On June 26 2017, Regulation (EU) 2015/848 (the “Regulation”) on insolvency proceedings came into operation and, finally substituting Regulation CE 2000/1346, became the applicable law to the proceedings that have been opened starting from the same date. The Regulation constitutes a further significant step in the consolidation of the European judicial cooperation project.
This legislation has been developed in continuity with the recent approach to insolvency proceedings, not conceiving them as necessarily preceding liquidation, but as a moment of possible reorganization and survival of the company. In this direction, the time of intervention over the crisis is anticipated, so to hopefully overcome it, and the Regulation scope of application extends to the pre-insolvency crisis, restructuring and voluntary arrangements, this being one of the most important innovations. The Regulation also applies to physical persons' financial distress (debt discharge or adjustment for consumers and self-employed individuals), while insurance undertakings, credit institutions, investment firms and other entities covered by Directive 2001/24/EC fall outside the scope of the Regulation, being them under National supervisors' control.
At the same time, the Regulation aims at speeding up and facilitating cross-border credit recovery and at preventing forum shopping abusive practices (namely, the undertaking selecting a softer insolvency legal system and consequently transferring its registration office in the corresponding Member State, for the sole purpose of evading its stricter regime). To identify the competent forum and place, the legislation at hand confirms debtor's "Centre Of Main Interest" criterion, normally coinciding with the place where the registration office is located, a presumption that, for the first time, can be overcome when the enterprise interests are customarily managed somewhere else, in a way that is commonly perceivable, or when the registration office transfer in another Member State, occurred in the 3 months prior to the insolvency declaration, is attributed by the judge to the entrepreneur's attempt to evade the insolvency legal system that would otherwise be relevant to him.
To grant an effective coordination between potentially conflicting legal systems, to facilitate a ready credit recovery and to protect parity among creditors, the judge has been entrusted with the power to ex officio verify - and therefore assess or deny - his jurisdiction; what is more, he also has the task to classify the proceedings as main, if initiated in the same place of the COMI, or secondary, for the State in which the debtor has an establishment and to the sole extent of the goods present on the relevant territory; and that with the specific objective to avoid that the secondary proceedings end up hindering or slowing down the main ones.
Moreover, the Regulation introduces ad hoc measures for group insolvency, namely the distress of different companies directly or indirectly controlled by the same mother company; measures that renounce to identify a single reference legal system, but that impose, to the extent possible, a cooperation and coordination duty to each national receiver, in order to increase the possibilities of the overall group survival.
Finally, the Regulation provides for the implementation of a interconnected IT system for the national insolvency registers, to avoid potential conflicts and assure full information sharing, in the context of a Single European judicial area that is progressively taking shape.
The only purpose of this Newsletter is to provide general information. It is not a legal opinion nor should it be relied upon as a substitute for legal advice.