Should European simplified liquidation procedures for micro-enterprises be abolished? This was the position defended by the European Parliament’s rapporteur on the draft directive on the harmonisation of insolvency law, Emil Radev (EPP, Bulgarian), who presented his text to Parliament’s Committee on Legal Affairs (JURI) on Wednesday 9 April.
Proposed in 2022 (see EUROPE 13079/2), the text aims to reduce differences between national systems in terms of the duration, costs and recovery rates for pre-pack proceedings. It is part of the project to create a Capital Markets Union.
In his draft report, Emil Radev supports the mechanisms established to facilitate the restructuring or rapid sale of a company in difficulty, specifically through a ‘pre-pack’.
He also supports improved access to bank asset and beneficial owner registers for insolvency practitioners.
However, the total deletion of Chapter VI on simplified winding-up procedures for micro-enterprises was a major change that inspired a particularly strong response.
According to the rapporteur, these provisions could generate “considerable legal uncertainty”, authorise abuses and impose “an additional administrative burden on SMEs”.
The shadow rapporteurs, for their part, were more ambivalent.
René Repasi (S&D, German), also rapporteur of the opinion of Parliament’s Committee on Economic and Monetary Affairs (ECON), called for greater caution.
In his view, the presence of a receiver - to independently manage the pre-pack proceedings, identify creditors, supervise the sale of assets and ensure compliance with the law - should be maintained, even in the simplest cases, in order to avoid abuses.
The Social Democrat MEP also recognises that very small structures cannot cope with the same procedural complexity as large companies. “We need to make things simpler for the smallest companies”, he said, calling for procedures to be streamlined without doing away with fundamental guarantees.
Ton Diepeveen (PfE, Dutch) supported the rapporteur’s approach. Indeed, he felt that micro-enterprises should not be regulated at European level under the principle of subsidiarity.
For her part, Jana Toom (Renew Europe, Estonian) proposed alternative approaches. The aim would be to maintain a simplified procedure, but with a mechanism for covering the practitioner’s costs, along the lines of the French fund.
Arash Saeidi (The Left, French) denounced the lack of guarantees for employees. He called for their right to information, the continuity of their contracts and the priority of their claims to be strengthened.
While Andreas Stein, Head of Unit in the European Commission’s Directorate-General for Justice and Consumer Affairs, acknowledged the difficulties faced by small businesses, he warned against abolishing the scheme altogether.
Amendments are expected by 22 April, for a vote in the parliamentary committee before the summer, with a view to a first meeting of inter-institutional negotiations (trilogue) in the second half of the year.
Link to the draft report: https://aeur.eu/f/gde (in French) (Nithya Paquiry)