09 January 2017

Accountancy Europe: EU Business insolvency - a contribution from the accountancy profession

This paper provides an overview of accountants' and auditors' current contribution to insolvency proceedings in Europe. This is in support of the proposed EC Directive for an effective insolvency framework which signalled the role of insolvency practitioners.

Preventing insolvency or granting second chances to “honest” entrepreneurs who do not make it the first time around improves the business environment and stimulates growth and jobs.
Accountancy Europe also presents its recommendations for improving insolvency proceedings in Europe to stimulate the discussion with the Member States and the European Parliament:

• involve practitioners with specialised expertise
• reduce the length of insolvency proceedings
• improve awareness on help available
• encourage management’s role in financial distress

Modernising and simplifying business insolvency can be part of to re-boost part of the economy and growth in the EU. There is a need to look into the financial problems encountered by entrepreneurs and provide them a helping hand at the stage of early warning or when facilitating insolvency proceedings.

Through its established role in statutory auditing, the profession can provide early warning to management or flag imminent risks of insolvency. Through its independent report, the profession can contribute to avoiding insolvency if the right initiatives are taken by management.

In addition to this role, the accountancy profession can take up broader tasks – thanks to its financial background – providing expertise to entrepreneurs who are facing financial distress, going through insolvency, or looking for a second chance.

It remains important to ensure that entrepreneurs have access to the appropriate expertise and advice at an early stage and that they are also encouraged to seek help. It is also crucial for insolvency practitioners to receive the necessary training and acquire specialised knowledge. The professions involved in insolvency proceedings can cooperate and offer their advice depending on their expertise so the entrepreneur benefits to the maximum.

Cooperation at EU level can simplify cross-border proceedings and can also safeguard more equal levels of opportunity for all entrepreneurs active in Europe.

Following the launch of the Commission’s proposal, the European Parliament and Council are expected to kick off discussions in order to reach an operational compromise. The profession remains available for further discussion and exchange of views.

Full briefing paper

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