Proposal for a directive of the European Parliament and of the Council harmonising certain aspects of insolvency law

5.12.2025

PROVISIONAL AGREEMENT RESULTING FROM INTERINSTITUTIONAL NEGOTIATIONS

Subject: Proposal for a directive of the European Parliament and of the Council harmonising certain aspects of insolvency law

(COM(2022)0702 – C9 0410/2022 – 2022/0408(COD))

The interinstitutional negotiations on the aforementioned proposal for a directive have led to a compromise. In accordance with Rule 75(4) of the Rules of Procedure, the provisional agreement reproduced below is submitted to the Committee on Legal Affairs for decision by way of a single vote.

2022/0408 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

harmonising certain aspects of insolvency law

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national Parliaments,

Having regard to the opinion of the European Economic and Social Committee,

Having regard to the opinion of the Committee of the Regions,

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1) The objective of this Directive is to contribute to the proper functioning of the internal market and the Capital Markets Union and remove obstacles to the exercise of fundamental freedoms, such as the free movement of capital and freedom of establishment, which result from differences between national laws and procedures in the area of insolvency.

(2) The wide differences in substantive insolvency laws acknowledged by Regulation (EU) 2015/848 of the European Parliament and of the Council create barriers to the internal market by reducing the attractiveness of cross-border investments, thus impacting the cross-border movement of capital within the Union and to and from third countries. Those differences also mean that harmonising certain aspects of insolvency law could entail changes in some Member States.

(3) Insolvency proceedings ensure the orderly winding-up or restructuring of companies or entrepreneurs in financial and economic distress. Those proceedings, including the relevant safeguards for accurately assessing the value of the companies, are key in financial investments, as they determine the final recovery value of such investments. Diverging rules among Member States have contributed to increasing legal uncertainty and unpredictability about the outcome of insolvency proceedings, so raising barriers especially for cross-border investments within the internal market. Large divergences in recovery value and time required to complete insolvency proceedings across the Union have negative repercussions on cost predictability for creditors and investors in cross-border situations in the internal market.

(4) The integration of the internal market in the area of insolvency laws pursued by this Directive is a key tool for a more efficient functioning of the capital markets in the European Union, including greater access to corporate financing. Therefore, it is necessary to set out minimum requirements in targeted areas of national insolvency proceedings, which have a significant impact on the efficiency and length of such proceedings, especially on cross-border insolvency proceedings.

(4a) This Directive should be without prejudice to individual and collective workers’ rights under Union and national law in the context of insolvency proceedings. In particular, it should be without prejudice to Council Directives 98/59/EC and 2001/23/EC, and Directives 2002/14/EC, 2008/94/EC and 2009/38/EC of the European Parliament and of the Council and national laws transposing those Directives. In particular, the obligations concerning information and consultation of employees and the rights of employees in the event of the transfer of an undertaking under those Directives and national laws transposing them should not be affected, including where those national laws contain rules that are more favourable to workers or their representatives.

(5) In order to protect the value of the insolvency estate for creditors, national insolvency laws should include effective rules on avoidance actions concerning legal acts, including legal transactions, that are detrimental to creditors and have been perfected prior to the opening of insolvency proceedings. The determination of whether a legal act is detrimental to the general body of creditors has to take into account the definition of the insolvency estate and the participating creditors. This is especially relevant where certain rights do not form part of the insolvency estate under national law but pertains to the debtor’s personal sphere, for example the right to enter into or end a marriage or adopt a child. The acceptance or rejection of an inheritance should not be subject to the avoidance rules under this Directive.

(5a) Given that avoidance actions aim to reverse the detrimental effects of a legal act on the insolvency estate, it is appropriate to consider that the detriment is caused upon the perfection of the legal act and not upon the execution of the performance. For the purposes of this Directive, a legal act is considered perfected when it produces legal effects in accordance with national law. However, where, pursuant to national law, the legal effects of a legal act are conditional upon an entry of the legal act in a public register, Member States should be able to provide that a legal act is considered perfected as soon as all the other requirements for its effectiveness have been met because the time of the registration in a public register is beyond the control of the debtor or of the parties to the legal act concerned.

(5b) As this Directive lays down minimum rules on avoidance actions, Member States should be able to maintain or adopt provisions on avoidance actions that are more favourable to the general body of creditors only with the exception of the limitation period for avoidance claims. Member States should also be able to provide for presumptions or requirements that alleviate the burden of proof in favour of the party claiming that the legal act is, voidable or unenforceable.

(6) The legal acts that could be challenged under the avoidance actions rules should be interpreted broadly to cover any deliberate behaviour with legal effects that is of detriment to the general body of creditors, irrespective of whether the legal effects or the detriment is intended by the person performing the behaviour, including if there is no fraudulent purpose, notwithstanding the provisions of other areas of law. Acts where the person performing the behaviour does not act consciously or in any other way in line with their free will are not considered as legal acts. Member States should be able to provide that legal acts may also include omissions, as it is of no significant difference whether creditors suffer a detriment as a consequence of an action or of the passivity of the party concerned. Similarly, avoidance rules should not be restricted to legal acts performed by the debtor, but should also include legal acts performed by the debtor’s counterparty or by a third party.

(7) To protect the legitimate expectations of the debtor’s counterparty, any interference with the validity or enforceability of a legal act should be proportionate to the circumstances under which that act is perfected. Such circumstances include the debtor’s intent, the knowledge of the counterparty or the time that elapsed between the perfection of the legal act and the commencement of the insolvency proceedings. Therefore, it is necessary to distinguish between a variety of specific avoidance grounds that are based on common and typical fact patterns and that should complement the general prerequisites for avoidance actions. Any interference should also respect the fundamental rights enshrined in the Charter of Fundamental Rights of the European Union.

(7a) Generally, the avoidance action should cover a certain minimum period prior to the date of the submission of the request for the opening of insolvency proceedings, or in those Member States where the insolvency proceedings can also be opened by the resolution of the members of the debtor, prior to the date of the resolution to commence insolvency proceedings. On principle, the voidness, voidability or unenforceability of a legal act should not depend on the time that the court takes to examine a request to open insolvency proceedings or for a resolution to be passed, pursuant to national law.

(8) In the context of avoidance actions, a distinction should be made between legal acts where the claim of the counterparty was due and enforceable and has been satisfied or secured in the owed manner (“congruent coverage”) and those where the performance was not entirely in accordance with the creditor’s claim (“incongruent coverage”). In the context of congruent and incongruent coverages, the terms satisfaction and collateralisation of the claim of the counterparty should be interpreted broadly, also including acts such as creating a right to set-off or granting creditors a privileged status. Examples of incongruent coverages include, in particular, premature payments, the satisfaction with unusual means of payments, the subsequent collateralisation of a so far unsecured claim which was not already agreed upon in the original debt agreement, granting an extraordinary termination right or other amendments not provided for in the underlying contract, the waiver of legal defences, objections or the acknowledgement of disputable debts. In the case of congruent coverages, the avoidance ground of preferences can only be invoked if the creditor of the legal act that is void, voidable or unenforceable knew at the time of the transaction that the debtor was insolvent.

