EU Insolvency Research Articles

Lack of Risk Management at Insolvency Consulting Companies: An Empirical Study in Germany 2024

In the wake of the COVID-19 pandemic, the Russian war of aggression against Ukraine and the resurgence of the Middle East conflict, government measures to support the economy have intervened massively in economic activity and thus influenced the real insolvency situation. This situation creates disruptive conditions in insolvency counselling and requires comprehensive risk management for the strategic safeguarding of internal processes in insolvency counselling companies. Despite a number of academic articles that address a lack of risk awareness in insolvency counselling, there have been no valid statistical surveys on this topic to date. The topic has also been largely ignored in practice. This article presents a study that examines risk management in insolvency advisory companies in the context of government intervention in the global economy from 2020 to 2023. The aim of the research is to assess the necessity and existence of risk management in these companies. A survey of 350 insolvency advisors was conducted between March and April 2024, from which 113 complete data sets could be analysed. The central hypothesis of the research study is that a significant majority of insolvency advisory companies have insufficient risk awareness and do not implement comprehensive risk management strategies. The survey results confirm that risk management is rarely practised and that a well-founded risk awareness is lacking in most consulting companies. It is noteworthy that two-thirds of those surveyed consider the benefits of risk management to be low, although more than half of those surveyed recognise increased risks due to government crisis measures. Ultimately, this study concludes with a recommendation that a standardised EU insolvency regulation could offer the greatest benefits for the insolvency sector, as it would simplify risk management for consultants in all member states.

McCormack, Gerard: EU Insolvency Law. Cross Border Insolvency Law in Comparative Focus. Cheltenham et al. 2022

McCormack, Gerard: EU Insolvency Law. Cross Border Insolvency Law in Comparative Focus. Cheltenham et al. 2022

Is EU Insolvency Law consistent?

Is EU Insolvency Law consistent?

Natural person ltd.: Towards a unified discharge regime for entrepreneurs and consumers

AbstractPersonal insolvency proceedings are increasingly fulfilling an economic function, aimed at the rehabilitation of the debtor. The idea of the fresh start and second chance, including an early discharge of residual debts, is an important illustration thereof. Despite the fact that this evolution is noted in all personal insolvency procedures, both with regard to entrepreneurs and consumers, debt discharge used to be easier to justify and more readily granted to entrepreneurs (traders) than to non‐entrepreneurs. Clear examples of the discomfort legislators seem to have with discharging unpaid debts of consumers are the EU Member States that differentiate between commercial and consumer insolvency procedures. In addition, the narrative of promoting entrepreneurship is now driving EU insolvency reforms. That (narrow) focus leads Directive 2019/1023/EU to make the same distinction between insolvent individual entrepreneurs and other natural persons, offering the former a full discharge of debt after a reasonable period of time, while providing no mandatory discharge principles for the latter. This means that not all natural persons are equal when it comes to the possibility of having a second chance, despite compelling evidence that shorter discharge periods lead to more productive individuals. The question therefore arises as to whether EU Member States should run separate discharge systems for entrepreneurs and consumers, and whether this is justified in relation to its purpose. Focusing on natural persons in an insolvency context, this article argues that the objectives of providing a fresh start and second chance, by promoting debt discharge, are as relevant for consumer debtors as they are for entrepreneurs.

Valuation of cryptoassets in EU insolvency: Challenges and prospects

AbstractHow and when to determine the value of cryptoassets in insolvency proceedings? This question becomes more topical with the increasing adoption of volatile cryptoassets such as Bitcoin. As many of these assets do not have an ‘apparent’ value that may be readily ascertainable, it is not always clear how their value may be established. This presents significant challenges to their proper valuation in the context of insolvency proceedings and requires certain attention to efficiently confront the implications on the assessment of claims, the calculation of their value and the determination of the recoverable amount. Accordingly, this Article exposes the arising challenges and implications from an EU insolvency perspective, with the aim to trigger considerations for legislative interventions at EU level.

