Brexit materials for Restructuring & Insolvency practitioners

Brexit materials for Restructuring & Insolvency practitioners

This News Analysis highlights the Brexit materials available on Lexis®PSL Restructuring & Insolvency (R&I) (subscription required) and sets out our preparations for implementation period (IP) completion day on 31 December 2020.

During the Brexit IP/transitional period, the key EU regulations effectively remained in place for R&I practitioners, but the situation changes significantly on IP completion day (31 December 2020 at 11.00 pm).

From IP completion day, assuming there is no deal on insolvency matters, the transition period ends, the UK is no longer an EU Member State and various Brexit SIs kick in. Essentially the key operative parts of Regulation (EU) 2015/848 (Recast Regulation on Insolvency) on automatic recognition fall away, as well as Regulation (EU) 1215/2012 (Brussels I (recast)), so while jurisdiction to open certain insolvency proceedings for foreign companies may still exist, their subsequent recognition in the remaining EU Member States will be more problematic.

This News Analysis highlights the main impact on R&I practitioners and provides further deeper reading links to materials available on Lexis®PSL. In addition, the Lexis®PSL R&I team are working to update key existing content including precedents and forms in advance of IP completion day to reflect the impact of Brexit.

All the materials relating to Brexit can be found in our Brexit subtopic which accessible from the drop down topic tree on the Lexis®PSL R&I homepage under ‘Key R&I law developments’.

HOW DOES BREXIT IMPACT R&I?

 
What are the key changes in practice from IP completion day?

From IP completion day, in the event of no deal, the main impact for R&I practitioners is the loss of the main operative parts of the Recast Regulation on Insolvency, EU Regulation 2015/848 relating to automatic recognition (see Practice Note: Brexit—impact on Recast Regulation on Insolvency).

Although the jurisdictional tests are retained, meaning many insolvency/restructuring procedures can still be commenced in England and Wales post IP completion day, their subsequent recognition in EU Member States will be problematic. See Practice Notes: Table showing impact of Brexit on jurisdiction to commence insolvency/restructuring proceedings and obtain recognition in other EU Member States and How EU Member States recognise insolvency proceedings of a third-party state.

The impact on each of the key English I&R processes is addressed in the following Practice Notes:

 

SCHEMES OF ARRANGEMENT (PART 26) AND RESTRUCTURING PLANS (PART 26A)

 
 What are the key changes in practice from IP completion day? From IP completion day, in the event of no deal, Brussels I recast will no longer apply. Therefore, although jurisdiction to commence a scheme or restructuring plan is unaffected, its later recognition in EU Member States is impacted.
 Further readingSee Practice Notes: Brexit—impact on schemes of arrangement and Brexit—impact on restructuring plans

 

 CREDIT INSTITUTIONS

 
 What are the key changes in practice from IP completion day? From IP completion day, in the event of no deal, the Credit Institutions and Insurance Undertakings Reorganisation and Winding Up (Amendment) (EU Exit) Regulations 2019, SI 2019/38 introduces the risk of parallel proceedings for insolvent credit institutions and insurers (and associated costs and delay) as it removes: (i) the prohibition on winding up, schemes of arrangement or reorganisation measures being brought in the UK against EEA credit institutions/EEA insurers (as defined therein), (ii) the reciprocal recognition of insolvency proceedings taken in other EEA states and (iii) various notification, publication and language requirements (eg to the EEA regulators and in the Official Journal).
 Further reading See Practice Note: Brexit—impact on insolvent credit institutions

INSURERS

 
What are the key changes in practice from IP completion day?From IP completion day, in the event of no deal, the Credit Institutions and Insurance Undertakings Reorganisation and Winding Up (Amendment) (EU Exit) Regulations 2019, SI 2019/38 introduces the risk of parallel proceedings for insolvent credit institutions and insurers (and associated costs and delay) as it removes: (i) the prohibition on winding up, schemes of arrangement or reorganisation measures being brought in the UK against EEA credit institutions/EEA insurers (as defined therein), (ii) the reciprocal recognition of insolvency proceedings taken in other EEA states and (iii) various notification, publication and language requirements (eg to the EEA regulators and in the Official Journal).
 Further readingSee Practice Note: Brexit—impact on insolvent insurers