(9) Certain congruent coverages, namely legal acts that are performed directly against fair consideration to the benefit of the debtor’s assets, should be exempted from the scope of legal acts that are void, voidable or unenforceable. Those legal acts aim at supporting the ordinary daily activity of the debtor’s business. Such legal acts should have a contractual basis, and require the direct exchange of the mutual performances. However, this exemption should not cover the granting of credit. Furthermore, performance and counter-performance in those legal acts should be equivalent in value. At the same time, the counter-performance should benefit the debtor and not a third party. This exemption should cover, in particular, prompt payment of commodities, wages, or service fees; cash or card payment of goods necessary for the debtor’s daily activity; delivery of goods, products, or services against payment by return; creation of a security right against disbursement of the loan or during the continuation of a loan, if this is necessary against the background of national rules to maintain an equivalence in value between performance and counter-performance; prompt payment of public fees against consideration such as admittance to public grounds or institutions. The payment of wages to the debtor’s employees may, in accordance with national law, be deemed to be performed directly if it is made within three months of the performance of the services by the employee to be remunerated.

(9a) The debtor’s payment of an outstanding debt to a third party in a three-person relationship, such as when a subsidiary company pays the parent company’s debt to a third party, should not automatically be considered as a legal act of the debtor against no or manifestly inadequate consideration. In such cases the debtor’s payment can be reciprocal to the performance which the parent company received from the third party and which may have given the debtor a direct or indirect advantage, and the third party may not have had the possibility to reject the debtor's payment.

(9b) The fact that the enrichment resulting from the void, voidable or unenforceable legal act is not available anymore in the property of the party which benefited from that legal act (‘lapse of enrichment’) should not be possible to invoke if that party was aware of the circumstances on which the avoidance action is based. As this Directive lays down minimum rules on avoidance, Member States can decide not to allow the benefited party the possibility of a lapse of enrichment defense, regardless that the party was not aware of the circumstances on which the avoidance action is based.

(10) New financing or interim financing provided during a restructuring attempt, in accordance with the requirements of national law, including in the course of a preventive insolvency procedure under Title II of Directive (EU) 2019/1023 of the European Parliament and of the Council, should be protected in subsequent insolvency proceedings.

(10a) As an instrument of minimum harmonisation, this Directive does not interfere with the national laws on the validity of legal acts subject to avoidance rules. It is, therefore, for Member States to decide if they consider the detrimental legal act ipso iure void, render it ineffective or unenforceable, or require the annulment of that legal act by the court. Moreover, this Directive does not provide for the conditions under which a debtor is to be considered unable to pay its debts as they fall due. Therefore, for the purposes of this Directive, the assessment of whether a debtor is unable to pay its debts as they fall due, including of whether that requires that the debtor is generally unable to pay its debts as they fall due, is to be carried out in accordance with national law.

(11) The main consequence of voidness, voidability or unenforceability in avoidance proceedings is the obligation for the party benefitting from the legal act that is void, voidable or unenforceable to return the benefits caused by such legal act to the insolvency estate. This should include emoluments, where relevant, and interest, in accordance with the applicable civil law and could be deemed fulfilled by the return of the consideration in kind or by the payment of its monetary equivalent, in accordance with national law. It should be possible to bring the avoidance actions against individual successors of the debtor if they acquired the asset while knowing the circumstances on which the avoidance actions are based.

(12) Parties who are closely related to the debtor, such as relatives in case the debtor is a natural person or actors fulfilling decisive roles in relation to a debtor that is a legal entity, usually enjoy an information advantage with regard to the financial situation of the debtor. In order to prevent abusive behaviours, additional safeguards should be established. Consequently, in the context of avoidance actions, legal presumptions about the knowledge of the circumstances on which the conditions for avoidance were based should be introduced when the other party involved in the legal act that is void, voidable or unenforceable is a party closely related to the debtor. Those presumptions should be rebuttable and should aim at reversing the burden of proof to the benefit of the insolvency estate. Where the party which has benefitted from a void, voidable or unenforceable legal act has transferred the benefit deriving from such legal act to a third party, the point in time for determining whether the benefitted party and the third party are closely related should be that of the transfer.

(13) Improving the means available to insolvency practitioners in order to identify and trace assets belonging to the insolvency estate, as well as assets subject to avoidance actions, is essential to maximise the value of that estate. When performing their duties, insolvency practitioners can access information held in public data registers, some of which have been established under Union law and are interconnected at European level, such as the Business Registers Interconnection System (BRIS) or the system of Insolvency Registers Interconnection (IRI). Having access only to information held in public databases, however, is often not sufficient in order to identify and trace assets that are, or should form, part of the insolvency estate. In particular, insolvency practitioners face practical difficulties when they try to access asset registers located in Member States other than that in which they have been appointed.

(14) It is therefore necessary to lay down provisions to ensure that insolvency practitioners, when performing their duties in insolvency proceedings, can have, either directly or indirectly, access to information held in databases which are not publicly accessible.

(15) Immediate direct access to bank account registers is often indispensable to maximise the value of the insolvency estate. Therefore, rules should be laid down providing for direct access to information held in the bank account registers for the designated courts or administrative authorities of the Member States. For the purposes of tracing and identifying assets belonging to the insolvency estate, as well as assets subject to avoidance actions, it may be necessary that access be granted not only to the bank account information of the debtor but also to the bank account information of third parties where there are reasonable grounds to consider that they are beneficiaries of void, voidable or unenforceable legal acts. Where a Member State provides access to bank account information through a central electronic data retrieval system, that Member State should ensure that the authority operating the retrieval system reports search results in an immediate and unfiltered way to the designated courts or administrative authorities.

(16) In order to respect the right to the protection of personal data and the right to privacy, direct and immediate access to bank account registers should be granted to courts or to administrative authorities that are designated by the Member States for that purpose. Insolvency practitioners should therefore be allowed to access information held in the bank account registers indirectly by requesting the designated courts or administrative authorities in their Member State to access the registers and perform the searches. Member States should be able to designate the same courts or administrative authorities for the purposes of accessing national bank account registers domestically or cross-border through the bank account registers interconnection system (BARIS) referred to in Directive (EU) 2024/1640 of the European Parliament and of the Council1. Member States should be also able to provide that the conditions for access and search of bank account information should be verified by courts or authorities other than the designated courts or authorities under this Directive. Access to information should be granted only on a case-by-case basis, where relevant to specific insolvency proceedings for the purpose of identifying and tracing assets belonging to the insolvency estate, as well as assets subject to avoidance actions. However, Member States may, in line with the minimum harmonisation nature of this Directive, adopt or maintain national rules that provide for direct access and search for insolvency practitioners in their national bank account registers and electronic data retrieval systems. Where such direct access and search is granted to insolvency practitioners, Member States are not required to designate courts or authorities for the purpose of access and search in their national bank account registers or electronic data retrieval systems, but remain under the obligation to designate courts or authorities for access and searches through BARIS.

