Insolvency: MEPs and EU governments reach deal on new rules

Simplified asset-tracing for insolvency practitioners

Pre-pack proceedings to save business before insolvency available across member states

Stricter rules for directors of insolvent companies

On Wednesday, MEPs reached an agreement with EU governments on new rules harmonising certain insolvency procedures across EU member states.

By aligning national insolvency standards more closely, the new rules aim to make the EU more attractive to foreign and cross-border investors.

Easier asset-tracing and improved protection of creditors

Insolvency practitioners will receive information from national authorities allowed to access and search national bank account registers and from those authorised to perform a cross-border search to identify and trace assets belonging to an insolvent company. They will also have access to beneficial ownership registers. EU countries will have to make sure that insolvency practitioners appointed in another EU country have the same access to court as national insolvency practitioners.

The new rules should ensure that some legal contracts concluded before the opening of an insolvency procedure become null and void if they benefit certain creditors only and are detrimental to others. Creditors’ interests could be better protected by the possibility to establish a creditors’ committee. MEPs negotiated that workers are also protected throughout the process and that they could become members of the creditors’ committee when they are among creditors.

Pre-pack proceedings and liability for directors

According to new rules, “pre-pack proceedings” will be made available across EU countries.They will allow the sale of a debtor’s business, while still operational, before opening insolvency proceedings. For this purpose, debtors will have to maintain control over at least part of their assets at the start of the procedure. MEPs also negotiated that EU countries could adopt laws establishing simplified winding-up proceedings for microenterprises.

The co-legislators have also agreed on stricter conditions for directors of insolvent companies. Directors will have to submit a request to open insolvency proceedings, with the exception of preventive restructuring proceedings, within three months; otherwise they will be liable for damages caused to creditors.

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Following the negotiations, Legal Affairs Committee (JURI) rapporteur Emil Radev (EPP, BG) said: „Harmonising core elements of insolvency proceedings is essential for ensuring fairer outcomes for creditors and debtors alike, reducing fragmentation in the single market and enabling faster, more effective proceedings for struggling businesses.”

Next steps

Once formally approved by the Parliament as a whole and the member states, the directive will enter into force one day after its publication in the Official Journal.

Background

To advance capital markets union and address differing national rules on insolvency, the European Commission proposed new rules in December 2022 to facilitate cross-border investment and contribute to the proper functioning of the internal market.