Inside this Topic Guide
There is no universal insolvency law. There are various frameworks in place to determine whether a particular court has jurisdiction to commence proceedings and which law is to govern those proceedings. It is also possible for there to be more than one insolvency or restructuring process in respect of the same entity, taking place in different jurisdictions. In addition, there are no bespoke provisions at present to deal with groups of companies. Matters become more complicated where companies in the same group are located in different jurisdictions and as a result it is possible that each company in a group may be subject to a separate insolvency process or restructuring process or indeed more than one process in various jurisdictions.
In order to regulate cross border insolvencies, there are various frameworks which facilitate recognition and co-operation amongst courts in relation to insolvency proceedings. From the English law perspective, the relevant legislation and court practice are derived from the following:
- Recast EU Regulation on Insolvency Proceedings (Regulation (EU) 2015/848), which applies from 26 June 2017 and replaces Regulation (EC) No 1346/2000;
- CBIR – Cross Border Insolvency Regulations 2006;
- Insolvency Act 1986 – s. 426; and
- Common law principles of comity.
There are also special regimes that apply to certain types of entities in the context of cross border insolvency. We limit the materials on this site to a consideration of:
- Credit Institutions; and
- Insurers
Recognition in England & Wales of insolvency proceedings taking place elsewhere can be achieved in a number of different ways. The two key considerations to take into account are:
(i) the entity type which is subject to a foreign process, and
(ii) the jurisdiction where the insolvency process has been commenced.
The responses to these questions will indicate which piece of legislation is applicable.
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Recast EU Regulation on Insolvency Proceedings
The Recast Regulation replaces the EU Regulation on Insolvency Proceedings (Regulation 1346/2000) from 26 June 2017 is intended to improve the efficiency and effectiveness of cross-border insolvency, benefit creditors and debtors, facilitate the survival of businesses and present a second chance for entrepreneurs.
The Recast Regulation (like its predecessor) applies to companies, partnerships and individuals. There are some exceptions which are insurance undertakings, credit institutions, investment undertakings which hold funds/securities for third parties and collective undertakings. The geographical scope of the Recast Regulation extends to debtors whose centre of main interests ("COMI") is located in the EU (except Denmark). The Recast Regulation has direct effect and pre-insolvency and insolvency proceedings which are listed by country in Annex A to the Recast Regulation are given automatic effect by virtue of the Recast Regulation throughout the EU. Primary jurisdiction for insolvency proceedings belongs to the member state where the debtor has its COMI. In the case of a company and in the absence of proof to the contrary, this is where the registered office is located (the presumption cannot be relied upon if the registered office has been moved within 3 months of the commencement of the proceedings); proceedings commenced in this respect are known as main proceedings and encompass all of the debtors' assets in the EU. The types of main proceedings, which include rescue and reorganisation type proceedings, are listed in Annex A to the EUIR. Territorial or secondary proceedings can be commenced in a place where a debtor has an establishment (a place of operation where there is non-transitory economic activity carried on with human means and assets). Territorial and secondary proceedings are limited to the assets of the debtor in the Member State where it has an establishment but they too can be any type listed in Annex A. Generally speaking, the governing law of the main insolvency proceedings determines its effects throughout the Member States, although there are general exceptions which include (amongst others) rights in rem, set-off, ROT clauses and rules relating to payment systems. The purpose of these exceptions, broadly speaking, is to protect existing contractual arrangements from the effects of the insolvency which are carried out in other Member States. The nature of the Recast Regulation not only means that the English courts will recognise insolvency proceedings commenced in fellow EU Member States, but also that other EU Member States will recognise English insolvency proceedings and give effect to them without further formality.
The key changes include:
- further clarification on jurisdiction and the concept of centre of main interest (COMI) to increase legal certainty;
- new rules relating to secondary proceedings and specific guidance on the circumstances under which they may be postponed or refused;
- establishment of interconnected insolvency registers via the European e-Justice Portal to enhance access to information and prevent the opening of parallel proceedings; and
- a new framework of procedural rules for insolvency proceedings concerning different entities within a group of companies.
The Regulation entered into force on 25 June 2015 and applies directly in Member States from 26 June 2017, with the exception of:
- Article 86 (information on national and union insolvency laws to be publicly available), which shall apply from 26 June 2016;
- Article 24(1) (establishing insolvency register), which shall apply from 26 June 2018; and
- Article 25 (interconnection of registers), which shall apply from 26 June 2019.
Original proposals: proposed Regulation amending Council Regulation (EC) No 1346/2000 on insolvency proceedings | Press release | Speech | Q&A - "Towards a new European approach to business failure and insolvency" | European Parliament Procedure file
Cases
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