(17) Directive (EU) 2024/1640 of the European Parliament and of the Council provides that centralised automated mechanisms, such as central registers or central electronic data retrieval systems, are interconnected via BARIS, which is to be developed and operated by the Commission. Considering the growing importance of insolvency cases with cross-border implications and the importance of relevant financial information for the purposes of maximising the value of the insolvency estate in insolvency proceedings, the designated courts or administrative authorities should be able to access and search the bank account registers of other Member States directly, through BARIS.

(17a) Access by the courts or administrative authorities designated under this Directive to bank account information across borders through BARIS is based on the mutual trust among Member States derived from their respect of fundamental rights and of the principles recognised by Article 6 of the Treaty on European Union (TEU) and by the Charter of Fundamental Rights of the European Union (the ‘Charter’), as well as the fundamental rights and principles provided for in international law and international agreements to which the Union or all the Member States are party, including the European Convention for the Protection of Human Rights and Fundamental Freedoms, and in Member States’ constitutions, in their respective fields of application. The power to access and search bank account information through BARIS pursuant to this Directive should be exercised in compliance with Union and national rules, as well as national procedural safeguards on the protection of personal data.

(18) Any personal data obtained by designated courts or administrative authorities and insolvency practitioners under this Directive should be processed only where it is necessary and proportionate for the purposes of identifying and tracing assets belonging to the insolvency estate in on-going insolvency proceedings, in accordance with the applicable data protection rules.

(19) Directive (EU) 2024/1640 ensures that persons with a legitimate interest are granted access to beneficial ownership information, in accordance with data protection rules. For the purpose of tracing assets in the context of ongoing insolvency proceedings, insolvency practitioners should be granted access in a timely manner to specific categories of beneficial ownership information held in the interconnected central beneficial ownership registers, such as on the name, month and year of birth and the country of residence and nationality of the beneficial owner, as well as the nature and extent of beneficial interest held.

(20) To ensure that assets can be traced efficiently in the context of cross-border insolvency proceedings, insolvency practitioners should be granted expeditious access to national registers and databases, even if those registers are located in a Member State other than that in which the insolvency practitioner was appointed. Access should be provided without the involvement of any intermediary court or authority, allowing insolvency practitioners to communicate directly with the entities operating or maintaining the national registers or databases concerned. Member States can provide for insolvency practitioners direct search in the datasets contained by such registers or databases. The access conditions applying to foreign insolvency practitioners should not be more cumbersome than those applying to domestic insolvency practitioners. Therefore, Member States cannot apply different conditions solely on the basis that the applicant is an insolvency practitioner established in another Member State. Procedural aspects of receiving and granting the requests submitted by domestic or foreign insolvency practitioners, such as language of the procedure or the verification of conditions of access, should be governed by the law of the Member State where the registers and databases are held.

(20a) In order to establish an effective and consistent system for the enforcement of debts against the assets of debtors, it is essential to prevent debtors from concealing their assets, including through the acquisition of financial instruments, such as securities. The differences between national settlement systems, as well as the varying types and characteristics of financial instruments, can give rise to difficulties in accessing records and in identifying the ultimate beneficial owner of a financial instrument. Therefore, irrespective of the kind of existing register, database or other source of information a Member State uses, it is necessary for Member States to have in place the framework to facilitate the tracing and identification of the owners of financial instruments by making those national registers and databases accessible upon request under this Directive.

(21) In the context of insolvent liquidation, national insolvency laws should allow for the realisation of the assets of a business to occur through the sale of the business or part thereof as a going concern. ‘Sale as a going concern’ should be understood to mean, for the purpose of this Directive, the transfer of a business, in whole or in part, to an acquirer in such a way that that business, or a sufficiently significant part thereof, can continue to operate as an economically productive unit and should not be understood to include the sale of the assets of the business piece by piece (piecemeal liquidation).

(22) It is generally assumed that more value can be recovered in liquidation by selling a business, or part thereof, as a going concern rather than by piecemeal liquidation. In order to promote sales of a going concern, national insolvency regimes should provide for a proceedings by means of which a debtor in financial distress, with the help or under the supervision of a monitor, can seek interested acquirers and prepare the sale of a business as a going concern (‘pre-pack proceedings’) before the formal opening of insolvency proceedings. The remaining assets of that business can therefore be quickly realised shortly after the formal opening of the insolvency proceedings. This Directive should lay down standards for a pre-pack proceedings while allowing for sufficient flexibility of implementation by Members States adapting those standards in existing national insolvency law. In order to guarantee that the sale process is prepared in a fair way, the monitor should be independent of the debtor and any party closely related to the debtor. Member States should be able to provide for additional requirements regarding the monitor’s independence from equity holders or creditors. The pre-pack proceedings should consist of two phases, namely a preparation phase and a liquidation phase. The preparation phase should aim at finding an appropriate buyer for the debtor’s business or part thereof and should be confidential at least as far as the efforts to find an appropriate buyer are concerned. The liquidation phase should aim at approving and executing the sale of the debtor’s business or part thereof and at distributing the proceeds to the creditors, in accordance with national law. The liquidation phase should begin with a decision of a judicial body or any other competent body to formally open insolvency proceedings under national law leading to the winding-up of the debtor. It is not precluded that the debtor may continue its business activity after the termination of the liquidation phase with the remaining part of the economic activity. The liquidation phase should be carried out by means of insolvency proceedings other than preventive restructuring procedures. In Member States where Regulation (EU) 2015/848 of the European Parliament and of the Council applies, the liquidation phase should be carried out by means of the insolvency proceedings that are included in Annex A other than preventive restructuring proceedings.

(22a) The pre-pack proceedings should be without prejudice to employees’ rights under Union and national law, including the involvement of employees’ representatives. Specifically, it should be governed by statutory or regulatory provisions and should be construed in a way where the transfer of all or part of an undertaking is prepared with the assistance of a monitor under the supervision of the court or competent authority, prior to the institution of formal insolvency proceedings that are instituted with a view to the liquidation of the assets of the debtor. While the primary aim of the pre-pack proceedings is to enable, in the interests of creditors, in the insolvency proceedings, a liquidation of the debtor’s assets by the transfer of all or part of the undertaking as a going concern which satisfies to the greatest extent possible the claims of all the creditors, it can also serve employment preservation.

(22b) This Directive should be without prejudice to Directive 2001/23. In view of the case law of the CJEU (Heiploeg), the liquidation phase of the pre-pack proceedings in this Directive is covered by the exception provided for in Article 5(1) of Council Directive 2001/23/EC where the pre-pack proceedings have the primary objective to satisfy the claims of creditors to the greatest extent possible whilst preserving employment as much as possible.

(22c) The introduction of pre-pack proceedings should not lead, in any way, to restrictions of the powers of insolvency practitioners or the possibility of selling the business as a going concern in insolvency proceedings under national law.

