a liquidator'.
Article 3 divides proceedings into main proceedings and territorial proceedings.
Main proceedings are accorded extraterritorial effect throughout the European Union.
The Regulation was amended in 2015, which again applied to all EU member states except Denmark.
The Recast Regulation contains a codification of the method of determination of centre of main interests (COMI).
COMI is presumed to be at the registered office, but the presumption is rebuttable if the central administration is located in another Member State.
The registered office presumption will not apply if there has been a move of the registered office during the three months prior to the opening of proceedings.
The Recast Regulation is extended in scope to new categories of proceedings.
It covers hybrid and pre-insolvency proceedings and secondary proceedings will no longer be limited to liquidation proceedings where a company has an establishment.
The definition of 'establishment' is amended to 'any place of operations where the debtor carries out a non-transitory economic activity with human means and assets'.
The relevant time for assessing an establishment will be either the time of the opening of the secondary proceedings or, alternatively, the three month period prior to that.
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Secondary proceedings may still be possible even if an establishment has recently closed.
The insolvency practitioner in the main proceedings is now expressly permitted to provide undertakings to treat local creditors as they would be treated under secondary proceedings.
The courts of the member state where main insolvency proceedings are opened will also have jurisdiction to hear actions derived directly from the insolvency proceedings that are closely linked, such as avoidance actions.
There will be new linked registers of insolvency proceedings.
The Recast Regulation calls for both national electronically-searchable databases in each member state, and for these to then be linked via a central European e-justice portal.
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Frequently Asked Questions
What is the insolvency law in the US?
In the US, a debtor is considered insolvent if their total debts exceed the value of their assets, or if they're consistently failing to pay debts as they come due. This is based on 28 U.S. Code § 3302, which outlines the federal insolvency law.
What is the insolvency regulation 2000?
The Insolvency Regulation 2000 is a European law that governs insolvency proceedings for companies operating across multiple EU countries. It sets rules for resolving insolvency disputes involving EU-based debtors with international operations.
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