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EU Ministers Back New Insolvency Regulation

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A new EU insolvency regime, hoped to "rescue and recover" viable businesses facing cross-border financial difficulties, has been backed by justice ministers throughout the EU. The Regulation must be formally adopted by, both the European Council and Parliament, before coming into force.

The new Insolvency Regulation is expected to come into force in 2017, and would replace the current regime - which has been in place since May 2002 - with a modern and "rescue orientated" approach. The new rules also aim to reinforce the single market while recovering from the financial crisis.

While the current regulation only covers liquidation proceedings, the proposed new regime would include an additional 19 national commercial and personal insolvency mechanisms. Pre-insolvency procedures would also be covered, including restructuring at an early stage, where the likelihood is that the business is heading towards insolvency.

Furthermore, a new test for determining a debtors' "centre of main interests" is contained within the draft regulation. This would start the main proceedings for resolving the debtor's insolvency, and would apply universally across the EU, meaning any secondary proceedings in other state would only be possible where the debtor has assets based in that state. If secondary proceedings were opened in a member state, the court under the new law would have to immediately notify the insolvency practitioner in the main proceedings. On request of the insolvency practitioner in the main proceedings, the court in the secondary proceedings would then have the power to postpone or refuse it.

The new Regulation would also require member states to provide a free, publicly- accessible online register of information relating to insolvency proceedings, to be compiled within a single, EU-wide online portal. Then, foreign creditors could submit claims within 45 days of notice of proceedings being published in the online register. The provisions of the draft regulation therefore make insolvency proceedings far more efficient, and create far better chances of rescuing businesses facing difficulties.

Vêra Jourovà, the EU's Justice Commissioner, said: "The new rules will viable businesses a much-needed second chance and will improve the effectiveness of EU insolvency proceedings. With these new rules, we are building solid foundations for boosting growth and jobs in Europe.

"Workers can now that if their company face difficulties, there is a bigger chance for it to recover and for their job to survive", she added.

According to figures from the European Commission, around one quarter of the 200,000 businesses involved in insolvency proceedings in the EU each year have a cross-border element, meaning hundreds of thousands of employees will be affected by the proposed Insolvency Regulation.

Contact Us – UK Bankruptcy & Company Insolvency Litigation Claims

Whether you wish to commence legal proceedings or challenge those that are being brought against you, our specialist insolvency team can guide you through the procedures. Further, if are worried about the costs involved, Advantage Litigation Services have the skills and expertise to help you find a way of funding commercial litigation without risking your personal finances or those of your business. Click here to contact us today or call 0800 160 1298 to see how we can help.

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