The Cooperation Mechanism and Legal Harmonisation: Analysing the Past, Present and Future of Mutual Recognition and Assistance in Insolvency Proceedings Across Mainland China and Hong Kong, with Insights from EU Insolvency Regulations

The Cooperation Mechanism and Legal Harmonisation: Analysing the Past, Present and Future of Mutual Recognition and Assistance in Insolvency Proceedings Across Mainland China and Hong Kong, with Insights from EU Insolvency Regulations

General Principles of EU Corporate and Insolvency Law

Over more than forty years, the European Union (formerly the European Community) has enacted a large number of directives aimed at harmonising company law rules across Member States. Nevertheless, differences across Member States persist with regard to company law rules. Member States’ regimes share a core of fundamental features: shareholders are not liable for the company's debts; companies have a separate legal personality; and the capital investment is commodified through the vehicle of freely disposable shares. Beyond these fundamental elements, it is more uncertain whether other general principles, having legal relevance, exist throughout the EU. By looking at national company law regimes and EU harmonising directives, this work has isolated only two principles that seem sufficiently general, common, and fundamental. The first principle is the unrestricted powers of directors to act on behalf of the company: this principle is based upon the German tradition and has been extended to public companies of all Member States by the First Company Law Directive of 1968. The second principle is equal treatment of shareholders who are in the same condition: this is a general duty that all companies’ bodies should respect when they make decisions that affect shareholders. Such a principle, however, is not a rigid equality rule, as differentiated treatment might still be justified in the interest of the company. However, its status within case-law of the European Court of Justice it is still unclear: on the one hand, the Court has denied that this duty is a general principle of EU law, with the consequence that it only applies within the scope of the specific provisions entailing this rule; on the other hand, other decisions of the Court seem to follow an opposite logic. Concerning insolvency law, it is much more controversial whether general principles exist within the EU legal order. Insolvency proceedings are country-specific, as most of their rules have a re-distributive impact on a broad range of stakeholders of the company, such as employees, creditors, and customers. Therefore, insolvency regimes are strictly related to political balances and national social security policies. The only common denominator of Member States insolvency regimes seems to be the duty to treat creditors equally and respect pre-insolvency entitlement and creditor ranking. Nevertheless, there is also an intricate web of exceptions to this principle, which vary broadly across jurisdictions and aim at protecting specific classes of creditors.

국제도산과 담보권 - 2015 EU도산규정을 중심으로 -

국경을 초월한 경제주체들의 도산 상황을 통일적 기준에 따라 형평에 맞게 처리하기 위해, 국제도산법제는 원칙적으로 보편주의와 단일주의를 지향한다. 이에 따르면 어느 국가에서 개시된 도산절차는 다른 국가에 대해서도 효력을 갖고 그 준거법은 도산법정지법이어야 한다. 그러나 각국의 주권과 법체계 하에서 보편주의에 대해 일정한 제한이 가해지는 것은 필연적이다. 현재 국제도산법제의 두 축을 이루는 2015 EU도산규정 및 UNCITRAL 모델법도 그러하다. 다만 유럽연합이라는 지역적 특수성 하에서 자동승인제를 택한 2015 EU도산규정은 모델법에 비해 보편주의의 색채가 상대적으로 강하다.<BR> 국제도산에서 외국담보권의 취급에 관한 문제는 보편주의와 도산법정지법, 이에 대한 예외라는 이해의 충돌 상황을 잘 보여준다. 보편주의 원칙을 관철한다면 도산절차개시국 이외의 국가에 소재하는 담보권에 대하여도 도산법정지법을 적용해야 하지만, 이 경우 통상 소재지법에 근거해 담보권을 설정한 채권자의 신뢰와 이익을 침해할 우려가 있고, 나아가 국제적 활동 주체들의 금융거래 자체를 원천적으로 제한하는 결과가 발생할 수 있다. 유럽연합에서 국제도산규범을 형성하는 과정에서도 외국담보권의 취급은 가장 중요한 쟁점으로 다루어졌던 것으로 보인다. 2015 EU도산규정은 채무자의 COMI가 인정되는 회원국에서 개시된 도산절차는 주절차로서 그 효력이 다른 회원국에 대하여도 미치고 원칙적으로 도산법정지법을 준거법으로 하지만, 제8조 제1항에서는 외국담보권에 대하여 도산절차개시의 효력이 미치지 않는다는 예외를 인정한다. 그 결과 외국담보권자는 도산법정지법 및 담보목적물 소재지국의 도산법 모두의 적용을 받지 않고 자신의 담보권을 행사하여 채권의 만족을 얻을 수 있다. 이에 대해서는 여전히 많은 비판이 제기되는 실정이지만, 외국담보권자가 도산절차로부터 절연되는 효과를 부여한다는 측면에서 본다면 규정의 형식에 관하여는 충분히 합리성을 인정할 수 있다고 본다.<BR> 2015 EU도산규정 및 이에 관한 해석론은 외국담보권의 취급에 관하여 채무자회생법이나 국제사법에 명시적인 규정을 두지 않고 있는 우리나라에서의 해석론과 입법에 시사하는 바가 매우 크다. 채무자회생법상의 국제도산에 관한 규율은 외국도산절차를 국내법에 따라 승인하고 필요시 지원결정을 하는 방식을 택하고 있기 때문에, 종래 외국담보권의 취급과 그 준거법에 관한 문제는 크게 부각되지 않았던 것으로 보인다. 생각건대 채무자회생법상으로도 2015 EU도산규정과 마찬가지로 외국담보권에 대해서는 도산법정지법과 소재지국의 도산법 모두 적용되지 않는다고 해석함이 타당하다. 이와 관련하여 모델법을 변형하여 수용한 채무자회생법이 갖는 본질적인 특성을 고려해야 할 것이다.

