Published: December 2016Contents
i) What are the hot topics?
On 20 May 2015, the European Parliament and Counsel published the Recast Regulation on Insolvency 2015/848, which will apply to insolvency proceedings initiated after 26 June 2017. The Recast Regulation acknowledges the fact that it would not be practical to introduce an insolvency regime with ‘universal scope’ throughout the European Union in light of the diversity of local insolvency laws. Chapter V of the Recast does, however, specifically address insolvency proceedings of members of a group of companies in different jurisdictions. Section 1 of Chapter V (Articles 56–60) addresses ‘cooperation and communication’ between such proceedings, while Section 2 (Articles 61–77) creates a new concept of a ‘group coordination proceeding’ under the auspices of a ‘coordinator’.
In addition to the provisions addressing corporate groups in Chapter V, the Recast Regulation also recognises that ‘[s]econdary insolvency proceedings may also hamper the efficient administration of the insolvency estate’. Accordingly, the Recast Regulation confers upon the insolvency practitioner in main insolvency proceedings the possibility of distributing to local creditors what they would have received had secondary local proceedings been initiated and empowers courts to refuse to initiate secondary proceedings if these ‘synthetic’ or ‘virtual’ proceedings are proposed. These provisions may help facilitate synthetic group restructurings of the sort employed in the Collins & Aikman case.
ii) Tell us about any key legal developments – recent or pending – and their international impact.
UNCITRAL Working Group V has continued to develop an addendum to the Model Law to facilitate the effective treatment of cross-border insolvencies of multinational enterprise groups. The Working Group has identified eight key principles of a regime to address insolvency in the context of enterprise groups, which themselves are subject to two fundamental underpinning principles. Those foundational principles are, first, that the jurisdiction of the courts in the state in which the centre of main interest (COMI) of an enterprise group member is located will remain unaffected by a group insolvency solution, and, second, the eight identified principles do not replace or interfere with any process or procedure required by the jurisdiction in which the COMI of a group member is located in respect of that group member’s participation in a group insolvency solution.
iii) What are the biggest opportunities and challenges for practitioners and clients?
There has been no indication regarding when Working Group V will be in a position to put forward final proposals for the Recast Regulation. It therefore remains to be seen how these measures will function in practice, and also whether the voluntary nature of the proposed regimes will limit their utility. It is also possible that there will be resistance in some jurisdictions to ceding sovereignty over local insolvency law even to the limited degree contemplated by the Recast Regulation and the Working Group V principles.