On 7 December 2022, the European Commission published its proposal for a directive harmonising certain aspects of insolvency law (the Insolvency Directive). 

Aims

The Insolvency Directive seeks to offer more certainty and create a common minimum standard of insolvency regimes across Member States, encouraging more effective cross-border investment. 

It aims to harmonise three key areas of EU insolvency law:

• the recovery of assets 

• the efficiency of proceedings, and 

• the distribution of recovered assets among creditors.

Key aspects

The proposed new measures include:

• Directors' duties – an obligation on directors to file for insolvency proceedings within three months after they become aware that the company is insolvent. Directors will be personally liable for damages if they fail to comply. 

• Pre-pack proceedings – a new regime to allow a sale of the debtor’s business to be negotiated before the opening of insolvency proceedings and implemented shortly after proceedings are commenced (albeit with some limitations that differ to the UK regime). 

• Avoidance actions – three grounds for transaction avoidance to enable an insolvent company to recover assets where the transaction was at an undervalue, intentionally detrimental or fraudulent or a creditor preference. 

• Asset tracing – access by insolvency practitioners to beneficial ownership information and insolvency court access to bank account information to facilitate cross-border asset tracing and recovery across Member States.

Next Steps

The proposal will now go through the legislative process and may be amended before it is adopted by the EU Parliament and Council. Member States will then be required to implement it (usually within a period of 2 years). 

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.