The European Commission has reached agreement to update the current insolvency regulation known as Council Regulation (EC) No 1346/2000 dated May 29, 2000 on insolvency proceedings. The goal of the new Regulation is to rescue companies in distress. The proposed insolvency Regulation will change the member states’ insolvency proceedings with respect to both personal and corporate insolvencies and will include modified restructuring options that may not always result in a formal insolvency proceeding and liquidation.
In particular, the proposed Regulation states that, in certain circumstances, courts will have the ability to refuse to open secondary proceedings in another member state, even if the insolvency practitioner in the main proceeding makes such a request. This will have a substantial impact on companies operating across multiple jurisdictions because such companies would then be restructured in one country rather than in various competing processes in various countries. The new rules would also limit the current practice of “forum shopping”, where litigants file their case in the country where they believe they will get the most favourable outcome.
Ultimately, the new Regulation is aimed at changing the focus away from liquidation and to focus on restructurings, as well as to make cross-border insolvency proceedings more efficient. It is expected that the new Regulation will be formally adopted by the European Parliament in the second quarter of this year. If it is approved as planned, the new Regulation will come into effect during the summer of 2017.
Please refer to the press release dated December 13, 2014 for more information on this subject.