COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Revision of Regulation (EC) No 1346/2000 on insolvency proceedings
Date: 2012-12-12
Institutions: European Commission
Subjects: cross-border cooperation, enforcement of ruling, financial solvency, judicial cooperation in civil matters in the EU, judicial proceedings

EUROPEAN 
COMMISSION 

Strasbourg, 12.12.2012  
SWD(2012) 417 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Revision of Regulation (EC) No 1346/2000 on insolvency proceedings 

{COM(2012) 744 final} 
{SWD(2012) 416 final}

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COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Revision of Regulation (EC) No 1346/2000 on insolvency proceedings 

1. 

INTRODUCTION 

As  the  European  Union  is  facing  the  biggest  economic  crisis  in  its  history,  the  European 
Council  has  repeatedly  emphasised  the  Union’s  role  in  promoting  sustainable  growth  while 
pushing  for  financial  consolidation.  Growth  has  therefore  been  put  at  the  heart  of  the 
Commission’s agenda on justice (‘Justice for Growth’). 

One  of  the  measures  supporting  economic  activities  in  the  area  of  justice  is  the  revision  of 
Council  Regulation  (EC)  No  1346/2000  on  insolvency  proceedings  (the  ‘Regulation’  or 
‘EIR’).  From  2009-2011,  an  average  of  200 000  firms  went  bankrupt  per  year  in  the  EU, 
resulting in direct job losses each year of 1.7 million. About one-quarter of these bankruptcies 
have a cross-border element, and so fall under the EIR. As firms that trade cross-border tend 
to be larger than average, the share of jobs affected is likely to be greater than the share of 
bankruptcies, even before taking into account the effects on creditors of these firms. 

The Commission has put the revision of the Regulation in its Work Programme for 2012, in 
line  with  the  review  clause  of  the  Regulation,  Article  46.  The  revision  is  consistent  with 
Europe 2020, the Small Business Act, the Annual Growth Survey 2012 and the Single Market 
Act II. In October 2011, the European Parliament adopted a resolution calling for the revision 
of the Regulation and recommending the harmonisation of specific aspects of insolvency law 
and company  law. The revision will  be adopted together with a report on its application, in 
line with the review clause of the Regulation. 

2. 

PROBLEM DEFINITION 

2.1. 

Evaluation of the Regulation 

Regulation (EC) No 1346/2000 on insolvency proceedings establishes a legal framework for 
cross-border  insolvencies  in  the  European  Union.  The  EIR  lays  down  uniform  rules  for 
jurisdiction, the recognition and enforcement of insolvency-related decisions, and applicable 
law. It also provides for coordination of multiple proceedings relating to the same debtor. In 
short: 

•  The  Regulation  applies  to  legal  and  natural  persons,  whenever  the  debtor  has  assets  or 

creditors in more than one Member State; 

•  Jurisdiction for opening main insolvency proceedings lies with the court where the debtor 
has  its  centre  of  main  interest  (COMI).  The  opening  decision  and  all  other  decisions 
issued by that court are recognised and enforced in all other Member States; 

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•  Secondary  proceedings  can  be  opened  in  any  Member  State  where  the  debtor  has  an 
establishment, i.e. any place where the debtor carries out economic activity. The effect of 
secondary proceedings is limited to the assets located in that Member State. The liquidator 
of  the  secondary  proceedings  has  to  cooperate  with  his  counterpart  in  the  main 
proceedings (and vice-versa) in order to coordinate the proceedings; and 

•  The law applicable to the insolvency proceedings is, in principle, the law of the country 
where  the  proceedings  are  opened.  This  law  determines,  in  particular,  the  ranking  of 
claims and the procedural rights of the creditor. 

Although  the  EIR  is  generally  considered  to  be  successful  in  facilitating  cross-border 
insolvency proceedings within the European Union, the evaluation shows a range of problems 
in implementing the Regulation. It also shows that the Regulation does not sufficiently reflect 
current EU priorities and national practices in insolvency law, in particular in promoting the 
rescue of firms in difficulties. 

The evaluation of the EIR highlighted the following key problems: 

(1) 

(2) 

(3) 

(4) 

Obstacles to the rescue of companies and to the free movement of entrepreneurs and 
debt-discharged persons; 

Difficulties in determining the right jurisdiction to open proceedings; 

Inefficient cross-border procedures; 

No legal framework to cover insolvency of groups of companies. 

This section analyses the four problems, linking them as they are connected and grouping the 
above problems into two categories. 

2.2. 

