It is estimated that around 200,000 companies become bankrupt each year in Europe. More than half do not survive the first five years of existence, leading to the loss of more than 1.7 million jobs each year. One-fifth of these bankrupt companies operate across national borders, so their eventual demise has an international dimension.

In its February session, European parliament endorsed a draft amendment to Council Regulation (ES) No. 1346/2000 of May 29, 2000 on insolvency proceedings. This insolvency law was adopted in 2000 and has been in effect since May 31, 2002. Looking back after 10 years of its operation, the Commission drew on practical experiences of the regulation to propose reforms. These amendments aim to create an up-to-date tool for handling the cross-border insolvencies of companies and individuals in the European Union.

The proposed measures can be summed up in five key points:

1) Scope

The scope of the regulation is extended through a revised definition of insolvency proceedings that includes hybrid and pre-insolvency proceedings as well as debt discharge proceedings and other insolvency proceedings for natural persons who do not fit into the current definition. 

2) Jurisdiction 

The bill clarifies the rules and improves the procedural framework for establishing jurisdiction. The concept of the debtor’s Centre of Main Interests ("COMI") is retained, which means that matters are dealt with in a jurisdiction where the debtor has a real connection rather than one chosen through forum shopping. European parliament has called for a 3-month period to determine the debtor’s COMI before the insolvency proceedings are launched. The draft also proposes a new definition of COMI to guide legal practitioners and introduces provisions on determining the COMI of individuals. It refines the circumstances for rebutting the presumption that a legal person’s COMI is in its place of domicile.

3) Secondary proceedings

Increasing the efficiency of insolvency proceedings is another key aim. Under the bill, courts may refuse to launch secondary proceedings that are not needed to protect the interests of local creditors. At the same time, secondary proceedings no longer have to be wind-up proceedings and greater cooperation is required between courts in main and secondary proceedings.

4) Publishing court decisions and lodging claims 

Other draft provisions mandate the publication of court decisions in cross-border insolvency cases in a public electronic register in Member States. The interconnection of national insolvency registers is required. The bill also introduces standard forms for lodging claims.

5) Groups of companies 

Finally, the draft amendment calls for better coordination of insolvency proceedings involving different members of the same group of companies. Liquidators and courts involved in the various main proceedings must cooperate and communicate with each other. These liquidators are given procedural tools to request a stay of other relevant proceedings and propose a rescue plan for members of a group in insolvency. The Council of the European Union is due to discuss the proposal in June this year. New rules on cross-border insolvency proceedings should, thus, be implemented relatively quickly.

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