EP ThinkTank: New EU insolvency rules give troubled businesses a chance to start anew [EU Legislation in Progress]

20 June 2018

The initiative is a key deliverable under the capital markets union action plan. It will also contribute substantially to addressing the high levels of non-performing loans in banks’ balance sheets.

In 2012, the Commission proposed to recast the 2000 Insolvency Regulation in order to address the cross-border aspects of insolvency in the EU. Adopted in 2015, the recast regulation introduced clear rules on the jurisdiction and law applicable to a debtor’s insolvency proceedings and made mandatory the recognition of those proceedings in other EU Member States.

Its remit was expanded to include not only bankruptcy but also hybrid and pre-insolvency proceedings, as well as debt discharges and debt adjustments for natural persons (consumers and sole traders).

In late 2016, as a further step and a follow up to the Insolvency Recommendation of 2014, the Commission proposed to adopt a directive on business restructuring, which would provide new legal tools to rescue viable businesses in distress and give honest but bankrupt entrepreneurs a second chance.

The proposal focuses on three key elements:

• common principles on early restructuring tools, which would help companies to continue operating and preserve jobs;
• rules to allow entrepreneurs to benefit from a second chance through a discharge of debt; and
• targeted measures allowing Member States to increase the efficiency of insolvency, restructuring and discharge procedures.

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