BRUSSELS I RECAST

 
 What are the key changes in practice from IP completion day?From IP completion day, in the event of no deal, Brussels I recast is revoked. This regime was used to determine whether or not a given EU Member State court had jurisdiction over proceedings.
 Further reading See Practice Note: No deal Brexit—enforcement of judgments
 

HAGUE CONVENTION

 
What are the key changes in practice from IP completion day?From IP completion day, the Hague Convention is revoked, however the UK can be a party in its own right.
Further reading See Practice Note: Brexit post implementation period—Hague Convention on Choice of Court Agreements (jurisdiction and enforcement)
 

LUGANO CONVENTION

 
 What are the key changes in practice from IP completion day? From IP completion day, the Lugano convention is revoked, however, the UK can be a party in its own right.
 Further reading See Practice Note: No deal Brexit—jurisdiction (UK and the Lugano Convention)

ROME I AND II

 
What are the key changes in practice from IP completion day?Minimal impact: From IP completion day, the substantive rules in Rome I (Regulation (EC) 593/2008), Rome II (Regulation (EC) 864/2007) and the 1980 Rome Convention continue to apply (as amended) as domestic law in all parts of the UK to determine the law applicable to contractual and non-contractual obligations under The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc) (EU Exit) Regulations 2019, SI 2019/834.
Further readingSee Practice Notes: Rome I—application and interpretationRome II—application and interpretation and Rome Convention—introduction and interpretation

FINANCIAL COLLATERAL

 
What are the key changes in practice from IP completion day?Minimal change: The Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019, SI 2019/341 maintains the Financial Collateral Arrangements (No 2) Regulations 2003, SI 2003/3226 almost in its entirely. The changes include deleting references to Directive 2014/59/EU (the recovery and resolution directive) and extending the standard test regarding applicable law to book entry securities financial arrangements to include ‘territory’ in addition to country.
Further readingSee: LNB News 14/12/2018 98

TRANSFER OF UNDERTAKING (PROTECTION OF EMPLOYMENT) REGULATIONS 2006, SI 2006/246 (TUPE 2006)

 
What are the key changes in practice from IP completion day?Minimal impact: The majority of TUPE 2006 implements Directive 2001/23/EC, the Acquired Rights Directive. However, some of the provisions in relation to service provision changes are not required by the Directive and are therefore extensions to rights provided under EU legislation (ie gold plating). The government’s position so far on employment rights and Brexit is (in broad summary) that as a result of European Union (Withdrawal) Act 2018, workers in the UK will continue to be entitled to the rights they have under UK law, covering those aspects which come from EU law. Even if TUPE 2006 is ultimately repealed in its entirety, employment issues in commercial transactions involving transfers of undertakings are therefore likely to continue much as they do under TUPE 2006.
Further readingSee Practice Note: Brexit—implications for employment law

GENERAL DATA PROTECTION REGULATION, Regulation (EU) 2016/679 (GDPR)

 
What are the key changes in practice from IP completion day?Minimal impact: The UK will get a new ‘UK GDPR’ data protection regime when the Brexit transition period ends. That regime is heavily based on the current (EU) GDPR regime that currently applies in the UK.
Further readingSee Practice Note: Brexit—implications for data protection

 

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About the author:

Anna joined the Restructuring and Insolvency team at Lexis®PSL in August 2013 from Berwin Leighton Paisner where she was a senior associate in the Restructuring Team.

Anna has worked on a number of large scale restructurings primarily in the UK market acting on behalf of lending institutions.

Recent transactions include the restructuring of a UK hotel chain and the administration sale of part of the Connaught group. Anna has also spent time on secondment at The Royal Bank of Scotland and trained at Clifford Chance qualifying in 2007.