25th January 2023 |
On 7 December 2022, the European Commission published its draft Proposal for a Directive of the European Parliament and of the Council on harmonising certain aspects of national insolvency laws.
Such harmonisation has been a priority for the EU over the last decade. EU initiatives have intensified and gained momentum in the aftermath of the Global Financial Crisis of the late 2000s. They crystallised with the adoption of the European Commission Recommendation on a New Approach to Business Failure and Insolvency in 2014, the European Insolvency Regulation Recast 2015 and the Preventive Restructuring Directive 2019.
The proposal would affect Irish company insolvency law, personal insolvency law and bankruptcy law as currently drafted. Its potential implications deserve careful examination.
The aim of this proposal is to harmonise insolvency rules, with the primary objective of making them more efficient and effective with a view to facilitating more cross border investment. As such, this proposal forms part of the EU Capital Markets Union initiative which is designed to:
- further financial and economic integration across the EU through making EU financial clearing services more attractive and resilient
- support the EU's open strategic autonomy and preserving financial stability
- alleviate, through a new Listing Act, the administrative burden for companies, in particular SMEs, so that they can better access public funding by listing on stock exchanges
The insolvency proposal aims at targeted harmonisation of national insolvency proceedings, including:
- the recovery of assets from the liquidated insolvency estate
- the efficiency of procedures
- the predictable and fair distribution of recovered value among creditors
It provides for:
- a minimum set of harmonised conditions for exercising avoidance actions
- strengthening asset traceability through improved access by insolvency practitioners to beneficial ownership registers and asset registers, including in a cross-border setting
- provisions to introduce so called ‘pre-pack’ liquidation procedures
- provisions on a duty of directors to timely file for insolvency to avoid potential asset value losses for creditors
- simplified liquidation procedure for insolvent microenterprises
- requirements for improving the representation of creditors’ interests in the proceedings through creditors’ committees
- enhanced transparency on the key features of national insolvency regimes
As well as insolvent legal entities, the proposal also applies to an insolvent ‘entrepreneur’, defined (as in Directive 2019/1023) as ‘a natural person exercising a trade, business, craft or profession’. This is a wide definition, going beyond the usual meaning of the term ‘entrepreneur’, and which can include, for example, a self-employed tradesperson or professional, or a farmer.
The Commission proposal will now be discussed by the European Council and the European Parliament, with a view to possible amendment, and agreement.
Call for views
The Department of Enterprise, Trade and Employment, together with the Department of Justice and the Department of Finance, are providing an opportunity in timely fashion for stakeholders to provide their views on the proposal for a directive. Where possible, these views should be accompanied by an explanation or evidence of the expected impact of the proposal.
Submissions should be marked 'Consultation on the EU Insolvency Directive' and should be emailed to the Department of Enterprise, Trade and Employment at email@example.com.
If the subject of the submission relates to personal insolvency and bankruptcy, it may alternatively be sent to the Department of Justice at EUInsolvencyProposalConsultation@justice.ie.
The deadline for submissions is close of business on 24 February 2023.
Publication of submissions and relevant provisions of the Freedom of Information Act 2014
Each of the departments concerned may publish all submissions received under this consultation on its website. However, should you submit information that you consider commercially sensitive, please identify that information in your submission and give reasons for considering it commercially sensitive. The department(s) concerned will consult with you regarding such information before making any decision to publish.
Attention is drawn to the fact that information provided to the department(s) concerned may be disclosed in response to a request under the Freedom of Information Act 2014. Therefore, should it be considered that any information provided by a respondent is commercially sensitive, please identify same, and specify the reason for its sensitivity. The department(s)will consult with interested parties regarding information identified by them as sensitive before making a decision on any Freedom of Information request.