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Proposal for a Directive harmonising certain aspects of insolvency law – Corporate Finance Lab

Today the European Commission presented a new proposal for a directive to harmonise certain aspects of insolvency law. The proposal can be consulted here.

According to the Commission, the very divergent insolvency rules in the EU are often mentioned as a significant obstacle to the further development of the Capital Markets Union. They deliver different outcomes across Member States, and in particular they have different degrees of efficiency in terms of the time it takes to liquidate a company and the value that can eventually be recovered.

The proposal aims at encouraging cross border investment within the single market through targeted harmonisation of insolvency proceedings. It targets the three key dimensions of insolvency law: (i) the recovery of assets from the liquidated insolvency estate; (ii) the efficiency of procedures; and (iii) the predictable and fair distribution of recovered value among creditors. It provides for:

  • Minimum set of harmonised conditions for exercising avoidance actions;
  • Strengthening asset traceability through improved access by insolvency practitioners to asset registers, including in a cross-border setting;
  • Provisions to introduce so called ‘pre-pack’ liquidation procedures.
    Provisions on a duty of directors to timely file for insolvency to avoid potential asset value losses for creditors;
  • Simplified liquidation procedure for insolvent microenterprises;
  • Requirements for improving the representation of creditors’ interests in the proceedings through creditors’ committees;
  • Enhanced transparency for creditors on the key features of national insolvency regimes, including on the rules governing insolvency triggers and the ranking of claims.

A more detailed analysis of this proposal will follow shortly.

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