UK insolvency laws in event of ‘no deal’ Brexit

UK insolvency laws in event of ‘no deal’ Brexit

Hamish Anderson, consultant at Norton Rose Fulbright LLP, considers thepotential implications of thedraft Insolvency (Amendment) (EU Exit) Regulations 2018 (the 2018 Regulations) which deal with thescenario where theUK leaves theEU without a deal on insolvency.

Insolvency (Amendment) (EU Exit) Regulations 2018, SI 2018/Draft: This draft enactment is laid in exercise of legislative powers under theEuropean Union (Withdrawal) Act 2018 and theEuropean Communities Act 1972 in preparation for Brexit. This draft enactment amends UK legislation and retained EU legislation in relation to insolvency and theprotection of employees in theevent of theinsolvency of their employers. It comes into force partly on exit day.

What is themain impact of this draft on theRecast Regulation on Insolvency 2015/848?

Impact of thedraft Regulations

The 2018 Regulations are a draft—they will only come into force if a deal is not reached. There is therefore no immediate impact on theRegulation (EU) 2015/848 on insolvency proceedings (the Recast Regulation on Insolvency).

To start at thebeginning, theRecast Regulation on Insolvency is theEU measure which regulates where insolvency proceedings can be opened within theEU. The fundamental concept of theRecast Regulation on Insolvency is that thejurisdiction of Member States to open proceedings should be restricted so as to avoid competing proceedings and that, in return, proceedings opened in accordance with its provisions receive EU-wide recognition. The consequence of theUK leaving theEU will be that theRecast Regulation on Insolvency will cease to apply as a matter of EU law. However, section 3 of theEuropean Union (Withdrawal) Act 2018 (EU(W)A 2018), provides that it will become part of our domestic law on exit day except in so far as ministers make regulations under EU(W)A 2018, s 8 to deal with deficiencies arising from withdrawal. There would be deficiencies because theproper operation of theRecast Regulation on Insolvency depends on reciprocity, without which restrictions on jurisdiction are not accompanied by

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.