IRSG response to the Commission's consultation on an effective insolvency framework within the EU

On 13 June, the International Regulatory Strategy Group (IRSG) submitted a response to the European Commission’s public consultation on an effective insolvency framework within the EU.

In line with the CMU Action Plan, the European Commission is proposing to modernise current rules on cross border insolvency which date from 2000. On 23 March 2016, the Commission launched a consultation on an effective insolvency framework within the EU. The responses to the consultation will be used to identify the aspects to be possibly dealt with in the Commission’s future insolvency initiative, which the Commission intends to present by the end of 2016.

Insolvency proceedings were identified by the IRSG in its response to the CMU Action Plan as one of the longer-term challenges of CMU. While insolvency and other related areas, such as company law, remain a shared competence, the IRSG welcomes the Commission’s initiative and supports recommendations in the following four areas

1. Preventive restructuring frameworks

  • Businesses in financial difficulty should be able to access free or low-cost consulting services before the beginning of a formal insolvency process.
  • Early warning systems and support/mentoring programmes that work well at the domestic level should be replicated across the EU.
  • Access to pre-insolvency or hybrid proceedings should be promoted across the EU.
  • Publicity for out-of-court procedures should not be made an absolute requirement.
  • The possibility to include early restructuring and hybrid proceedings on the future European register of insolvencies on a voluntary basis should be offered.
  • The INSOL Principles as the standard for out-of-court restructuring proceedings in the EU should be adopted.


2. Promotion of rescue finance, extension of stay procedures in court-supervised restructurings and creditor-led restructuring plans

  • The introduction of incentives to promote the availability of rescue finance across the EU should be considered, as well as the potential use of European funds to support the provision of rescue finance.
  • Stay procedures across the EU should be extended. Stay procedures should be publicised on the future European register of insolvencies.
  • The future EU legislative proposal on insolvency could contain provisions to promote creditor-led restructuring plans.


3. Discharge period limitation

  • The stigma associated with bankruptcy should be minimised.
  • An upper limit for a discharge period for consumers and entrepreneurs should be set.


4. Shortening of insolvency proceedings in particular for small and medium-sized enterprises (SMEs)

  • A maximum duration of 1-2 years for insolvency proceedings could be envisaged, particularly for SMEs. Extensions should be granted when necessary.
  • Cross-border mentoring initiatives and information sharing between EU Member States, in order to promote a cultural change in EU jurisdictions where a more sophisticated approach to insolvency proceedings would be desirable should be promoted.