(22d) The pre-pack proceedings do not replace national substantive rules, in particular, on the ranking of creditors’ claims, the distribution of proceeds, the nature, scope and form of creditors’ participation or the remuneration of the insolvency practitioner. In the event that a court or competent authority does not authorise the sale of a business, or part thereof, as proposed by the monitor, insolvency proceedings should proceed in accordance with the applicable national insolvency law. The opening of the liquidation phase is subject to the requirements for the opening of insolvency proceedings under national law, such as the presence of a ground for the opening of proceedings.

(22e) The pre-pack proceedings set out in this Directive should be applied to debtors that are legal persons. Member States may extend the application of the pre-pack proceedings to natural persons who are entrepreneurs.

(22f) The debtor should be able to benefit from a temporary stay of individual enforcement actions. The stay should be available either in the preparation phase or in the context of another type of insolvency proceedings, in which the debtor remains totally, or at least partially, in control of its assets and day-to-day operation of its business and in which the sale of the business of the debtor, or part thereof, as going concern can be continued and concluded. Where the stay is being made available within the preparation phase, it should be available under the conditions set forth in Articles 6 and 7 of Directive (EU) 2019/1023 and the national laws transposing that Directive.

(24) The pre-pack proceedings should ensure that the best bid received during the preparation phase is either submitted to the court or competent authority for authorisation, or to the creditors for approval. The monitor should assess and state whether the piecemeal liquidation would recover manifestly more value for creditors than the market price obtained through the sale of the business, or part thereof, as a going concern. The going-concern value of a business may be reasonably expected to be higher than its piecemeal liquidation value because it is based on the assumption that the business will continue its activity with the minimum of disruption, maintain the confidence of financial creditors, shareholders and clients and continue to generate revenue. No undue burden is to be put on the monitor and the process and, in particular, a full-fledged valuation should not be required in the preparatory phase of the process, unless the prospective buyer is a party closely related to the debtor. National law may require the monitor to take into account elements other than price, including the public interest or ensuring the viability of a business. However, a requirement to impose increased scrutiny should apply where the assessment of the monitor or the insolvency practitioner involves a case where the offer that is considered the best is made by a party who is closely related to the debtor. Member States can require the monitor to justify that the bid identified as best offer does not put the creditors in a situation worse than that they would be under an alternative mechanism of addressing the debtor’s insolvency. The monitor should document the preparation of the sales process, so as to provide an appropriate basis for the authorization or approval of the best offer.

(24a) The preparation phase should be limited in time. Member States should provide for a maximum duration that can be shorter than the length of the stay of individual enforcement actions as provided for in Directive (EU) 2019/1023. Where it becomes evident in the course of the preparation phase that the objectives of the pre-pack cannot be achieved, Member States should be able to allow for the termination of the pre-pack proceedings. Such situations can occur where the debtor fails to cooperate with the monitor or to conduct the preparation phase with due diligence, or where there is no reasonable prospect of selling the business as a going concern. The latter could be the case, for example, where the books and records of the debtor are incomplete or deficient to a degree that makes it impossible to ascertain its business and financial situation. Furthermore, whenever it is required that the sale process conducted during the preparation phase is competitive, transparent, fair, and meets market standard, acts of the debtor that are not compliant with those requirements can be viewed as a failure to proceed with due diligence. Nevertheless, Member States may provide that, even if the debtor fails to cooperate with the monitor or to conduct the preparation phase with due diligence, where the continuation of the preparatory phase is in the general interest of the creditors, the court or competent authority may limit the debtor’s rights to administer its business in accordance with applicable insolvency law, with a view to finalising the pre-pack proceedings.

(25) In order to ensure that a business is sold for the best price through the pre-pack proceedings, Member States should ensure that the sale process in the preparation phase is conducted under high standards of competitiveness, transparency and fairness. Alternatively, Member States may provide that, after the opening of the liquidation phase or the presentation of the recommended best bidder, a public auction is run to select the best bid or the bid recommended by the monitor is approved by the creditors. It is for Member States to decide whether the approval of the creditors is given by the general meeting of creditors or creditors committee.

(25a) It is not precluded for the Member States to provide that a court or a competent authority that established that the sale process is not competitive, transparent, fair, and does not meet market standards can decide to proceed with a public auction during the liquidation phase, or piecemeal liquidation of debtor’s assets in insolvency proceeding commenced within the pre-pack proceedings.

(25b) It is necessary that all creditors holding claims against the insolvent debtor have the right to participate in the liquidation phase of the pre-pack proceedings. It should be possible for such claims to be duly recorded, examined and satisfied in accordance with the applicable insolvency framework.

(25c) In insolvency systems that are based on the principle of creditor autonomy, Member States should be able to provide that it is for the general meeting of creditors or the creditors’ committee to authorise the sale of the debtor’s business or part thereof in accordance with national law.

(26) If a Member State opts to require high standards in the preparation phase, the monitor, or, where and to the extent that Member States so decide, the debtor-in-possession, should be responsible for ensuring that the sale process is competitive, transparent, fair and meets market standards. Complying with market standards in this context should require that the process is compatible with standard rules and practice on mergers and acquisitions in the Member State concerned, and include an invitation to potentially interested parties to participate in the sale process, disclosing the same information to potential buyers, enabling the exercise of due diligence by interested acquirers, and obtaining the offers from the interested parties through a structured process.

(27) When a public auction is run prior to or after the opening of the liquidation phase, the offer selected by the monitor during the preparation phase should be used as an initial bid (‘stalking horse bid’) for the purposes of the auction. The debtor should be able to offer incentives to the ‘stalking horse bidder’ by agreeing, in particular, to expense reimbursements or break-up fees in the case a better offer is selected through the public auction. Member States should, nevertheless, ensure that such incentives given by the debtors to the ‘stalking horse bidders’ during the preparation phase are commensurate and do not deter other potentially interested bidders from participating in the public auction in the liquidation phase.

(27a) The monitor should document and report each step of the sale process. The documents and reports of the monitor shall be done in writing, and shall be made available in digital format and in a timely manner. Member States shall ensure that, the monitor is subject to the same confidentiality requirements as an insolvency practitioner.

(28) To prevent a business from depreciating its value merely because it is subject to insolvency proceedings, it is important to ensure that operational counterparties, such as suppliers or customers of the debtor concerned, are taken over by the acquirer and not affected by the pre-pack proceedings. Therefore, the opening of insolvency proceedings should not result in the early termination of contracts under which the parties still have to perform certain obligations and which are necessary for the continuation of business operations. Such termination would unduly jeopardise the value of the business, or part thereof, to be sold through the pre-pack proceedings. It should, therefore, be ensured that such contracts are assigned to the acquirer of the business of the debtor, or part thereof, even without the consent of the counterparty of the debtor to them. Nevertheless, there can be situations in which the assignment of certain obligations under such contracts cannot be reasonably expected, such as when the acquirer is a competitor of the counterparty of the contract. In addition, Member States should be able to provide that the consent of the debtor’s counterparty or counterparties is required for the assignment of contractual obligations, depending on the type of contract, quality of the parties, or interests of the business concerned. Member States should be able to require the consent of the licensee to terminate contracts relating to licenses of intellectual and industrial property rights, of which the debtor is the licensor, as the protection of these rights in the case of the insolvency of the licensor endorses investing in the development of such rights.