Insolvency proceedings from a sustainability perspective

AbstractSustainability is a wide concept including environmental, economic, social/culture, and political dimensions. Currently, sustainability research is a rich scientific discipline producing a significant number of research papers. However, sustainability in the context of insolvency proceedings has attracted little research compared with, for example, how much attention corporate social responsibility has received in company law research. This article studies sustainability in the context of liquidation and restructuring proceedings and the preservation of different kinds of resources (natural, manufactured, human, and social capital) in insolvency procedures. The purpose of insolvency proceedings may prevent the full implementation of sustainability. In bankruptcy, the administrator must maximise the selling price for creditor satisfaction, and there are few possibilities to promote sustainability. When facing an acute environmental hazard, in the name of public interest, a bankruptcy estate with assets usually has to act unless the law stipulates that society is responsible for taking care of the problem. In restructuring proceedings, the main purpose is to continue the debtor's business. It depends on the markets how sustainable the debtor company must be to achieve profitability. If becoming a profitable company in a “green” or otherwise sustainable market requires costly efforts, creditors' interests may require the sale of the assets. The author views through sustainability lenses EU Restructuring and insolvency Directive (2019) and finds there is not much of a sustainability approach included.

A Fresh View on the Hard/Soft Law Divide: Implications for International Insolvency of Enterprise Groups

It is the orthodox belief that treaties and—within the EU—directly applicable regulations represent hard, binding international law, while other international instruments—including model laws—are forms of soft law. In a previous publication(The Future of Cross-Border Insolvency: Overcoming Biases and Closing Gaps), I discussed how the traditional distinction between hard and soft law is less firm, due particularly to economic and behavioral implications of instrument choice and design. Building on that analysis, this Article focuses on the new rules for the international insolvency of enterprise groups in the Recast EU Insolvency Regulation 2015 (the “EIR”) and in the forthcoming UNCITRAL model law on enterprise groups. Contrasting the instruments and using a multi-layered assessment illustrates the blur between hard and soft law. This Article argues that only on the first layer—the agreement to participate in the international instrument—is the EIR (chapter on groups) robustly harder than the UNCITRAL instrument. On the second and third layers—enforcement of the instrument and the agreement on hard, more complete rules within it—the UNCITRAL instrument is almost as hard or even harder than the EIR and, as such, more promising. The Article also provides certain concrete conclusions regarding the way that regional and global regimes may be hardened in the future to meet the challenges of enterprise groups’ insolvencies.

The New EU Insolvency Regime (recast) and its Implications

The New EU Insolvency Regime (recast) and its Implications

General Principles of EU Corporate and Insolvency Law

General Principles of EU Corporate and Insolvency Law

Wpływ postępowań likwidacyjnych wszczynanych w wybranych krajach europejskich systemu prawnego common law na bieg postępowań rozpoznawczych i egzekucyjnych toczących się w Polsce oraz wpływ wszczęcia i wyniku postępowania w wyżej wymienionych krajach na istnienie roszczenia dochodzonego przed sądem polskim

