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The European Insolvency Regulation (Recast)

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The European Insolvency Regulation (Recast) The European Insolvency Regulation (recast) A brief summary of the most important provisions 4 TABLE OF CONTENTS Table of contents Frequently used terms 6 Introduction 7 Robert van Galen / Barbara Rumora-Scheltema Chapter 1 - Scope 11 Barbara Rumora-Scheltema Chapter 2 - COMI 15 Tom de Clerck Chapter 3 - International Jurisdiction 19 Bart Wijnstekers Chapter 4 - Applicable Law 23 Tom de Clerck TABLE OF CONTENTS 5 Chapter 5 - Secondary or Territorial Procedures 27 Marc Orval Chapter 6 - Rights in rem 31 Willem Keukens & Saskia Heumakers Chapter 7 - Contracts of Employment 37 Robert Woudenberg Chapter 8 - Group Companies 41 Catrien Rozeman & Linda Tomassen Chapter 9 - Communication and filing of claims 45 Jochem Hummelen Restructuring and Insolvency Partners 48 6 FreQUENTLY USED termS Frequently used terms COMI Centre of main interests. See Chapter 2. The proceedings listed in Annex A of the R-EIR. Insolvency proceedings See Chapter 1. European Insolvency Regulation. Council Regulation EIR (EC) 1346/2000 of 29 May 2000 on Insolvency Proceedings. IP Insolvency Practitioner. Lex contractus The law applicable to the relevant contract. Lex fori concursus or The law of the State in which the insolvency lex concursus proceedings are commenced. Insolvency proceedings opened by the courts of the Main insolvency proceedings Member State within the territory of which the COMI of the debtor is situated. See Chapter 2. Recast European Insolvency Regulation. Regulation R-EIR (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on Insolvency Proceedings. Insolvency proceedings opened by the court of the Territorial or secondary Member State other than where the COMI is located, insolvency proceedings where the debtor has an establishment. See Chapter 5. The possibility to treat creditors in accordance Synthetic secondary with local laws without actually opening secondary proceedings insolvency proceedings. See Chapter 5. INTRODUCtiON 7 Introduction Robert van Galen / Barbara Rumora-Scheltema It was not until 2000 before the Member States of the European Union finally agreed on a European wide arrangement for the recognition of insolvency proceedings: the European Insolvency Regulation (“EIR”). The EIR became effective on 31 May 2002 and provided, in short, that insolvency proceedings opened in the Member State where the debtor has its centre of main interests (“COMI”) would be effective throughout the European Union. The EIR was a much greater success than had been expected. Before its introduction, the general expectation had been that the EIR would not be very popular because of its lack of provisions concerning groups of companies. The idea was that cross-border aspects of insolvency proceedings would not occur very often, because enterprises would address international issues by setting up a foreign group entity. The EIR would therefore be mainly relevant for insolvency proceedings relating to private individuals with a vacation home abroad. However, there turned out to be many more cross-border cases, and several cases ended up with the European Court of Justice. An interesting (and to some extent: unexpected) consequence of the EIR was the forum shopping that resulted. Under the EIR, the courts of the Member State where the debtor has its COMI are solely authorized to open insolvency proceedings. Furthermore, the laws of that Member State determine the effects of the insolvency proceedings (with a few exceptions). The EIR did not harmonize the insolvency laws of the Member States, and those laws are very different from one state to another. Member States use these laws to incorporate their different policy goals: some give a stronger protection to employees, others prioritize the interest of secured creditors or strengthen the position of national tax authorities. Consequently, debtors (often stimulated by their larger creditors) shifted their COMI to the Member State where the laws in their (or those creditors’) view advanced the interests they sought to enhance. Not everyone thought these COMI shifts were desirable: advancing the interests of one party might result in a deterioration of the position of others. Moreover, a COMI shift changes the rules of the game – and thereby the position of creditors vis-à-vis each other – just before the lights are turned off. 8 INTRODUCtiON The EIR provided that ten years after its introduction, an evaluation would follow along with recommendations for changes where useful. And indeed, with some delay, after an evaluation a recast EIR (“R-EIR”) was adopted in 2015. The R-EIR applies to all insolvency proceedings opened on or after 26 June 2017. The most important change in the R-EIR, compared to the EIR, is the introduction of a chapter relating to group insolvencies. Other changes are adaptations of existing provisions. To the disappointment of many, some of the more controversial provisions remained essentially the same. For example, the rules about COMI have only slightly changed. The same applies to the rules concerning