Brussels, 13 December 2024
The EU Council adopted its position on key elements of a proposed directive to harmonise certain aspects of insolvency law. This partial general approach focuses on measures to preserve the insolvency estate, the duties of directors in the event of insolvency and transparency obligations.
Bringing national insolvency regimes closer to each other will make the EU more attractive for investors. Currently cross-border investors have to take 27 different insolvency rules into account when assessing an investment opportunity.
A favourable investment climate is a precondition to boost the EU’s competitiveness. This EU insolvency law will remove an important obstacle for cross-border investments.
Bence Tuzson, Hungarian Minister for Justice
Core elements of the Council position
Avoidance actions
In order to arrive at EU-wide minimum rules which prevent debtors from reducing the value that creditors can obtain following the insolvency of a company, the Council agreed on a number of provisions related to avoidance actions. Avoidance actions are mechanisms to challenge transactions of the debtor before the start of the bankruptcy procedure and, as such, protect the insolvency estate against the illegitimate removal of assets.
Tracing assets
These provisions require member states to designate courts or authorities that are empowered, upon the request of an insolvency practitioner, to access and search national centralised bank account registers of all member states as regards information on assets that belong or should belong to the insolvency estate. The proposal also ensures access by insolvency practitioners to beneficial ownership registers and certain national registers and databases. Their goal is to improve the access of insolvency practitioners, irrespective of the country they are established in, to bank account information and other relevant information on assets. Member states can maintain existing, or introduce new, measures that further facilitate access to information by insolvency practitioners.
Directors’ duty
Another measure to maximise the recovery value for the creditor is to align national rules concerning the duty of a director to file for insolvency proceedings in a timely manner. The Council position ensures that directors must submit the request for the opening of insolvency proceedings within three months of becoming aware that the company is in financial distress. Member states may also provide that this obligation is suspended if they take measures that are designed to avoid damage for the creditors of the insolvent company and ensure a level of protection of creditors that is equivalent to the protection provided by the duty to file for insolvency proceedings.
Enhancing transparency of national insolvency proceedings
Another measure to reduce the barrier of investing in another member state involves new obligations for EU countries to produce a factsheet with practical information on the main features of their domestic laws on insolvency proceedings.
Next steps
During the Polish presidency, member state experts will continue discussions on the remaining provisions.
Background
The directive was proposed by the Commission on 7 December 2022, together with other measures intended to further develop the EU’s capital markets union.
The lack of harmonised insolvency regimes has consistently been identified as a barrier to cross-border investments. A 2015 report of the Council, the European Parliament, the Commission and the European Central Bank concluded that insolvency law was a key area for achieving a “true” capital markets union. More harmonised insolvency rules contribute to improved certainty and cost reductions for (foreign) investors.
The main elements of the proposal are to ensure that creditors can recover the maximum value from the liquidated company, to improve the efficiency of insolvency procedures and increase the predictability and fair distribution of recovered value among creditors.
- Directive harmonising certain aspects of insolvency law (partial general approach), 29 November 2024
- European capital markets (Background information)
Source – EU Council: Visit the meeting page