This paper is an analysis of effects of winding up proceedings conducted in certain European countries of the common law system. First of all, the paper presents the system of insolvency law in the EU, taking into account the sources of EU insolvency law. This is followed by a presentation of European law regulations concerning the impact of an insolvency order issued in one EU Member State on litigation and enforcement proceedings in another Member State, including the effects of such insolvency order on pending lawsuits, with special focus on enforcement and examination proceedings. Then there follows a presentation of the regulations concerning consumer bankruptcy in the UK, including the sources of law, with a specification of the particularities of the law of England, Wales, Scotland, and Northern Ireland, the procedure, the legal effects of bankruptcy orders and the legal effects of writing-off of debts. Finally, the influence of winding-up proceedings initiated in Ireland and the UK on the initiation and conduct of litigation before Polish courts and on the course of examination proceedings in Poland. On the basis of the above reflections, a conclusion is formulated that if in Ireland and the UK consumer bankruptcy proceedings are initiated, while in Poland proceedings are pending with respect to the bankruptcy estate, these proceedings should be stayed pursuant to the Polish law. These proceedings should be resumed with the participation of a trustee or, where no trustee has been appointed, with the participation of an official receiver. It is also indicated that if an insolvency or bankruptcy order is issued in the UK, then English law will apply to assessing the possibility of initiating examination proceedings before a Polish court. Under the English law, unsecured creditors have no legal remedies against the debtor until declaration of bankruptcy without the leave of the court (Section 285 of the Insolvency Act). Once they obtain consent, they have to submit their claims to the trustee. Only secured creditors, e.g. ones having a mortgage on the debtor’s property, have the right to pursue their secured clams bypassing the rules presented above.

Silos: Establishing the Distributional Baseline in Cross-Border Bankruptcies

The first two decades of law reform related to cross-border bankruptcy are the paired story of the UNCITRAL Model Law (Chapter 15 in the United States) and the EU Insolvency Regulation (the EU Reg). Both seek to create an architecture whereby a court located at a debtor’s center of main interest (COMI) can coordinate the insolvency of a debtor with assets and operations in multiple jurisdictions. The Model Law focuses on the automatic recognition of foreign representatives, and the creation of an ancillary proceeding to administer local assets and claims or transfer them for administration in the main case. Both statutes focus on centralizing administrative power in the “main case.” Relatively less attention has been paid to how assets should be administered in the main case pending at the debtor’s COMI. Governing law has beenassumed to be domestic bankruptcy law in the main, and a subset of domestic bankruptcy law in the ancillary jurisdiction. The next round, of law reform will be devoted to developing and harmonizing the procedures for administering the main case pending at the debtor’s center of main interest in a manner that facilitates cooperation in cross-border cases. In particular, the goal of these efforts should be to adopt measures that: (1) facilitate cooperation by ancillary courts; (2) minimize the effects and incentives for forum shopping; and (3) minimize the conflicts of interest faced by those charged with administering assets in multiple jurisdictions. This article argues that the success of these efforts is going to turn largely on the ability to distinguish harmonized and global bankruptcy procedures from locally determined substantive rights — finding the proper scope for lex fori (law of the forum) and lex situs (law of the location of the property or cause of action) respectively. This choice-of-law approach envisions cooperation a two-way street. This idea — using choice of law principles to allocate value — is motivated by a principle that might be called “global best interests.” In a coordinated case, the distributional baseline entitlement would be determined by calculating the amount that would be received in a hypothetical territorial liquidation. Local claims would be entitled to a minimum distribution based on their local priorities, though limited to the assets that would have been available in a territorial case had one been filed. The practical task imposed on courts (and administrators) would be to calculate the hypothetical territorial distribution. This Article make two related points. First, it acknowledges that the choice of law approach places great pressure on the ability to locate claims and assets for the purpose of distribution, but argues that ultimately the task is not too hard. Second, it explains why the exercise is worth the trouble, in that it offers a practical basis for allocating value in, and a normative basis for, justifying global reorganizations.

‘Brexit’ and International Insolvency Beyond the Realm of Mutual Trust

AbstractThe outcome of the referendum held in the UK in June 2016 is of far‐reaching and unpredictable consequences. This article focuses on the particular field of international insolvency with a view to identifying some of them, all arising out of the fact that the UK will be leaving the EU area of justice and the strong cooperation based on mutual trust between member states. This will make UK–EU insolvency cases clearly less efficient and effective. The consequences of Brexit could be mitigated by the already existing coordination among the international instruments dealing with these matters, in particular the European Insolvency Regulation and the UNCITRAL Model Law on Cross‐Border Insolvency. However, not all EU member states have in place rules dealing with these issues as regards to third states. In order to lessen the impact of Brexit in this sensitive area of law, the implementation of the Model Law in order to deal with extra‐EU cross‐border insolvency could be of avail. Copyright © 2017 INSOL International and John Wiley &amp; Sons, Ltd