Problem group 1: Problems relating to the scope of the Regulation 

The first set of problems covers issues relating to gaps in the current scope of the Regulation, 
such  as  the  lack  of  provisions  on  pre-insolvency  schemes,  provisions  on  debt  discharge 
procedures for natural persons and specific rules on groups of companies. 

2.2.1.  The Regulation does not cover national insolvency proceedings that aim at rescuing 

companies 

Since the Regulation was enacted, many Member States have updated their insolvency laws 
by introducing new procedures that aim at rescuing businesses, providing a second chance to 
honest  entrepreneurs  and  giving  individuals  debt  discharge.  The  Heidelberg  study  revealed 
that almost two thirds of Member States have pre-insolvency or hybrid (debtor in possession) 
proceedings that are not covered by the Regulation. These proceedings aim at rescuing viable 
business and at safeguarding jobs and their economic benefits are widely recognised. 

When proceedings are not covered by the Regulation, there is no EU-wide recognition of their 
effects, notably the suspension of individual enforcement action. As a result, foreign creditors 
can continue with individual enforcement action against the company and its assets, and are 
less  willing  to  fully  engage  in  restructuring  negotiations  or  consent  to  rescue  plans.  As  a 
consequence,  the  opportunity  to  rescue  the  company  may  be  lost  and  jobs  cannot  be  saved. 
Respondents to the public consultation highlighted these problems, 51 % of whom felt that the 

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lack of coverage of pre-insolvency or hybrid insolvency proceedings is problematic. 59 % 
also agreed that the EIR should cover national pre-insolvency procedures. 

Between 2009 and 2011, more than 200 000 companies went bankrupt each year in the EU. 
Job losses are estimated to be about 1.7 million per year. It is estimated that about 5 million 
European  companies  have  customers,  creditors  or  business  partnerships  in  other  Member 
States and are  therefore potentially affected by the Regulation  as debtors or creditors in the 
event of an insolvency. About 50 000 companies (1 % of 5 million) per year will be debtors 
and at least twice as many will be creditors in a cross-border insolvency. 

Cross-border insolvencies particularly affect large companies because these are more likely to 
do  business  across  borders  than  SMEs.  The  insolvency  of  a  large  company  has  significant 
effects  on  the  European  economy  because  large  companies,  although  they  represent  only 
0.2 %  of  European  companies,  provide  30 %  of  jobs  in  the  EU  and  produce  41 %  of  gross 
added value. Large  companies  often  source their supplies from smaller companies, possibly 
located abroad, so the insolvency of a large company can have sizeable knock-on effects. 

2.2.2.  The  Regulation  does  not  effectively  cover  the  full  range  of  personal  insolvency 

schemes of Member States 

The rise in personal over-indebtedness in Europe has led to many Member States introducing 
personal  insolvency  schemes.  This  reflects  the  increasing  awareness  that  insolvency  and 
ensuing personal debt is a significant obstacle to entrepreneurship. Bringing in the possibility 
to obtain a debt discharge also aims to counter the negative social impacts that private over-
indebtedness has on the individuals concerned. 

While  several  personal  insolvency  procedures,  including  debt  discharge,  are  covered  by  the 
Regulation,  many  others  are  not.  As  a  consequence,  debtors  remain  liable  to  foreign 
creditors. The fact that the EIR does not cover some personal insolvency schemes therefore 
constitutes an obstacle to honest entrepreneurs and debt-discharged persons getting a second 
chance, and enabling them to make full use of the opportunities of the single market. This is 
in contradiction with EU policies on entrepreneurship. 

The  number  of  personal  insolvencies  that  are  currently  not  covered  by  the  Regulation 
can  be  estimated  at  about  200 000  per  year.  Half  of  the  respondents  to  the  public 
consultation (49 %) agreed that the EIR should apply to private individuals/self-employed, 
while  one  third  (34 %)  disagreed,  with  those  in  favour  including  judges,  insolvency 
practitioners  and  academics.  Some  respondents  did  not  think  an  expansion  should  include 
consumers. 

2.2.3.  The Regulation does not effectively deal with the insolvency of groups of companies 

Although  many  cross-border  insolvencies  involve  groups  of  companies,  the  Insolvency 
Regulation  does  not  contain  specific  rules  dealing  with  the  insolvency  of  a  multi-national 
enterprise  group.  The  basic  premise  of  the  Insolvency  Regulation  is  that  insolvency 
proceedings relate to a single legal entity and that, in principle, separate proceedings must be 
opened  for  each  individual  member  of  the  group.  There  is  no  compulsory  coordination  of 
independent insolvency proceedings opened for a parent company and its subsidiaries. 