(28a) The provisions of this Directive on the automatic assignment of contracts to the acquirer are without prejudice to the right of the counterparty to terminate the contract in accordance with its applicable terms, or the right of the counterparty to resort to the measures granted by the applicable contract law that aim at ensuring a compliant performance of the obligation of the debtor for cases of non or faulty performance, such as the counterparty’s right to require a deposit or security interests or the right of retention of performance before or after the assignment.

(28b) Member States should also be able to introduce an additional safeguard for the protection of the counterparty’s legitimate interest by granting the right to the counterparty to terminate the assigned contract upon a notice period of no less than 3 months where the counterparty would be unfairly prejudiced by an obligation to continue to perform the contract up until the earliest date by which it could otherwise terminate the contract under national law. This Directive should be without prejudice to the rules on the burden of proof concerning the existence of an unfair prejudice under national law.

(28c) In order to increase the attractiveness of asset deals for potential buyers and, thereby, to achieve higher prices in going-concern sales, Member States should ensure that purchasers acquire businesses free and clear of debts and liabilities. Therefore, creditors’ claims should be satisfied from the proceeds of sale and not asserted directly against the purchaser of a business. However, obligations arising from executory contracts or employment relations, for example any occupational benefit entitlements, which are transferred to the buyer remain with the acquirer. Additionally, Member States should be able to introduce or maintain rules providing that the conduct of the debtor is taken into account in the assessment of the acquirer’s liability for damages, if that conduct is imputable to the acquirer under the applicable insolvency law. Such rules may apply to damages covered by environmental law or damages connected to the ownership or control of certain assets.

(28d) The release of security interests or other encumbrances over assets belonging to the debtor’s business should be governed by national law. Where the law in a Member State requires the express consent of the holder of the security interests for the release of such interest, that Member States should be able to provide for a derogation from that requirement, provided that a holder of secured claims does not object to that release.

(28e) The best offer should not be disqualified from the preparation phase solely on the basis that it comes from a closely related party to a debtor. Closely related parties to the debtor should, therefore, be allowed to make a bid and, where their bid is successful, to benefit from the “free and clear” acquisition of the business concerned. The eligibility of closely related parties to bid should, nevertheless, be balanced with enhanced scrutiny of the bidding process. Providing equal opportunities for other bidders, particularly in relation to access to information and ensuring information symmetry, facilitates a quick and efficient pre-pack mechanism and allows other bidders to prepare their bids.

(28f) Where the offer made by a party closely related to the debtor is considered as the best offer, Member States should be able to introduce additional safeguards for the authorisation and execution of the sale of the debtor’s business or part thereof. Such safeguards can include, for example, the obligation for the acquirer to ensure business continuity for a minimum period of time, or the maintenance of pending employment contracts.

(29) The possibility of enforcing pre-emption rights in the course of a sale process would distort competition in the pre-pack proceedings. Potential bidders might abstain from bidding where rights holders could, at their discretion, discard those bids, irrespective of the time and resources invested and the economic value of the offers concerned. In order to ensure that winning offers reflect the best available prices on the market, pre-emption rights should not be conceded to bidders, nor should such rights be enforced in the course of the liquidation phase. Holders of pre-emption rights that were granted prior to the commencement of the pre-pack proceedings should, instead of invoking their option, be invited to participate in the bidding. Nevertheless, Member States should be able to enforce statutory pre-emption rights that are not affected by the insolvency of the debtor.

(30) Member States should allow secured creditors to participate in the bidding process in the pre-pack proceedings by offering the amount of their secured claims as consideration for the purchase of the assets over which they hold a security (credit bidding). Credit bidding should not, however, be used in such a way as to provide secured creditors with an undue advantage in the bidding process, such as where the amount of their secured claim against a debtor’s assets is above the market value of that debtor’s business. As such, a secured creditor should not be able to bid the whole amount of a claim against the debtor’s business that is worth less than the amount of that claim, thereby deterring potential competitors from participating in the bidding process. Therefore, this Directive should restrict the amount that a creditor can bid in cases where there are undersecured or undercollateralised claims. In such cases, a secured creditor should only be allowed to bid an amount that is to be offset against the purchase price, without exceeding the market value of the business. The restriction on a creditor’s ability to bid the value of a secured claim does not mean that that claim loses its security interest in respect of the portion of the claim that cannot be used in the bidding process.

(31) This Directive should be without prejudice to the application of Union competition law, especially Council Regulation (EC) No 139/2004 nor should it prevent Member States from enforcing national merger control systems. When selecting the best offer, the monitor should be allowed to take into account the regulatory risks raised by offers requiring the authorisation of competition authorities and may consult with those authorities if allowed under applicable rules. The disclosure of information by the competition authority should not be contrary to national rules on the protection of business secrets. It should remain the responsibility of the bidders to provide all necessary information to assess those risks and to engage in timely manner with competent competition authorities in order to mitigate those risks. In order to increase the likelihood that procedures are successful, in presence of an offer that raises such risks, the monitor or the debtor should be required to perform their role in a way that facilitates the presentation of alternative bids.

(32) Directors oversee the management of the affairs of a company and have the best overview of its financial situation. Directors are therefore among the first to realise whether a company is insolvent. A late filing for insolvency by directors may lead to lower recovery values for creditors. Member States should therefore introduce an obligation on directors to submit a request for the opening of insolvency proceedings within a specified period. In the context of this duty Member States may define insolvency in a way that differs from the trigger for the opening of insolvency proceedings. Where a Member State has more than one insolvency threshold, it is for that Member State to determine which of those thresholds triggers the duty to submit a request for the opening of the insolvency proceedings. For the purposes of this Directive, Member States should also define to whom the directors’ duties should apply taking into account that the notion of “director” taking into account the variety of responsibilities that certain persons or bodies may have with respect to decisions relating to the management of the company.

(32a) Member States should set a deadline for the duty to submit a request for the opening of insolvency proceedings that is no longer than three months of the directors having become aware, or being reasonably expected to have become aware that the company is insolvent. If the company regains its solvency before that deadline, Member States should be able to provide that a new period starts if the company becomes insolvent again thereafter.

(32b) When a company becomes insolvent, the protection of the general body of creditors may be achieved in different ways. Therefore, Member States should be able to provide that the duty to submit a request for the opening of insolvency proceedings can be discharged by informing the public of the company’s insolvency through a notification in a public register in order to ensure that the creditors are able to apply for insolvency proceedings. Furthermore, Member States should also be able to suspend the duty of directors to submit a request for the opening of insolvency proceedings, if they take measures with a view to protecting the interests of the general body of creditors of the insolvent company, provided that such measures ensure a level of protection to the general body of creditors which is equivalent to that provided by the duty to submit a request for the opening of insolvency proceedings. Those measures can include, for example initiating measures by the company's owners to restore solvency.

