On Wednesday 11 November, the European Commission began its work to improve convergence between national frameworks for corporate insolvency by publishing an inception impact assessment for an initiative that is expected in the second quarter of 2022.
The initiative, which was announced in its new Capital Markets Union Action Plan (see EUROPE 12562/9), is expected to address those aspects of insolvency proceedings that have been identified as obstacles to cross-border investment.
The Commission points out that “harmonising insolvency laws is very complex, in particular as it is closely intertwined with other fields of law”, and notes that previously Member States’ Justice Ministries were very hesitant on the issue.
In its inception impact assessment, the Commission explains that the Directive on Insolvency adopted in 2019 (see EUROPE 12162/5) did not harmonise core aspects of substantive insolvency law.
It also believes that the country-specific recommendations addressed to Member States, in the framework of the European Semester, regarding reforms to their insolvency frameworks, cannot reduce the differences between national procedures in a coordinated way.
The Commission believes that it might, in the future, consider aligning some features of insolvency regimes, such as the prerequisites for when insolvency proceedings should be commenced, including a definition of insolvency, the conditions for determining avoidance actions, directors’ duties related to handling insolvency proceedings and the capacity of courts to provide expertise and training for judges.
The Commission plans to launch an impact assessment in 2021 which should help it to decide whether a proposal for a directive harmonising some key aspects of insolvency law is required, whether a Commission Recommendation would be more appropriate or whether a combination of both would be needed.
The Commission states that a gradual approach could also be considered, consisting of a Recommendation, followed later by a proposal for binding measures if there is insufficient follow-up to the Recommendation from Member States.
The inception impact assessment can be found at: https://bit.ly/3f0Inw3 (Original version in French by Marion Fontana)