This  situation  diminishes  the  prospects  of  successful  restructuring  and  reduces  the  value  of 
the group’s assets. According to the April 2011 report of the Reflection Group on the Future 
of EU Company Law, international grouping of companies has become the prevailing form of 

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European  large-sized  enterprises.  It  is  estimated  that  every  year  2100  companies  (among 
which  2000  SMEs)  are  affected  by  difficulties  in  group  insolvency.  Almost  half  of 
respondents  to  the  public  consultation  (49 %)  felt  the  EIR  does  not  work  efficiently  for 
multinational group insolvencies, with 30 % feeling it does. 

2.3. 

Problem group 2: Problems in implementing the Regulation 

A  number  of  difficulties  have  arisen  in  implementing  the  EIR,  and  they  can  be  grouped  as 
follows. 

2.3.1.  No  definition  of  COMI  and  consequent  difficulties  relating  to  determining 

jurisdiction for opening insolvency proceedings and forum shopping 

The Regulation grants jurisdiction to open main insolvency proceedings with the courts of the 
Member State where the debtor has the centre of its main interests (‘COMI’). The case will be 
handled  in  the  Member  State  of  the  COMI  and  be  subject  to  that  state’s  insolvency  law, 
without  prejudice  to  the  opening  of  secondary  proceedings.  While  77 %  of  respondents  to 
the public consultation approved the use of COMI to determine the jurisdiction of the main 
proceedings, its application in practice has given rise to difficulties as national courts are not 
sufficiently  aware  of  CJEU  case  law  in  the  Eurofood  and  Interedil  cases.  Furthermore,  the 
Regulation  does  not  contain  an  express  obligation  for  the  court  opening  insolvency 
proceedings to investigate the international jurisdiction. The risk is that this results in parallel 
main proceedings opened with conflicts of competence. 

The  Regulation  has  also  been  criticised  for  allowing  forum  shopping  by  companies  and 
natural  persons  that  exploit  the  system  by  relocating  their  COMI  to  another  Member  State. 
However,  not  all  relocations  are  wrongful.  The  problem  of  forum  shopping  is  essentially 
driven by differences in national insolvency laws. 

The Court of Justice has accepted cases of companies relocating their COMI as a legitimate 
exercise of the freedom of establishment. There are several cases where COMI relocation to 
the  UK  led  to  the  successful  restructuring  of  a  company  because  of  the  flexibility  which 
English insolvency law grants companies. 

COMI  relocation  has  also  been  reported  in  cases  of  over-indebted  natural  persons.  This 
phenomenon  has  been  termed  ‘bankruptcy  tourism’.  Bankruptcy  tourism  is  problematic 
because  a  debtor  takes  advantage  of  a  more  favourable  insolvency  regime  in  another 
jurisdiction  without  genuinely  relocating  to  the  other  Member  State,  to  the  detriment  of  his 
creditors who are unable to enforce their claims. 

Issues  relating  to  determining  COMI  are  a  frequent  source  of  litigation,  although  COMI 
litigation is becoming less frequent. Research concluded that COMI issues arise in 40-50 % of 
the cases, albeit not always as a contested issue. The extent of wrongful COMI relocation is 
difficult to quantify, partly due to diverging views as to whether COMI relocation is actually 
wrongful  and  partly  because,  due  to  the  deficiencies  in  the  procedural  framework,  not  all 
wrongful  COMI  shifts  are  detected.  UK  statistics  indicate  that  in  fewer  than  100  cases  per 
year, the COMI shift could be considered to be wrongful. 

2.3.2.  Relationship between the main and the secondary proceedings under the Regulation 

The EIR allows secondary proceedings to be opened if the debtor has an establishment in that 
country. However, it provides that secondary proceedings must be winding-up or liquidation 

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proceedings, that is, they cannot be restructuring or re-starting proceedings. This requirement 
has  triggered  criticism  that  the  EIR  focuses  on  liquidation  rather  than  restructuring,  and  is 
therefore  incompatible  with  today’s  ‘corporate  rescue’  culture.  A  vast  majority  of 
stakeholders consider this to be a problem. 

