The proposed modernisation of the EU’s Insolvency rules aims to shift the focus away from liquidation towards a new approach helping businesses overcome financial difficulties (so helping sound businesses to survive and honest entrepreneurs to get a second chance), while at the same time protecting creditors’ rights to get their money back.

Through its different initiatives, the European Commission wants to modernise the current rules on cross-border insolvency, which date from 2000, and aims to take the first step towards an EU rescue and recovery culture for companies and individuals in financial difficulties.

Invest Europe position

The European Commission’s work on insolvency is particularly important and relevant for those private equity firms who invest mostly in distressed assets.

While Invest Europe welcomes the European Commission’s efforts to encourage access to finance, enable viable businesses to be rescued, and improve growth and sustainability in the overall economy through its new approach to business failure and insolvency, we are not persuaded that harmonisation is necessarily something that will deliver these improvements.

There has already been a natural convergence in the promotion of pre-insolvency/rescue procedures across Europe. In conjunction with proposals to extend the scope of the European Regulation on Insolvency Proceedings to pre-insolvency and rescue type procedures, this may be more feasible than a harmonised approach.