Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings comes into effect on 26 June 2017 for insolvency proceedings that are opened on or after that date. The Recast Regulation replaces the EC Regulation (1346/2000) on insolvency proceedings and has direct effect in the UK until such time as the UK leaves the EU.
The amendments are aimed at changing the focus away from liquidations and towards restructurings, as well as making cross-border insolvency proceedings – especially of groups operating across multiple jurisdictions – more efficient.
The main changes are:
- The Recast Regulation is broader in scope than the original, as it now includes interim proceedings which have the purpose of rescue, adjustment of debt or reorganisation, as well as liquidation. Each member state has produced an exhaustive list of procedures which fall within the Recast Regulation and the UK list does not include schemes of arrangement.
- A new “look back” period has been introduced for determining a debtor’s COMI in an attempt to limit “bad forum shopping.” It is 3 months for a company or an individual carrying on business and 6 months for any other individual. If there has been a change of COMI during the look back period, the presumption that the debtor’s COMI is in its current registered office location is disapplied. The Court in the member state of the earlier location will have jurisdiction to open proceedings.
- A flexible framework for co-operation between officeholders and courts dealing with the insolvency of a group of companies in different member states now allows for coordination of the insolvencies and permitting group members to opt out of the procedure if they wish.
- Secondary proceedings are no longer restricted to liquidation and can be avoided by the insolvency practitioner giving an undertaking to distribute assets in the secondary jurisdiction to creditors in that member state in accordance with local rules.
- Also coming into effect on 26 June is The Insolvency Amendment (EU 2015/848) Regulations 2017 which replaces references in Insolvency Act 1986 and Insolvency Rules 2016 to the original Regulation with references to the Recast Regulation. There are new standard forms for use in all member states which will be available on the European e-Justice Portal and in the UK, Companies House will be producing new forms to comply with the notice requirements.