Cross-Border Insolvency Law in Europe: Present Status and Future Prospects

In May 2007 the European countries celebrated the first lustrum of the EU Insolvency Regulation (1346/2000). This article describes where Europe stands with its model which is based on well known theories of private international law for dealing with cross-border insolvencies. The EU Insolvency Regulation provides for a national court to exercise international jurisdiction to open insolvency proceedings. The basis for international jurisdiction is the debtor’s “centre of main interests” or COMI. The two most important cases decided by the European Court of Justice (17 January 2006 Staubitz Schreiber and 2 May 2006 Eurofood) are discussed. The article further analyses the regulation’s legal concept and its procedural context and explains that 'financial institutions' are not covered by the Insolvency Regulation, but by separate directives (2001/17; 2001/24). After having taken stock several suggestions are submitted for improvement of the system of cross-border insolvency in Europe.&#x0D;

The recast of the Insolvency Regulation: a third country perspective

During the recasting process of the EU Insolvency Regulation, issues relating to the relationship between the Regulation and the outer world were not debated. Indeed, the new Regulation (EU) 2015/848 maintains its territorial scope of application by making the application of the Regulation subject to the location of the centre of main interests within the territory of a Member State. This article tries to highlight the drawbacks of such geographical limitation concerning different aspects of the Regulation: in particular, jurisdiction, groups of companies, recognition of insolvency proceedings, cooperation and communication among courts and insolvency practitioners. Considering various possibilities to establish a truly universal regime, the article concludes that, in the light of the objective of an efficient administration of insolvency proceedings, the preferred approach is to extend the scope of application of the Regulation unilaterally, thereby including insolvencies significantly linked with third States.

Banking Communication Non-binding and Burden-sharing Approved: Kotnik

Case note on Judgment of the Court (Grand Chamber) 19 July 2016, Tadej Kotnik and Others v Državni zbor Republike Slovenij (526/14) On 19 July 2016, the CJEU decided the Kotnik case concerning State aid, EU soft law, corporate law and insolvency law. The wide spectre of legal subjects touched upon shows that the case is important not only for constitutional and State aid law, but also for the research field on regulatory private law. It impacts banking contracts throughout the EU. The importance of the case is underlined by the fact that the CJEU decided the case in the Grand Chamber. In short, the CJEU ruled that the Commission’s Banking Communication from 2013 is not binding on Member States. It considered the Banking Communication’s provisions on burden-sharing to comply with EU primary law including State aid provisions, the right to property and the principle of protection of legitimate expectations. The CJEU also found that the burden-sharing regime is compatible with Directive 2012/30/EU which generally requires that a capital alteration be decided by the general shareholder meeting. However, the burden- sharing regime is limited by the principle of proportionality since it may not exceed what is necessary to counter the capital shortfall. After a short outline of the facts and legal background, this case note will address each of the CJEU’s findings and discuss their implications for other areas of EU law.

A COMPARATIVE ANALYSIS OF THE UNCITRAL MODEL LAW ON CROSS-BORDER INSOLVENCY AND EU INSOLVENCY REGULATION 2017, AGAINST THE BACKGROUND OF VARIOUS SOURCES OF CROSSBORDER INSOLVENCY LAW

In this investigation, I will compare and contrast the UNCITRAL model law on cross-border insolvency law (hereafter referred to as ‘UNCITRAL model law’) with the EU Insolvency Regulation against the backdrop of various sources or dispensations of cross-border insolvency law. In this comparison, I will highlight the similarities and differences between the two, as well as discuss the other sources in depth, as they largely inform my research. My main aim in including the other sources in this comparative study is to provide deeper insight into these two sources of international cross-border insolvency law, as provided for by academics and sages in the field of insolvency law. These other sources include legislation, common law, treaties and regional dispensations.

The EU Insolvency Regulation Recast: Scope and Rules on Jurisdiction

The new text of the European Insolvency Regulation (the “EIR Recast”) has addressed a large number of gaps and ambiguities raised by the practical application of the current version. This paper offers a critical analysis of three particular issues: the new scope of application of the EIR Recast, the provisions on the determination of the debtor’s Centre of Main Interests, and the scope of the jurisdiction of the courts of the Member State opening insolvency proceedings.