What next for the EC Reg on insolvency?

The UK has opted in to reforms to EC Regulation on Insolvency – what does this mean? We have looked at some of the key issues.

Why did the UK decide to opt in?

The UK government had to decide whether to opt in to the European Commission’s proposed regulation amending the existing regulation on insolvency proceedings by 10th April 2013 as the legal basis for the amendments (the Treaty on the Functioning of the European Union, Title V Part three) is not applicable unless the UK/Ireland decide otherwise. The decision to opt in was communicated to the EU Council on 10 April 2013 following a ‘Call for Evidence‘ conducted by the Insolvency Service which unanimously supported the decision.

The decision to opt in was made as it will be of general benefit to businesses and creditors of insolvency proceedings in the UK and the EU. In particular, business minister, Jo Swinson, said:

‘I believe the proposed amendments to the Insolvency Regulation will benefit UK businesses affected by insolvency in the EU. The proposals support business rescue by expanding the scope of the Regulation to restructuring and pre-insolvency proceedings. Bankruptcy tourism will be tackled through new rules on determining jurisdiction and increased transparency for creditors. In addition, the proposals include new rules on publication of insolvency information via free online registers across the EU, in line with our Digital by Default strategy.’

What will the new reforms entail?

The European Commission published a proposal for a new draft regulation (the Amending Regulation) to amend the Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings (the EC Regulation on Insolvency) consisting of an explanatory memorandum, followed by draft wording for the Amending Regulation. The reforms follow consultation with experts across the member states.

The proposed reforms cover 5 key areas:


Extended to cover hybrid (where existing management are left in place ie debtor-in-possession proceedings) and pre-insolvency (eg restructuring) proceedings for corporates if conducted under the control or supervision of the court, plus debt discharge proceedings for individuals.


Definition of centre of main interests (COMI) clarified.

Secondary proceedings

The court conducting main proceedings can refuse the opening of secondary proceedings if not necessary to protect interests of local creditors. The liquidator in main proceedings is also expressly permitted to provide undertakings to treat local creditors as they would be treated under secondary proceedings (ie formalises the UK practice of synthetic secondary proceedings used in MG Rover, Collins & Aikman and Nortel). Further, secondary proceedings are no longer limited to winding-up proceedings, but can include the full range of rescue proceedings. Finally, courts (as well as liquidators) must cooperate (eg through protocols)

Publicity and lodging claims

A European electronic register will be established. All decisions opening proceedings (plus other relevant decisions) must be published in a publicly accessible national electronic register. All national registers will be linked and searchable via the European e-justice portal. Standard forms for the notice to creditors and lodging claims will be published on the European e-justice portal in all official languages of the European Union. Foreign creditors will have at least 45 days to lodge their claims (even if national law requires a shorter period)

Group companies

Liquidators of (and courts involved with) group companies will be obliged to cooperate and communicate. Liquidators will be given express powers to intervene in other group proceedings (ie a right to be heard, request a stay, propose a rescue plan or attend a meeting of creditors). However, COMI must still be decided separately for each group company.

The full proposal and Amending Regulation wording can be viewed here and are summarised in our Practice Note:Reforms to EC Regulation on Insolvency 1346/2000.

What are the next steps?

The government will now participate fully in negotiations on the draft text of the Amending Regulation.

The Amending Regulation will be passed to the European Parliament and Council for consideration and adoption (expected later in 2013) where further amendments could be proposed.

Relevant Articles
Area of Interest