(33) To ensure that directors do not act against the interests of creditors by delaying the submission of a request for the opening of insolvency proceedings, despite signs of insolvency, Member States should lay down provisions making directors civilly liable for a breach of the duty to submit such a request. In that case, directors should compensate creditors for any damage resulting from the deterioration in the recovery value of the company compared to the situation where the request would have been submitted on time. Unless this Directive provides for specific rules, all other aspects of civil liability, such as the calculation of damages or the burden of proof, should be governed by national law. Member States should also be able to adopt or maintain national rules on civil liability of directors related to the filing for insolvency that are stricter than those laid down by this Directive.

(33a) Where Member States allow directors to take measures to protect the interests of the general body of creditors, other than by complying with the duty to submit a request for the opening of insolvency proceedings, they should also lay down provisions that ensure that directors are liable for any damage caused to the creditors resulting from the deterioration in the recovery value of the company compared to the situation where a request for the opening of insolvency proceedings would have been submitted. In such a case, creditors should be put in a position as they would be, if the request to open insolvency proceedings would have been submitted by the directors within the deadline set by the Member States. It should be possible for Member States to provide that directors be relieved of such liability, if and to the extent that those directors are able to demonstrate, on the basis of objective circumstances and of information ascertainable at the time of the respective measures, that such measures were reasonably likely to secure an equivalent or better outcome for creditors than that provided by the duty to submit a request for the opening of insolvency proceedings. In such situations, national law on the discharge of the burden of proof should apply.

(33b) In order to promote an efficient and inclusive insolvency framework that supports entrepreneurship and economic renewal, Member States should be able to maintain or introduce simplified winding-up proceedings for microenterprises.

(33c) If an entrepreneur fully or partly owns a company and is personally liable for all the debt of the company, the fact that the company does not have sufficient assets to cover the cost of the insolvency proceedings of the company should not be an obstacle for the entrepreneur to obtain a discharge in accordance with Directive (EU) 2019/1023 and thus to get a second chance. While Member States are not required to introduce a new discharge procedure, they should ensure access to discharge for entrepreneurs who are natural persons, not companies. This Directive concerns insolvent entrepreneurs who are liable for all the debts of a company and does not concern persons who are only partly liable for the debt of a company such as a guarantor for the company’s bank loan and other kinds of guarantees to one of the company’s creditors. This Directive only concerns denial of discharge on the ground that no insolvency proceedings can be opened against the company because the company does not have sufficient assets to cover the costs of such insolvency proceedings. This Directive does not regulate other grounds for denial of discharge such as the reasons for denial of discharge mentioned in Directive (EU) 2019/1023. When a person fulfills the conditions for discharge, the date of the decision to refuse or not to open insolvency proceedings against the company can be applied instead of the date referred to in Directive (EU) 2019/1023 Article 21(1)(b).

(47) It is important to ensure that creditors are appropriately involved in the process, such that creditors’ interests can be adequately considered. Creditors’ committees allow for better involvement of creditors in insolvency proceedings, in particular when creditors would otherwise be inhibited from doing so individually, due to limited resources, economic significance of their claims or the lack of geographic proximity. Creditors’ committees can help cross-border creditors better exercise their rights and ensure their fair treatment. Member States should allow the establishment of a creditors’ committee once insolvency proceedings are opened. Member States should also be able to provide that a creditors’ committee is established before insolvency proceedings are opened. Member States are not prevented from extending the application of those provisions to preventive restructuring proceedings. A creditors’ committee should be established whenever the general meeting of creditors so decides or requests or, where national law does not provide for a general meeting of creditors, if creditors so request in accordance with national law. Member States may decide that the courts, insolvency practitioners or competent authorities can establish the creditors’ committee on their own motion or upon request of one or more creditors, the insolvency practitioner or the debtor.

(48) The burden of setting up and operating a creditors’ committee ought to be commensurate with its benefits. Therefore, Member State should be able to provide that the establishment of the creditors’ committee would not be justified in those instances where the burden of its set-up and operations is higher than the economic relevance of the decisions it might take. This may be the case where there are too few creditors, where the large majority of creditors has a small share in the claim against the debtor, where possible delays caused by the establishment of a creditors’ committee would lead to a deterioration of the financial situation of the debtor or where the expected recovery from the insolvency estate in insolvency proceedings is lower than the cost of the set-up and operation of the creditors’ committee. Such situations occur in particular in insolvency cases concerning entrepreneur debtors and small enterprises or in discharge procedures. Member States should be able to provide for the establishment of the creditors committee only for large undertakings within the meaning of Article 3(4) of Directive 2013/34/EU. For smaller enterprises an adequate realization of creditors interests in insolvency proceedings may already be provided by national law in other ways.

(48a) The provisions on the establishment of the creditors’ committee should apply to debtors that are legal persons. Member States may extend the application of those provisions to natural persons who are entrepreneurs.

(49) Member States should clarify the requirements, duties and procedures for the appointment of members of the creditors’ committee, as well as its functions. To avoid undue delays in the set-up of the creditors’ committee, the members should be appointed expeditiously to ensure an efficient running of the insolvency proceedings. Member States should cater for a fair representation of creditors in the creditors’ committee and ensure that creditors that are resident in another Member State are not precluded from participating in the creditors’ committee. Member States should ensure that creditors are fairly represented within the committee. When workers are among the creditors, those workers or their representatives should be eligible for appointment to the creditors’ committee, unless there is another at least equivalent mechanism of representing the interests of workers in insolvency proceedings, such as when workers' interests in collective proceedings are taken into account through mandatory consultations with their representatives on the direction of the proceedings or prior to major decisions, for example the sale of assets or the transfer of the business. Workers whose wage claims are paid in full by a guarantee institution are not among the creditors.

(50) Fair representation of creditors in the creditors’ committee is particularly important in relation to unsecured creditors, including creditors with small claims. Member States should be able to provide that persons or entities other than creditors, such as employees' representatives, workers' representatives, public bodies or a guarantee institution, are also eligible for the appointment to the creditors’ committee.

(51) The creditors’ committee should be involved in insolvency proceedings and ensure that they are conducted in a way that protects creditors’ interests, including by following and being regularly informed of the activities of the insolvency practitioner, without requiring the insolvency practitioner to be subordinate to the committee. The committee’s role in the monitoring of the fairness and integrity of the proceedings can only be performed effectively if the creditors’ committee and its members act independently from the insolvency practitioner and are accountable only to the creditors. The members of the creditors’ committee should act in good faith when carrying out the functions of the committee. Creditors, members of the creditors’ committee and any professionals employed by the creditors’ committee should maintain the confidentiality of confidential information obtained in connection with the committee’s activities

(52) The creditors’ committee should be, on the one hand, sufficiently large to ensure diversity of views and interests in the committee and, on the other hand, remain relatively limited to deliver on its tasks effectively and timely. Member States should clarify when and how the composition of the committee needs to be altered, which could happen if representatives are no longer able to act, including in the creditors’ best interests, or wish to withdraw. Member States should also clarify the conditions for the removal of members who committed a violation of serious nature of duties with respect to the interest of the general body of creditors. Such violations can include situations of conflict of interests.