The narrow scope of secondary proceedings can be an obstacle to the successful restructuring 
of a company with branches in several Member States, thereby diminishing the total value of 
the  debtor’s  assets  and  destroying  jobs.  This  sub-problem  therefore  reinforces  the  first  sub-
problem that the current Regulation constitutes an obstacle to business continuation and the 
safeguarding  of  jobs.  The  system  of  secondary  proceedings  was  introduced  to  protect  the 
interests of local creditors and/or to facilitate the administration of complex cases. In practice 
however,  secondary  proceedings  can  obstruct  both  the  effective  administration  of  the  estate 
and  the  successful  reorganisation  of  a  company.  They  remove  part  of  the  assets  from  the 
control of the insolvency administrator in the main proceedings. They also increase the costs 
of  proceedings  because  an  additional  insolvency  practitioner  has  to  be  paid.  The  use  of 
secondary  procedures  has  fallen  because  companies  tend  to  organise  their  cross-border 
activities through subsidiaries. However, the use of branches remains the norm in the aviation 
sector,  with  big  assets  and  many  employees.  It  is  estimated  that  every  year  about  700 
companies  with  branches  in  another  Member  State  go  bankrupt  and  several  hundred 
secondary proceedings are opened. 

When  secondary  proceedings  are  opened,  all  parties  involved  report  that  there  is  a  lack  of 
coordination between the main and secondary procedure. The Regulation obliges insolvency 
practitioners  to  communicate  information  and  cooperate  with  each  other.  Associations  of 
practitioners  have  produced  several  guidelines  for  practitioners  on  cooperation  and 
communication  in  cross-border  insolvencies.  Insolvency  practitioners  and  courts  have 
reported  that  cooperation  is  not  effective  in  practice.  The  additional  cost  of  cooperation, 
language barriers and national procedural rules preventing the disclosure of information may 
also  be  a  source  of  difficulties  in  cooperation.  Moreover,  there  are  no  similar  duties  of 
cooperation  between  the  courts  and  between  insolvency  administrators  and  the  courts.  As  a 
result,  the  judge  in  the  main  proceedings  is  not  informed  of  developments  in  the  secondary 
proceedings  before  deciding  on  further  action,  and  vice-versa.  This  ultimately  reduces  the 
efficiency  of  proceedings,  increases  their  length  and  costs,  and,  ultimately,  chances  to 
maximise  the  value  of  the  assets  may  be  lost.  70 %  of  respondents  to  the  public 
consultation  were  dissatisfied  with  the  coordination  between  main  and  secondary 
proceedings. 61 % responded similarly in the Heidelberg report. 

2.3.3.  Difficulties in practical implementation relating to the lack of publicity of decisions 

on an insolvency procedure and to the lodging of claims 

A  court  opening  insolvency  proceedings  needs  to  know  whether  the  company  or  person  is 
already  subject  to  insolvency  proceedings  in  another  Member  State.  Today  there  is  no 
systematic  publication  or  registration  of  the  decisions  in  the  Member  States  where  a 
proceeding  is  opened,  nor  in  Member  states  where  there  is  an  establishment.  The  lack  of 
information  on  proceedings  has  resulted  in  concurrent  proceedings  being  launched 
unnecessarily. It is also essential to give access to the decision closing a procedure. 

In  all  but  two  Member  States,  information  about  insolvency  proceedings  is  collected 
centrally.  While  insolvency  proceedings  of  legal  entities  are  registered  in  every  Member 
State,  insolvencies  of  individuals  are  only  registered  in  some.  Only  14  Member  States 
publish  decisions  in  an  insolvency  register  that  is  publicly  accessible  online,  free  of 

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charge.  9  other  Member  States  make  some  information  on  insolvency  available  in  an 
electronic database, e.g. a company register or an electronic version of the official bulletin. 

The  evaluation  study  and  respondents  to  the  public  consultation  (in  particular  the  European 
Association for SMEs) have reported that creditors experience difficulties in lodging claims 
under the European Insolvency Regulation. Liquidators do not always inform creditors in due 
time about their right to lodge a claim. This may entail the total loss of the claim if it is lodged 
after deadlines under national law have expired. 

These costs and difficulties deter small creditors. The average cost of lodging a claim for a 
foreign creditor has been estimated at about €

 2000 in a cross-border situation. 

2.4. 

EU right to act: Legal basis, subsidiarity and proportionality 

The reform would be based on Articles 81(2)(a), (c) and (f) TFEU. The measures would be 
adopted  in  ordinary  legislative  procedure.  The  development  by  the  EU  of  more  efficient 
cross-border  insolvency  rules  is  in  complete  compliance  with  principle  of  subsidiarity.  The 
issue has cross-border aspects, which cannot satisfactorily be dealt by individual action by the 
Member  States. Furthermore,  action  at EU level would produce clear benefits (compared to 
Member State action) in terms of effectiveness. 

