Current state of play
- The EC Regulation on Insolvency Proceedings (EIR) applies in all EU member states (except Denmark). This means that an insolvency process listed in the annex to the EIR commenced in a member state is afforded automatic recognition and – to a certain extent - exclusivity in any other EU member state (except Denmark).
- UK schemes of arrangement benefit from recognition under certain other EU legislation (but not the EIR).
- Credit institutions, insurance undertakings, investment undertakings which provide services involving the holding of funds or securities for third parties and collective investment undertakings (Financial Institutions) are not in the scope of the EIR. However, the UK and the other EU member states have adopted legislation to implement the EU Credit Institutions Winding-up Directive and the Insurance Undertakings Winding-up Directive. These give recognition to insolvency and reorganisation measures commenced in a Financial Institution’s home EU member state without any further requirements and without the opportunity to open territorially limited proceedings.
What should I be thinking about now?
- What insolvency proceedings in EU member states are available to the relevant entity? Which process would be most beneficial (including from a later recognition perspective)?
- Is an English scheme of arrangement an available and beneficial option?
- Is further legal analysis required to ensure that any cross-border insolvency restructuring will have the intended effects across all relevant jurisdiction?
- Would separate restructuring measures with respect to branch offices, subsidiaries or assets in the UK have to be taken in a multi-jurisdictional restructuring or insolvency?
Should the UK leave the EU, the answers to the above questions will depend upon the nature of a post-Brexit UK-EU relationship.