rights in rem concerning assets of a debtor located in a different Member State than the one where the insolvency proceedings were opened. On the occasion of the entry into effect of the R-EIR, NautaDutilh is proud to present an overview of the most important provisions of the R-EIR. In the following chapters, you will find a practical guide from the members of NautaDutilh’s Restructuring and Insolvency team aimed to help you identify the main rules that apply in European cross-border situations, along with, where applicable, an explanation of the changes in the R-EIR compared to the EIR. This guide is not intended as legal advice and specific rules may be different in specific circumstances. Our team is of course happy to assist you with any questions about these and other issues that you may have. INTRODUCtiON 9 NautaDutilh’s Core Restructuring & Insolvency Team Amsterdam Brussels Tom de Clerck Stan Brijs Robert van Galen Charlotte De Muynck Saskia Heumakers Jean-Luc Hagon Jochem Hummelen Arie Van Hoe Willem Keukens Sophie Jacmain Catrien Rozeman Rubben Lindemans Barbara Rumora-Scheltema Teun Struycken London Linda Tomassen Marc Orval David Viëtor Bart Wijnstekers Luxembourg Robert Woudenberg Romain Sabatier CHApter 1 - SCOpe 11 Chapter 1 Scope Barbara Rumora-Scheltema 12 CHApter 1 - SCOpe There are many different types of insolvency proceedings throughout the Member States. TAKEAWAYS Those proceedings differ in scope and in purpose: some are geared at a restructuring • R-EIR applies to insolvency of the debtor and/or its debt, others aim to proceedings based on insolvency liquidate the debtor’s assets, etcetera. The laws, including, among other things, EIR sought to provide a definition that would proceedings where the debtor include those proceedings with certain remains in possession of his assets general characteristics. It provided that the EIR would apply to collective insolvency proceedings, entailing the partial or total divestment of a debtor and the appointment of a liquidator. Insolvency proceedings concerning insurance companies, financial institutions and the like were excluded from the workings of the EIR. The same applies to Danish insolvency proceedings: Denmark chose to opt-out of the EIR, and has also opted out of the R-EIR. The EIR contained an Annex A, listing all insolvency proceedings in the Member States to which the definition applied.A dditionally, Annex B listed all winding-up proceedings and Annex C contained a list of insolvency practitioners. Proceedings that were not included in Annex A did not fall within the scope of the EIR, whereas secondary or territorial proceedings could only be a winding-up proceeding listed in Annex B (see Chapter 5 for more information about secondary/ territorial proceedings). CHApter 1 - SCOpe 13 The R-EIR has broadened the scope of its application to include, among other things, proceedings where no liquidator is appointed, as well as other rescue and reorganization procedures based on laws relating to insolvency. These proceedings must be public collective proceedings, including interim proceedings, in which, for the purpose of rescue, adjustment of debt, reorganization or liquidation: • a debtor is totally or partially divested of its assets and an insolvency practitioner (“IP”) is appointed; • the assets and affairs of a debtor are subject to control or supervision by a court; or • a temporary stay of individual enforcement proceedings is granted by a court or by operation of law, in order to allow for negotiations between the debtor and its creditors, provided the general body of creditors is protected during the stay and, where no agreement is reached, the stay is preliminary to one of the proceedings mentioned before. Moreover, where such proceedings may be commenced in situations where there is only a likelihood of insolvency, they must aim to avoid the debtor’s insolvency or cessation of his business activities. Thus, unlike its predecessor, the R-EIR also applies to proceedings where the debtor remains in possession of his assets. The R-EIR abandoned the idea of secondary/territorial proceedings being limited to winding- up proceedings only. As a result, the R-EIR only has two annexes: Annex A containing a list of insolvency proceedings that fall within the scope of the regulation, and Annex B with a list of IP’s, being any person or body whose function, including on an interim basis, is to verify and admit claims in insolvency proceedings, represent the collective interest of the creditors, administer the assets of which the debtor has been divested, liquidate those assets and supervise the administration of the debtor’s affairs. Barbara Rumora-Scheltema T +31 20 71 71 449 M +31 6 53 77 58 28 E [email protected] CHApter 2 - COmi 15 Chapter 2 COMI Tom de Clerck 16 CHApter 2 - COmi COMI stands for ‘centre of main interests’ and is defined in Article 3 TAKEAWAYS of the R-EIR as “the place where the debtor conducts the administration • COMI is the connecting factor to of its interests on a regular basis designate jurisdiction of a court of a and which is ascertainable by third Member State with respect to main parties”.
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