3. 

POLICY OBJECTIVES 

General objective 

To improve the efficiency of the European framework for resolving cross-border insolvency cases in view 
of improving the functioning of the internal market and its resilience in economic crises. 

Specific objectives 

To  ensure  EU-wide  recognition  of  national  insolvency-related  proceedings  contributing  to  rescuing 
businesses,  protecting  investment,  safeguarding  jobs  and  encouraging  entrepreneurship;  and  providing  a 
second chance to honest entrepreneurs and over-indebted consumers; 

To increase legal certainty for creditors, thereby encouraging cross-border trade and investment; 

To improve the efficient administration of cross-border insolvencies that protects the interest of all creditors 
and other interested persons, including the debtor; 

To  improve  the  efficient  administration  of  the  insolvency  of  members  of  a  multi-national  group  of 
companies, thereby maximising the value of their assets and facilitating rescue. 

Operational objectives 

To address the problem of scope of the Regulation, which does not take into account the increased use of 
non-liquidation proceedings (e.g. pre-insolvency and hybrid proceedings); to set up a process to adapt the 
Regulation  to  developments  in  national  insolvency  law  and  to  allow  secondary  proceedings  to  cover 
restructuring, pre-insolvency and hybrid proceedings; 

To  clarify  the  rules  relating  to  jurisdiction  for  opening  insolvency  proceedings,  without  prejudice  to  the 
rights  of  companies  and  natural  persons  to  legitimately  exercise  their  freedom  of  establishment  and 

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movement in the Union;  

To improve the procedural framework for taking the decision on jurisdiction and ensuring the possibility for 
judicial review for interested parties; 

To  improve  coordination  between  courts  and  practitioners,  both  prior  to  and  during  the  proceedings;  to 
increase transparency by making it mandatory to publish all relevant decisions in each Member State; and to 
improve access to justice, in particular for SMEs, by devising measures to facilitate the lodging of claims; 
and 

To create a specific legal framework for group insolvency. 

4. 

POLICY OPTIONS 

Three policy options have been identified to tackle with the above problems and achieve the 
above objectives. These are: 

1) Status quo, or baseline scenario; 

2) Option A, updating the existing Regulation, while maintaining the current balance between 
creditors and debtors and between universality and territoriality; and 

3) Option B, changing the basic premises of the Regulation and requiring some approximation 
or convergence of national insolvency laws and proceedings. 

Overleaf  is  a  table  setting  out  the  aspects  making  up  each  of  these  options,  against  the 
problems that were broken down into two categories. Certain aspects are common to options 
A  and  B  as  both  would  extend  the  scope  of  the  Regulation,  e.g.  regarding  the  national 
insolvency registers and the simplified procedures for lodging a claim. 

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Problem 

Status Quo (Baseline 
scenario) 

Option A ‘Updating 
the framework for 
cross-border 
insolvency 
proceedings’ 

Option B ‘Towards 
approximation of 
national insolvency 
laws and proceedings’ 

Limited  scope  of 
Insolvency Regulation 

the 

The  scope  and  definition 
of  the  EIR  do  not  cover 
hybrid 
pre-insolvency, 
and  most 
personal 
insolvency proceedings. 

Extend  the  scope  of  the  EIR  to  include  hybrid 
proceedings,  pre-insolvency  proceedings  and  personal 
insolvency  proceedings  and  do  away  with 
the 
requirement  that  secondary  proceedings  have  to  be 
winding-up proceedings. 

No  rules  for  groups  of 
companies. 

Coordination  of  main 
through 
proceedings 
cooperation 
general 
the 
mechanisms,  with 
option, 
when 
appropriate,  to  nominate 
a 
insolvency 
practitioner. 

lead 

Single court competent for 
proceedings; 
all  main 
single 
insolvency 
administrator appointed for 
all  members  of  the  group 
(‘procedural 
consolidation’). 

Difficulties 
implementing 
Insolvency Regulation 

in 
the 

No  obligation  to  publish 
and  not  all  MS  have  an 
electronic 
insolvency 
register. 

Require  Member  States 
to  publish  all  relevant 
decisions  of  insolvency  proceedings  in  a  national 
electronic register and define common categories to be 
able to link national registers in the e-justice portal. 

No  standard  forms  for 
lodging 
claims.  The 
procedures  are  entirely 
left to national law. 

