Council Regulation (EC) 1346/2000 on insolvency proceedings (the “Regulation”), entered into force on 31 May 2002 and was originally enacted to harmonize rules in relation to cross-border insolvency proceedings within the European Union, save for Denmark.
The Regulation has been perceived as a success in the area of private international law and was recast as Regulation (EU) 2015/848 of the European Parliament and of the Council on insolvency proceedings (the “Recast Regulation”), to cater for the deficiencies of the previous framework as well as introduce new provisions in order to enhance the effective administration of such proceedings in Member States.
The key reforms brought about by the Recast Regulation include:
Scope – It has been widened to cover also pre-insolvency proceedings such as rescue, adjustment of debt, reorganisation or liquidation. Annex A of the Recast Regulation now exhaustively lists insolvency and pre-insolvency proceedings of Member States, falling within the scope of the Recast Regulation.
Centre of Main Interests (COMI) – The COMI requirement for the establishment of jurisdiction to instigate insolvency proceedings has been revamped and is now defined as “… the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties”. Although COMI will be presumed to be the debtor’s registered office in case of a company, or habitual residence in case of an individual unless proven otherwise, this presumption will not apply if the registered office or the habitual residence has been moved to another Member State within three or six months prior to the opening of the proceedings. This is geared towards preventing forum shopping.
Jurisdiction for actions closely linked – It is now stipulated that the court where main insolvency proceedings have been opened, shall have jurisdiction for actions which derive directly from such proceedings and are closely linked, such as avoidance actions aiming to achieve consistency.
Insolvency Registers – The Recast Regulation imposes a positive obligation on Member States to establish and maintain insolvency registers in their territory containing information on insolvency proceedings. In addition, the Commission is tasked to develop a platform for the interconnection of national registers with the European e-Justice Portal which shall provide public electronic access to information contained therein.
Secondary proceedings – These are no longer limited to winding-up proceedings, as was the case in the Regulation, and can be any of those mentioned in Annex A. The insolvency practitioner in the main insolvency proceedings may give an undertaking, to avoid secondary proceedings for assets located in another Member State, that it will comply with the distribution and priority rights under the national law of that Member State as if secondary proceedings were opened, pending on the approval by known local creditors for the undertaking to be binding on the estate. In addition, new provisions have been added on the cooperation and communication between the courts of the main and secondary insolvency proceedings concerning the same debtor. The insolvency practitioner of the main proceedings is given a right to intervene in secondary proceedings and request a suspension of the secondary proceedings for a period of three months in case of a stay in the main proceedings provided the creditors’ interests are guaranteed.
Group of Companies – The Recast Regulation introduces a novel framework for insolvency proceedings relating to members of a group of companies. Insolvency practitioners related to insolvency proceedings of members of a group of companies and a court where such proceedings have been opened are under an obligation to cooperate and communicate among themselves to facilitate the effective administration of the proceedings, including the request for a restructuring plan for all or some members of the group
Lodging Claims – The Commission is under an obligation to create standard forms for the lodging of claims. In cases of foreign creditors, a claim must be lodged within 30 days following the date of publication of the insolvency proceedings in the national insolvency register.
The Recast Regulation entered into force from 26 June 2015, the majority of its provisions applying to insolvency proceedings within the Union from 26 June 2017 with the exception of: the obligation upon Member States to establish national insolvency registers which shall come into force from 26 June 2018 and the creation of an interconnected online register from 26 June 2019.