Published: 08 March 2017
Area of Law: Restructuring
The implications of Brexit on the UK’s insolvency and restructuring regime
Since 31 May 2002, the European Insolvency Regulation ("EIR") has had direct effect in England and Wales.
The EIR allows for the automatic recognition across Europe of insolvency proceedings in EU Member States. This means that Insolvency Practitioners (“IPs”) can take control and realise the assets of an insolvent company or of a bankrupt individual in other EU Member States quickly, cheaply and efficiently. This avoids the need for IPs to apply to the Court in the relevant jurisdiction to ask for recognition of their powers to act and then to apply for the repatriation of assets to the UK. In summary, it provides for rules on the choice of law, the recognition and enforcement of judgments and co-operation between IPs.
The potential implications of Brexit on the RIR
On 5 June 2015, the Recast Insolvency Regulation (“RIR”) was published, which was due to apply to this jurisdiction from 26 June 2017. It extends to all EU Members, except Denmark. As the UK prepares to leave the EU, there is an emerging danger that Brexit means the UK will be excluded from the RIR and its benefits
R3, the Association of Business Recovery Professionals, is calling on the UK government to ensure that the benefits of the EIR and the RIR are preserved in negotiations via an equivalent treaty between the UK and the EU. This would ensure that the UK’s insolvency proceedings are automatically recognised across the EU, helping to maintain the UK’s status as an attractive place to do business.
“Insolvency Restructuring and Second Chance”
The UK’s preparations to leave the EU also coincide with the publication of the Directive on “Insolvency Restructuring and Second Chance”.
In 2016, the Insolvency Service instigated a consultation of the “Corporate Insolvency Framework” and proposed the introduction of new tools to support business rescue, including a “moratorium” and a new restructuring tool. Under these proposals, instigation of these new tools was to be undertaken by qualified IPs. That is not what the Directive above provides. It introduces the terms “managers“ and “supervisors” who are not necessarily qualified IPs.
Shakespeare Martineau are sponsors of The Academic Forum of Insol Europe, and this will be the focus of the conference being held in Warsaw in October 2017.
Also, in my role as Chair of R3 London & South East from 28 February 2017, I will be inviting MPs in our region to share their economic concerns and to listen to ours.