Introduce  procedures  and  a  standardised  form  at  EU 
level for lodging claims and encourage Member States 
to set-up electronic means for lodging claims. 

Jurisdiction  remains  at 
the  COMI,  which 
is 
defined by case law. 

Improve  the  procedural 
framework 
train 
and 
judges on the EIR. 

Harmonise  elements  of 
national insolvency laws.  

Coordination  is  limited 
to  coordination  between 
practitioners. 

Maintain 
secondary 
proceedings  but  improve 
the 
coordination  with 
main  proceedings  prior 
to  and  during  secondary 
proceedings. 

Abolish 
proceedings. 

secondary 

4.1. 

Option A 

First  element:  Extend  the  scope  of  the  EIR  to  include  hybrid  proceedings,  pre-insolvency 
proceedings  and  personal  insolvency  proceedings  and  do  away  with  the  requirement  that 
secondary proceedings have to be winding-up proceedings. 

The  definition  of  insolvency  proceedings  would  be  broadened  to  include  hybrid,  pre-
insolvency and personal insolvency proceedings. National insolvency procedures notified by 
Member  States  and  which  fall  under  the  definition  in  the  Regulation  would  be  listed  in  the 
Annex. The definition would require, in particular, that the insolvency proceeding entail some 
degree  of  court  supervision,  which  is  necessary  for  recognition  based  on  mutual  trust.  The 
Commission  would  be  tasked  with  ensuring  that  only  proceedings  which  comply  with  the 
definition are listed in the Annex to the Regulation. 

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The  current  requirement  that  secondary  proceedings  have  to  be  ‘winding-up  proceedings’ 
would be abolished in order to include proceedings promoting restructuring. 

Second element: Coordination of main proceedings through general cooperation mechanisms, 
with the possibility, when appropriate, to nominate a lead insolvency practitioner. Option A 
would maintain the entity-by-entity approach of the Regulation but provide for coordination 
of  the  insolvency  proceedings  concerning  members  of  the  same  group.  Coordination  would 
apply in three respects: 

(1) 

(2) 

(3) 

The liquidators of the different main proceedings would be obliged to communicate 
and  cooperate,  notably  by  trying  to  develop  a  reorganisation  plan  for  the  insolvent 
members  of  the  group.  This  obligation  would  build  on  the  existing  mechanism  for 
coordination between liquidators in main and secondary proceedings. 

Secondly,  the  Regulation  would  oblige  the  courts  competent  for  the  different  main 
proceedings to communicate information and cooperate, e.g. by appointing the same 
liquidator(s) who have indicated they can cooperate with each other. 

Thirdly,  the  liquidator  in  the  main  proceedings  for  one  group  member  would  have 
the  duty  to  communicate  and  cooperate  with  the  courts  competent  for  the 
proceedings relating to another group member. 

For certain companies, e.g. wholly-owned subsidiaries, in addition to the above coordination 
mechanisms,  they  could  give  a  ‘leading  role’  to  the  liquidator  of  the  parent  company.  The 
‘lead’  liquidator  would  have  the  power  to  direct  the  reorganisation  of  the  insolvent  group 
members, in particular, by requesting the competent court to order a suspension of the process 
of liquidation of a subsidiary, obtain information from the other liquidators or courts involved 
or propose a restructuring plan. 

Third  element:  Require  Member  States  to  publish  decisions  opening  and  closing 
insolvency  proceedings  and  other  decisions  issued  in  the  proceedings  in  a  national 
electronic register and define common categories to link the national registers in the e-justice 
portal. 

This  would  require  all  Member  States  to  set  up  and  maintain  an  electronic  register  for 
insolvency  decisions,  both  for  companies  and  private  persons.  It  would  define  common 
categories to be able to link the national registers in the e-justice portal1 with the purpose of 
providing an accessible and comprehensive EU database of insolvency proceedings, allowing 
creditors,  shareholders,  employees  and  courts  to  see  whether  insolvency  proceedings  have 
been opened in another Member State. 

Fourth  element:  Introduce  procedures  and  a  standard  form  at  EU  level  for  lodging 
claims and encourage Member States to set up electronic means for lodging claims. 

Option A would define a standard form in all EU languages that could be used by all creditors 
in cross-border proceedings to lodge claims. It would also define EU procedures for lodging 
claims  to  ensure  that  national  laws  take  into  account  the  cross-border  dimension  of  certain 
proceedings, e.g. they give reasonable timeframe for lodging a claim, penalise practitioners if 
they do not follow the procedure and provide information to creditors on the outcome of their 

1 

The e-justice portal is intended to be a ‘one-stop shop’ in the area of justice, providing information and 
improving access to justice throughout the EU.  

