European Justice Ministers agree on modern insolvency rules
A "rescue and recovery" approach to insolvency will give viable businesses a second chance when facing financial difficulties cross-border – following political agreement by ministers in the Justice Council yesterday. The modernised rules (IP/12/1354) will make it easier for businesses to restructure and for creditors to get their money back, as well as ensuring that procedures for cross-border insolvencies are effective and efficient.
Věra Jourová, EU Justice Commissioner said, "Every year in the EU, 50,000 companies are faced with cross-border insolvency proceedings – equating to one in four of all insolvency proceedings in the EU. Currently, each year, an estimated 400,000 people lose their jobs due to cross-border insolvencies. Today's political agreement is an important milestone on our path in creating the best possible environment for growth and investment in Europe. We have risen to the challenge of the financial crisis and we now will have insolvency rules that will reinforce the Single market".
"The new rules will give viable businesses a much-needed second chance and will improve the effectiveness of EU insolvency proceedings. With these new rules, we are building solid foundations for boosting growth and jobs in Europe. We are ensuring that entrepreneurs are confident to invest in Europe. Workers can know that if their company faces difficulties, there is a bigger chance for it to recover and for their job to survive. I thank the Italian Presidency for its swift work to reach an agreement for these rules, which are so important in building an attractive environment for investment in Europe."
The modernised Regulation will bring:
* A broadened scope: Therules will cover a broader range of commercial and personal insolvency proceedings, such as the so-called Spanish scheme of arrangement, the Italian reorganisation plan procedure and the * Finnish consumer insolvency procedures. Overall, the reform will allow 19 new national insolvency procedures to benefit from the Regulation.
* Legal certainty and safeguards against bankruptcy tourism: If a debtor relocates shortly before filing for insolvency, the court will have to carefully look into all circumstances of the case to see that the relocation is genuine and not abusive.
* Interconnected insolvency registers: Businesses, creditors and investors will have easy access to any national insolvency register on the European e-Justice Portal. This system has already been piloted for seven Member States (IP/14/774).
* Increased chances to rescue companies: The new rules avoid secondary proceedings in other Member States being opened, while at the same time guaranteeing the interests of local creditors. It will be easier to restructure companies in a cross-border context.
* A framework for group insolvency proceedings: With increased efficiency for insolvency proceedings concerning different members of a group of companies, there will be greater chances of rescuing the group as a whole.
Today's political agreement follows the general approach by Ministers in June this year (MEMO/14/88) and endorses the outcome of negotiations between the European Parliament and the Council on the text of the new law.
The new Regulation will replace the former European Insolvency Regulation (Regulation (EC) No 1346/2000 on insolvency proceedings), which has applied since 31 May 2002. Together with the Commission's Recommendation on a new approach to business failure and insolvency (IP/14/254), the new Insolvency Regulation will help move Europe towards a rescue-oriented approach to insolvency.
The Council is due to formally adopt the Regulation in March 2015, and it will then be formally adopted by the European Parliament (the Legal Affairs (JURI) committee and plenary) in April or May 2015. The Regulation will enter into force 24 months later.
For more information
Webpage of Věra Jourová, EU Commissioner for Justice: http://ec.europa.eu/commission/2014-2019/jourova_en
Follow the Commissioner on Twitter: @VeraJourova