The public concerned by insolvencies – companies, the self-employed, insolvency administrators, public powers, etc – have until 21 June to submit their views to the European Commission on the advisability of modernising the EU regulation in this area, drafted 12 years ago.

Insolvencies are a fact of economic life. According to the Commission, which launched its consultation on 30 March, nearly half of companies survive less than five years. In 2010, 220,000 companies went into liquidation in the Union, ie 600 companies a day. The trend continued in 2011.

After ten years of application of the regulation on insolvency proceedings in the EU, there have been important developments in national insolvency law and considerable changes in the economic and political environment, which “call for a fresh look at the regulation,” notes the EU executive. Large companies are increasingly members of international groups that invest and finance their activities on a global scale. Small and mid-sized structures increasingly operate beyond their home borders. On top of globalisation and relocations has come the economic and financial crisis. All these phenomena increase the risk of financial problems and insolvencies.

The 2000 regulation aimed to enhance legal certainty and facilitate judicial cooperation in cross-border insolvencies, but it has shown its limits. Difficulties result from a lack of precision in legal concepts, considerable disparities between national laws, unclear links between insolvency legislation and other branches of law (civil law, labour law, business law, etc) and a lack of coordination between states.

For Justice Commissioner Viviane Reding, modern EU legislation on insolvency is “an essential part of a modern single market and encourages entrepreneurs to take risks”. “And if necessary, it provides an orderly way for businesses to close down,” she said in a statement.

Her goal is to stimulate the economy by giving a second chance to economically sturdy companies that face short-term financial difficulties. “That is why we are consulting businesses as well as lawyers, judicial authorities and the public at large,” the commissioner explained.

Further information is available at ec.europa.eu/justice/newsroom/civil/opinion/120326_en.htm

Background

Regulation (EC) 1346/2000 on insolvency proceedings lays down rules on competence, recognition and law applicable to cross-border insolvencies and organises coordination for proceedings opened in several EU member states. It applies in every case where a debtor has assets or creditors in more than one member state.