Parallel Reorganizations under the Recast European Insolvency Regulation – A Hypothetical Case Study

Abstract

This article aims to explore the implications of the repeal, through the recast European Insolvency Regulation 2015/848, of the rules in Article 3(3) and Article 27 of the original EIR which required that secondary insolvency proceedings take the form of a liquidation (winding-up). The article's goal is to start to develop an understanding of what will – and what will not – be feasible within the new regulatory framework laid down for non-liquidation secondary proceedings under the Recast EIR. In doing so, the article analyses the new EU regime in the setting of a notional experiment – a hypothetical corporate debtor who wishes to reorganize in parallel proceedings in the Czech Republic, where it is incorporated and where its COMI is, and in the Slovak Republic, where it has its only establishment. The article therefore tests the key variables of parallel non-liquidations conducted under the Recast EIR not in the abstract but in the context of real-life rules on reorganizations contained in insolvency codes of Member State which have both adopted relatively modern provisions on reorganizations, broadly modelled on the U.S. Chapter 11 template. Based on the outcomes of the notional experiment, the article concludes that in principle, the Recast EIR provides EU debtors with a feasible cross-border platform to reorganize in more than one Member State, provided that the insolvency laws of the Member States involved show a reasonable degree of convergence.