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claim.  It  would  also  encourage  Member  States  to  set  up  electronic  interfaces  for  lodging 
claims that would be available to foreign creditors. These could be set up as a private venture, 
not necessarily by the public authorities. 

Fifth element: Improve the procedural  framework  and  train  judges  on  the  EIR, as the 
EIR would clarify the definition of COMI by codifying certain elements of CJEU case law. 
The Regulation would also state that the court opening insolvency proceedings is obliged to 
examine ex officio its basis of jurisdiction and to specify in the opening decision whether the 
proceedings are main or secondary proceedings. If there has been a recent change in COMI 
and debts remain in the original Member State, the courts would be obliged to examine at first 
instance, i.e. prior to pronouncing the debt discharge, whether the relocation is genuine. This 
could  be  done  by,  e.g.  requesting  further  documents  from  the  debtor  or  hearing  foreign 
creditors. In addition, creditors would have an effective remedy against the decision opening 
insolvency proceedings; in particular, they would be informed of the decision in due time to 
be  able  to  challenge  it.  Judges  would  be  trained  on  the  Regulation  and  on  the  case  law  of 
CJEU on COMI. 

Sixth element: Maintain secondary proceedings but improve coordination with the main 
proceeding prior to and during secondary proceedings, as follows: 

Require that the court hears the practitioner of the main proceeding, prior to the opening of 
secondary proceedings. 

Enable  the  court  to  postpone  or  refuse  the  opening  of  secondary  proceedings  if  this  would 
obstruct  the  effective  administration  of  the  estate  and  further  benefit  local  creditors.  The 
liquidator  and  the  courts  may  undertake  to  treat  local  creditors  as  if  secondary  proceedings 
had been opened (‘synthetic secondary proceedings’). 

Oblige  courts  and  insolvency  practitioners  to  cooperate  with  one  another,  and  courts  to 
communicate and cooperate between themselves. 

4.2. 

Option B 

The elements that are common to both options A and B are explained above, i.e.: 

– 

– 

– 

First element: Extend the scope of the EIR; 

Third  element:  Require  Member  States  to  publish  decisions  in  a  national 
electronic register; 

Fourth  element:  Introduce  procedures  and  a  standardised  form  for  lodging 
claims. 

Below are the elements specific to Option B.  

Second  element:  single  court  competent  for  all  main  proceedings  would  mean  having  a 
single  insolvency  administrator  appointed  for  all  members  of  the  group  (‘procedural 
consolidation’), whereby the insolvency proceedings for all members of the group would be 
consolidated  in  a  single  court  at  the  place  of  the  COMI  of  the  parent  company.  The  same 
insolvency practitioner would be appointed in all main proceedings of the subsidiaries. 

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Fifth  element:  Harmonising  elements  of  national  insolvency  laws  would  involve  certain 
aspects  of  national  insolvency  procedures,  in  particular,  debt  discharge  periods,  conditions 
and rules for opening proceedings, rules on hearings of creditors and effective remedy. 

Sixth  element:  Abolish  secondary  proceedings  under  Option  B.  Instead  of  secondary 
proceedings, there would be a single main insolvency proceeding with EU-wide effect dealing 
with the parent company and all branches and establishments. 

4.3. 

Discarded options 

Some  other  elements  were  identified  or  proposed  by  stakeholders  as  options  to  solve  the 
problems.  In  particular,  they  included  introducing  a  suspension  period after  a  change  of  the 
registered office or the COMI as a way to prevent forum shopping. However, it is doubtful 
whether it would effectively achieve this objective. 

5. 

IMPACT ANALYSIS AND COMPARISON OF THE OPTIONS 

The  status  quo  would  not  solve  the  problems  identified  and  would  perpetuate  the  negative 
effects  of  both  groups  of  problems.  Although  a  degree  of  regulatory  convergence  between 
Member States could be expected in some areas, in others the problems are likely to become 
more acute. 

