European Insolvency Rules – Improved?

Lithuania: 20 May 2015 the European Parliament adopted amendments to the European Regulation on Insolvency Proceedings No. 1346 (Regulation).

The new amendments introduce:

  • Easy access to national insolvency registers: a new database (European e-Justice Portal) will uniquely enable creditors, investors, business partners, lawyers, and others to check if e.g. business partners are not subject to insolvency proceedings.
  • Definition of COMI: while the earlier version of the Regulation did not define COMI (the Centre Of Main Interest of the debtor), now COMI is described as the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties. The presumption of registered office remains.
  • Restrictions on forum shopping: the previous practice of moving the registered office to another country just before insolvency in order to obtain a better insolvency regime is limited. Where the registered office has been changed three months prior to the filing of insolvency proceedings, the registered office presumption will not be applied. As a result, the burden of proof will increase significantly. However, there will be an alternative, where available, to wait for three months and then to file for opening of insolvency proceedings. The latter possibility raises a question if limitation of “bad forum shopping” will be effective in practice.
  • Broader scope: the Regulation will cover more types of corporate and individual insolvency proceedings listed in the annexes (e.g. Italian reorganization plan procedure).
  • More restructuring possibilities: opening of secondary proceedings is limited. Besides, secondary proceedings will no longer necessarily be winding-up proceedings.
  • More possibilities to save a group of companies: a new obligation is introduced for courts and officeholders to cooperate in case of international insolvency. This should increase the chances of saving a group of companies as a whole.

The amended Regulation (EU) 2015/848 was published in the Official Journal 5 June, 2015 and with several exceptions will come into force 26 June 2017.

Source: Official Journal of the European Union, No.: L 141/19.

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