Informal Stakeholder Meeting Insolvency initiative1st meeting DG Justice & Consumers
Where do we come from? • - Insolvency Regulations 1346/2000/EC and 848/2015/EU • - Country specific recommendations (European Semester) • - Commission's Communication (2012), Commission's Insolvency Recommendation (2014) • What is the policy background? • - EP Report with recommendations • - Five Presidents' report, Letter of President Juncker & VP Timmermans to the EP • - CMU Action Plan & Single Market Strategy • - ECOFIN Conclusions on the CMU • What will we do? • - Impact assessment
Insolvency Regulations Regulation 848/2015/EU on insolvency proceedings replacing as of June 2017 Regulation 1346/2000 on insolvency proceedings deal with: • conflicts of jurisdiction • conflicts of laws • recognition and enforcement of judgments
European Semester Regular country specific recommendations on insolvency • Concern only few countries • Short and general • Help accomplish reforms in Member States concerned • Do not ensure a coordinated EU-wide reform
Commission's Insolvency Communication Commission Communication on new approach to business failure and insolvency 2012 (COM (2012) 742 final) • Promoting restructuring plans • Second chance for bankrupt but honest entrepreneurs • Creating a level playing field for companies by ensuring equal access to insolvency proceedings • More certainty for creditors relating to procedures to file and verify claims
Commission's Insolvency Recommendation Recommendation on a new approach to business failure and insolvency, C(2014) 1500 final, 12.03.2014 Minimum standards on: • preventive restructuring procedures enabling debtors in financial difficulty to restructure at an early stage with the objective of avoiding their insolvency, and • discharge periods for honest bankrupt entrepreneurs which would allow them to have a second chance Evaluation of Insolvency Recommendation • Summary of the Evaluation in the CMU Action Plan • Full summary available at: http://ec.europa.eu/justice/civil/commercial/insolvency/index_en.htm
Evaluation of the Insolvency Recommendation • + useful focus for Member States which already started reforms earlier • - unable to spur coordinated EU-wide insolvency reforms leading to convergence • - number out-of-court restructurings and reorganisations very small compared to the number of liquidations (tens to thousands per year per country) • - second chance (3 years recommended): 1 to 10 years (+ conditional upon partial repayment) >> "debt traps" in number of countries remain
What is the policy background? • Capital Market Union ActionPlan (30 Sep 2015) • Single Market Strategy (28 Oct 2015) • Five Presidents' report (22 June 2015) • Letterof President Juncker& VP Timmermans to the EP (9 Sep 2015) • European ParliamentRecommendation(2011)
Capital Market Union Action Plan Capital Market Union ActionPlan, COM(2015) 468 final, 30 September 2015 • The Commission will propose a legislative initiative on business insolvency, including early restructuring and second chance, drawing on the experience of the Insolvency Recommendation. The initiative will seek to address the most important barriers to the free flow of capital, building on national regimes that work well (Q4 2016)
Single Market Strategy Communication on Single Market Strategy, COM(2015) 550 final, 30 October 2015 • Building on existing work, the Commission will support bona fide entrepreneurs and put forward a legislative proposal on business insolvency, including early restructuring and second chance, to ensure that Member States provide a regulatory environment that is able to accommodate failure without discouraging entrepreneurs from trying new ideas.
Five Presidents' Report Completing Europe’s Economic and Monetary Union, 22 June 2015 • A true Capital Markets Union also requires other improvements, some of which can only be achieved through legislation, such as: […] the most important bottlenecks preventing the integration of capital markets in areas like insolvency law, company law, property rights and as regards the legal enforceability of cross-border claims.
Letter to the European Parliament Letter of President Juncker and the First Vice-President Timmermans to EP's President Schulz, 9 September 2015 • Priority 4: A Deeper and Fairer Internal Market with Strengthened Industrial Base Launch and follow-up to the new Internal Market Strategy, including… an initiative on business insolvency law and improved enforcement to simplify life of consumers.
European Parliament Recommendations to the Commission on insolvency proceedings in the context of EU company law (2011/2006(INI)) • Part 1: Recommendations regarding the harmonisation of specific aspects of insolvency and company law • Certain aspects of the opening of insolvency • Certain aspects of the filing of claims • Aspects of avoidance actions • General aspects of the requirements for the qualification and work of liquidators • Aspects of restructuring plans
Key elements of the impact assessment process Studies • Legal study on a new approach to business failure and insolvency – Comparative legal analysis of the Member States' relevant provisions and practices (2015 – 1Q 2016) • Impact assessment study on policy options for a new initiative on minimum standards in insolvency and restructuring law (2016) Expert Group • Meetings of Insolvency Expert Group (8-10 meetings) (2016) • Composition of the Expert Group: 22 independent experts (lawyers + academics + judges + accountants + insolvency practitioners + banking representatives + consultants)
Key elements of the impact assessment process Public consultation • Publication of the Inception Impact Assessment • Online open public consultation (2ndQ 2016) Interaction with Member States • Economic Policy Council • Justice Council • EuroGroupmeeting
PROBLEM TREE Driver s Problems Consequences High amounts of accumulated debt since 2009 which is not being reduced Suboptimal cross - border Slow recovery of claims, especially in investment cross - border situations Lack of workable and efficient insolvency ensuring rescue of Companies instead of liquidation and high recovery rates Companies Insolvency proceedings not adapted to Loss of entrepreneurship (legal keeping viable companies alive and jobs persons) (restructuring at early stage). no equal access to restructuring procedures Slow debt deleveraging Diverging national insolvency laws - lack of level playing field for High costs due to: creditors and debtors - Varying recovery rates in MSs a) specialised legal advice in cross - border situations to assess risks Reduced consumption b) Lack of simplified proceedings for SMEs Risk o f forum - shopping detrimental to Risk of social "exclusion" Entrepreneurs t he creditors and insolvency stigma (natural Lack of efficient insolvency persons) proceedings Difficulty to start a new business/receive new financing Impossibility or long delays in Consumers discharging debts Resources caught up for a long period Untapped potential of the in unproductive activity Single M arket in terms of growth, jobs and Outstanding loans on banks' balance competitiveness shee ts
Possible scope • 1) Preventive restructuring procedures and a discharge of debt (second chance) for entrepreneurs as provided for by the Insolvency Recommendation • 2) Key areas of insolvency beyond the scope of the Insolvency Recommendation