Option A has overall positive impacts compared to the baseline. It would effectively achieve 
the  policy  objectives  and  address  the  problems  identified,  without  intrusion  in  national 
legislation  or  policies.  This  option  has  positive  economic  impacts  on  the  security  of 
investment, the functioning of the single market and on entrepreneurship. It would facilitate 
the survival of viable businesses and safeguard jobs. There is no evidence of any additional 
impact  on  the  situation  of  employees  in  the  event  of  insolvency  of  their  employer.  There 
would  be  a  risk  that  giving  a  second  chance  to  debtors  would  impact  other  entrepreneurs’ 
access  to  affordable  credit,  but  this  is  counter-balanced  by  the  efficiency  of  modern 
insolvency  schemes  that  are  tightened  and  closely  monitored.  There  is  also  a  risk  that 
extending  the  scope  to  cover  more  insolvency  schemes  would  have  an  effect  on  forum 
shopping.  However,  facilitating  rescue  is  the  primary  aim  of  the  hybrid  and  pre-insolvency 
proceedings, and the benefits are reinforced by the efficient coordination of procedures. This 
option  would  contribute  to  promoting  second  chance.  It  would  increase  efficiency,  fairness 
and transparency of cross-border insolvency proceedings and improve access to justice. 

Option A imposes some costs on Member State authorities related to insolvency registers and 
training for judges. The costs are justified by the benefits and savings for society of increasing 
the efficiency and quality of cross-border insolvency procedures. 

Option  A  would  have  a  positive  impact  on  mutual  trust  between  Member  States’  judicial 
authorities.  It  maintains  the  current  balance  between  debtor  and  creditor  and  between 
universality and territoriality. However, it would not address one major cause of the problems 
— inefficiencies and differences in national insolvency laws. 

Option  B  is  potentially  more  effective  than  Option  A  in  achieving  the  objectives  and 
providing  economic  and  social  benefits  for  the  single  market.  It  would  increase  the 
effectiveness and efficiency of insolvency proceedings in the EU as a whole; it would create 
elements  of  a  fully  universal  system,  similar  to  some  of  the  features  of  the  insolvency 
regulation governing the 50 States of the US, the US Insolvency Act. 

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Option B would more completely address the European Parliament’s Resolution of November 
2011, in which it made recommendations to the Commission regarding the harmonisation of 
specific  aspects  of  insolvency  proceedings.  The  basis  of  the  recommendations  is  that  the 
internal market would benefit from a level playing field, and that disparities between national 
insolvency  laws  create  competitive  advantages  or  disadvantages  and  difficulties  for 
companies  with  cross-border  activities,  which  could  become  obstacles  to  a  successful 
restructuring of insolvent companies and favour forum shopping. 

However, Option B would have a more significant impact on national systems. The proposed 
changes  go  beyond  simply  updating  the  EIR,  and  would  require  an  in-depth  comparative 
analysis of national insolvency laws, which would prevent the immediate implementation of 
Option B. In the meantime, the current problems would persist, and could even worsen. 

Therefore, while there is evidence supporting Option B, Option A seems a more proportionate 
option  at  this  stage.  Accordingly,  the  preferred  option  for  the  revision  of  the  Insolvency 
Regulation is Option A. 

The absence of detailed, systematic statistics specific to the number and type of bankruptcies 
that  fall  under  the  scope  of  the  EIR  -  an  absence  that  it  is  intended  to  remedy  in  the 
monitoring arrangements for the revised regulation, as set out in section 8 below - makes it 
difficult  to  make  precise,  robust  estimates  of  the  scale  of  the  positive  impacts  that  the 
preferred option is expected to generate. There is, nevertheless, substantial evidence that the 
approach  to  bankruptcy  and  insolvency  that  is  set  out  in  the  preferred  option,  of  giving 
preference  to  restructuring  over  liquidation,  and  of  avoiding  placing  unnecessary  hurdles  in 
the  way  of  failed  entrepreneurs  who  wish  to  have  a  "second  chance",  can  give  rise  to 
significant economic benefits. OECD data already cited in this IA show that the rate of loss of 
manufacturing companies is as much as one-third lower in countries that have hybrid or pre-
insolvency proceedings compared to those that do not. The concern that making it easier for 
bankrupts  to  start  up  another  company  will  reward  dishonest  behaviour  appears  to  be 
somewhat exaggerated, as no more than 4-6% of bankruptcies are fraudulent - and sanctions 
for fraud are not affected by the preferred option. 

6. 

MONITORING AND EVALUATION 

In order to monitor the application of the amended Regulation, the Commission will prepare 
regular  evaluation  reports,  based  on  consultations  with  Member  States,  stakeholders  and 
external  experts.  The  Commission  will  encourage  the  exchange  of  best  practices  between 
Member States and require in the revision of the EIR that they provide statistical data on the 
application  of  the  EIR,  notably  the  numbers  of  secondary  proceedings  and  of  proceedings 
concerning groups of companies. 

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