(53) The working methods of the creditors’ committee should be transparent and effective. Member States should therefore set out the working methods, specifying the scope of the creditors' committee, procedures for voting, including eligibility to vote and necessary quorum, record keeping of the decisions taken by the creditors’ committee, and how the impartiality and the confidentiality of the work of the creditors’ committee is ensured. Member States should ensure the possibility that the working methods may be further specified by means of protocols.

(53a) Creditors should be able to participate and vote electronically or delegate their voting rights to a duly authorised third person. This possibility would be particularly beneficial for creditors resident in other Member States.

(55) The creditors’ committee should be granted sufficient rights to perform its functions efficiently and effectively. Member States should ensure that the creditors’ committee acts in a transparent manner and can interact with insolvency practitioners, courts, the debtor-in-possession, and the creditors that it represents, as necessary, to enable the creditors’ committee to form and communicate its views on matters of direct interest and relevance to creditors, and for those views to be duly considered in proceedings. Member States should ensure the right of the creditors’ committee to request information from the insolvency practitioner and, where the debtor remains in possession, from the debtor. Member States could provide for a right of the creditors’ committee to be consulted on major decisions or allow the general meeting of creditors to delegate decisions to the creditors’ committee. Member States should also be able to provide the right to creditors committees to appoint a secretary and to request external advice on matters in which the creditors represented by the creditors’ committee have an interest.

(56) Since the operation of the creditors’ committee incurs expenses, Member States should establish clear rules as to who pays for them. Member States should also establish safeguards to prevent that the costs of the creditors’ committee reduce the recovery value of the insolvency estate in a disproportionate manner.

(57) To encourage creditors to become members of the creditors’ committee, Member States should limit their civil liability when they carry out functions in accordance with this Directive. Nonetheless, members of the creditors’ committee that have violated their duties intentionally or in a grossly negligent manner can be removed and held liable for their actions. In those cases, Member States should provide that the members are held individually liable for the detriment caused by their misconduct. Member States may decide not to apply such limitation of the civil liability when the expenses for an insurance covering the personal liability of the members of the creditors’ committee members is borne by the insolvency estate. Where Member States entrust the creditors’ committee with greater powers, allowing it, for example, to take decisions concerning the assets of the debtor or to accept transactions in insolvency proceedings, Member States should be able to provide that the members of the creditors’ committee are held liable in the same manner as an insolvency practitioner.

(58) To ensure an enhanced transparency of the key features of national insolvency proceedings and help especially cross-border creditors to estimate what would happen if their investments got involved in insolvency proceedings, investors and potential investors should be granted easy access to that information in a pre-defined, comparable and user-friendly format. A standardised key information factsheet should be prepared and made available to the public by Member States. The Commission should make it available to the public in a multilingual format. That document would be important for potential investors to make a “glance-through” assessment of the insolvency proceedings rules in a given Member State. It should contain sufficient explanations to allow the reader to understand the information therein without having to resort to other documents. The key information factsheet should, in particular, include practical information on the conditions that trigger the opening of insolvency proceedings as well as on the steps to take to request the opening of insolvency proceedings or to lodge a claim. Since Member States are already required to provide information on their national rules on insolvency procedures under Regulation (EU) 2015/848, it is important to ensure that information provided under this Directive is consistent with information provided under that Regulation. To that end, the Member States should be able to provide the information required by this Directive through the European Judicial Network in civil and commercial matters established by Council Decision 2001/470/EC1.

(58a) In the event of exceptional emergency situations stemming from natural disasters or other catastrophic events which seriously disrupt economic activities at the level of a Member State or its regions, Member States should be able to act quickly in order to minimise the adverse impact of those situations on the economy. Such situations have arisen in the context of the Covid pandemic and may arise in the context of a systemic crisis as defined in Article 2(1), point (30), of Directive 2014/59/EU or in situations where State aid is compatible with the internal market to repair damage caused by natural disasters or exceptional occurrences pursuant to Article 107(2), point (b), TFEU. In such situations, which imply the risk of widespread insolvencies, including for companies that are viable under ordinary circumstances, Member States should be able to temporarily derogate from certain provisions of this Directive. The derogations should be limited in scope and time to what is essential to address the exceptional situation, for example by being restricted geographically to the region in the Member States that is affected by a natural disaster. Member States should notify the Commission of the measures which derogate from this Directive, their territorial scope, their duration and a justification of the necessity of their implementation. The obligation of Member States to notify those measures should not affect their entry into force and application. The notification, which facilitates the Commission’s monitoring of the compliance of derogations with the relevant requirements, should be brought to the attention of other Member States without undue delay. The maximum time of the derogation should be one year comprising a possibility of extending it by six-month-periods with an additional controlling mechanism, obliging a Member State to notify the request no later than three months before its expiration and allowing the Commission to oppose it.

(59) In order to ensure uniform conditions for the implementation of this Directive, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council.

(59a) This Directive should be without prejudice to the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure pursuant to Directive (EU) 2016/943 of the European Parliament and of the Council.

(60) Since the objectives of this Directive cannot be sufficiently achieved by the Member States because differences between national insolvency frameworks would continue to raise obstacles to the free movement of capital and the freedom of establishment, but can rather be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.

(61) This Directive respects the fundamental rights and observes the principles recognised by the Charter of the Fundamental Rights of the European Union, in particular the right to respect for private and family life (Article 7 of the Charter), the right to the protection of personal data (Article 8 of the Charter), the freedom to choose an occupation and right to engage in work (Article 15 of the Charter), the freedom to conduct a business (Article 16 of the Charter), the right to property (Article 17 of the Charter), workers' right to information and consultation (Article 27 of the Charter) as well as the right to a fair trial (Article 47(2) of the Charter).

(62) Regulation (EU) 2016/679 of the European Parliament and of the Council applies to the processing of personal data for the purposes of this Directive. Regulation (EU) 2018/1725 of the European Parliament and of the Council applies to the processing of personal data by the Union institutions and bodies for the purposes of this Directive.

(63) The European Data Protection Supervisor was consulted in accordance with Article 42(1) of Regulation (EU) 2018/1725 of the European Parliament and of the Council and delivered an opinion on [OP: add data of publication],

HAVE ADOPTED THIS DIRECTIVE:

Title I GENERAL PROVISIONS

Article 1 Subject matter and scope

1. This Directive lays down common rules on:

(a) avoidance actions;

(b) the tracing of assets belonging to the insolvency estate;

(c) pre-pack proceedings;

(d) the duty of directors to submit a request for the opening of insolvency proceedings;

(f) creditors’ committees;

(g) the drawing-up of a key information factsheet by Member States on certain elements of their national law on insolvency proceedings.

