Ruud Brunninkhuis
Senior Associate | Lawyer
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Large companies are usually – whether or not through separate legal entities – established in multiple countries. Cross-border transactions are common for such companies When these companies end up in financial difficulties, questions relating to international insolvency arise. In order to establish an arrangement within the European Union, which enables an efficient and effective settlement of cross-border insolvency proceedings, the European Insolvency Regulation (“EIR”) has been adopted on 29May 2000. In essence, the EIR contains provisions on jurisdiction, recognition and a number of uniform choice-of-law rules on cross-border insolvency proceedings.
Although the EIR functions well in general, it has been found desirable to improve the application of certain of its provisions in a renewed and recast Insolvency Regulation (the “Recast EIR”). The Recast EIR has been approved on 20 May 2015, and shall enter into force on 26 June 2017. Please be advised that the most important amendments of the Recast EIR are the following:
i. The scope of the Recast EIR is extended to hybrid proceedings, such as proceedings which promote the rescue of economically viable but distressed businesses, so that entrepreneurs are given a second chance;
ii. The provisions governing international jurisdiction of the court to open the main insolvency proceedings have been clarified, in accordance with the case-law of the Court of Justice of the European Union;
iii. The inclusion of a number of safeguards aimed at preventing fraudulent or abusive forum shopping, such as determining the presumptions that the registered office, the principal place of business or the habitual residence of the natural person is the centre of main interests, which should not apply where the debtor, in case of a company, legal person or individual exercising an independent business or professional activity, has relocated its registered office or principal place of business to another Member State within a period of three months prior to the opening of insolvency proceedings;
iv. In order to enhance the transparency and to simplify the provision of information to creditors and courts, Member States are required to establish national insolvency registers (which will enter into force on 26 June 2018). These national insolvency registers shall be interconnected via the European e-Justice Portal (which shall apply from 26 June 2019);
v. The introduction of a new chapter with rules on cooperation and communication which relate to insolvency proceedings of members of a group of companies.