In 2016 the European Commission published a proposal for a directive on business insolvency, which aims to provide effective restructuring tools to rescue viable businesses in distress, give bona fide bankrupt entrepreneurs a second chance and increase the efficiency of insolvency, restructuring and debt relief procedures, so as to reduce barriers to the free flow of capital stemming from the different restructuring and insolvency frameworks of member states while striking an appropriate balance between the interests of stakeholders.
The text proposed by the commission is a minimum harmonization directive which introduces a framework of principles along with more detailed rules in certain areas, while allowing member states to go further when transposing the rules into national law.
Once adopted, the directive will complement the 2015 Insolvency Regulation, which focuses on resolving conflicts of jurisdiction and laws in cross-border insolvency proceedings and ensures the recognition of insolvency-related judgments across the EU.
On 11 October 2018 the European Council agreed its position on the proposed directive. It retains all the elements of the commission’s initial proposal but gives member states discretion to tailor the new legislation to their existing legal frameworks by amending provisions such as the degree of court involvement in insolvency proceedings, duration of the stay of individual enforcement actions and ability to bind dissenting creditors. As the European Parliament has already adopted its position, tripartite negotiations between the parliament, the council and the commission are now due to take place with the aim of arriving at an agreed text in early 2019.