1a. Titles II, III and VII of this Directive apply to collective proceedings, as defined in Article 2, point (1), of Regulation (EU) 2015/848, which are based on laws relating to insolvency, with the exception of preventive restructuring procedures. Title II does not apply to interim proceedings.

2. This Directive does not apply where debtors are:

(a) insurance undertakings or reinsurance undertakings as defined in Article 13 points (1) and (4), of Directive 2009/138/EC of the European Parliament and of the Council;

(b) credit institutions as defined in Article 4(1), point (1), of Regulation (EU) No 575/2013 of the European Parliament and of the Council;

(c) investment firms or collective investment undertakings as defined in Article 4(1), points (2) and (7), of Regulation (EU) No 575/2013;

(d) central counterparties as defined in Article 2, point (1), of Regulation (EU) No 648/2012 of the European Parliament and of the Council;

(e) central securities depositories as defined in Article 2(1), point (1) of Regulation (EU) No 909/2014 of the European Parliament and of the Council;

(f) other financial institutions and entities listed in Article 1(1), first subparagraph of Directive 2014/59/EU of the European Parliament and of the Council;

(g) public bodies under national law;

(h) natural persons who are not entrepreneurs .

2a. Member States may exclude from the scope of this Directive debtors that are financial entities, other than those referred to in paragraph 2, providing financial services that are subject to special arrangements under which the national supervisory or resolution authorities have wide-ranging powers of intervention comparable to those in relation to the financial entities referred to in paragraph 2. Member States shall communicate those special arrangements to the Commission.

3. Titles IV and VII apply to debtors that are legal persons.

4. Member States may decide to apply Title VII only to debtors that are large undertakings within the meaning of Article 3(4) of Directive 2013/34/EU.

Article 2 Definitions

For the purposes of this Directive, the following definitions apply:

(a) ‘insolvency practitioner’ means a person or body who has one or more of the functions listed in Article 2, point (5), of Regulation (EU) 2015/848 and in Article 2(1), point (12), of Directive (EU) 2019/1023;

(b) court’ means a judicial body of a Member State;

(d) ‘ bank account registers’ means centralised automated mechanisms, such as central registers or central electronic data retrieval systems, put in place in accordance with Article 16(1) of Directive (EU) 2024/1640 of the European Parliament and of the Council;

(e) ‘central beneficial ownership register’ means national central registers holding beneficial ownership information and the systems of interconnection of those registers as referred to in Article 10 of Directive (EU) 2024/1640;

(ea) ‘bank account information’ means the information listed in Article 16(3) of Directive (EU) 2024/1640;

(f) ‘legal act’ means, for the purposes of Title II, any deliberate human behaviour producing a legal effect;

(g) ‘executory contract’ means a contract between a debtor and one or more counterparties under which the parties still have obligations to perform at the time of the opening of insolvency proceedings in the liquidation phase in Title IV, with the exception of netting agreements, including close-out netting arrangements on financial markets, energy markets and commodity markets if such arrangements are enforceable under national insolvency law, and of financial contracts;

(h) ‘best-interest-of-creditors test’ means the test whereby no creditor would be worse off under a liquidation in the context of pre-pack proceedings than such a creditor would be if the normal ranking of liquidation priorities were applied in the event of a piecemeal liquidation or, where Member States so provide, in the event of the next-best-alternative scenario;

(i) ‘interim financing’ means any new financial assistance, provided by an existing or a new creditor, that includes, as a minimum, financial assistance during pre-pack proceedings, and that is reasonable and immediately necessary for the debtor’s business or part thereof to continue operating, or to preserve or enhance the value of that business;

(o) ‘creditors’ committee’ means a representative body of creditors in accordance with Title VII;

(p) ‘pre-pack proceedings’ means proceedings, comprising a preparation phase and a liquidation phase, that allows for the sale of the business of the debtor, in whole or in part, as a going-concern to the best bidder in the course of insolvency proceedings for the debtor;

(pa) ‘preparation phase’ means the phase of the pre-pack proceedings aiming at finding an appropriate buyer for the debtor’s business or part thereof;

(pb) ‘liquidation phase’ means the phase of the pre-pack proceedings aiming at approving and executing the sale of the debtor’s business or part thereof and at distributing the proceeds to the creditors;

2. For the purposes of this Directive, the concepts of “insolvency” and “directors” are to be understood as defined by national law.

Article 3 Party closely related to the debtor

1. For the purposes of Title II, parties closely related to the debtor shall include:

(a) where the debtor is a natural person:

(i) the spouse or partner of the debtor;

(ii) ascendants, descendants, and siblings of the debtor, or of the spouse or partner of the debtor, and the spouses or partners of those persons;

(iii) persons living in the household of the debtor;

(iv) persons with access to non-public information on the affairs of the debtor, who have the possibility to control the debtor’s operations, including where they work for the debtor under a contract of employment or are in an employment relationship with the debtor;

(v) legal entities in which the debtor or one of the persons referred to in points (i) to (iv) is a member of the administrative, management or supervisory bodies or that performs duties which provide for access to non-public information on the affairs of the debtor;

(b) where the debtor is a legal entity:

(i) any member of the administrative, management or supervisory bodies of the debtor;

(ii) equity holders with a controlling interest in the debtor;

(iii) persons who perform functions similar to those performed by persons under point (i);

(iv) persons who are closely related in accordance with the first subparagraph to the persons listed in points (i), (ii) and (iii) of this subparagraph.

1a. For the purposes of Title IV, parties closely related to the debtor shall include the persons listed in paragraph 1 and any other persons, including legal persons, with preferential access to non-public information on the affairs of the debtor.

2. The point in time for determining whether a party is closely related to the debtor shall be:

(a) for the purposes of Title II, the day when the legal act subject to an avoidance action was perfected or during a period falling three months prior to the perfection of the legal act;

(b) for the purposes of Title IV, the day when the liquidation phase of the pre-pack proceedings starts or during a period falling at least six months prior to the commencement of the liquidation phase.

Paragraph -1 and paragraph 1, point (a), of this Article shall apply mutatis mutandis to the concept of persons closely related to parties which have benefitted from a void, voidable or unenforceable legal act as referred to in Article 11(2), second subparagraph.

Article 3a National law and minimum harmonisation

1. Without prejudice to Article 9(3), Member States may adopt or maintain laws in conformity with Union law which provide for a greater level of protection for the general body of creditors than that provided for under Titles II and V.

3. Member States may adopt or maintain laws relating to the establishment, functioning, tasks and members of creditors’ committees which provide for a greater participation of creditors in insolvency proceedings than that provided for in Title VII.

2. Member States may adopt or maintain laws which facilitate access by insolvency practitioners to bank account information held in their bank account registers, beneficial ownership information and national registers and databases to a greater extent than the rules provided for in Title III.

3a. Member States shall ensure that insolvent entrepreneurs or other natural persons who as equity holders are personally liable for the debts of a company with unlimited liability have access to a full discharge of debt in accordance with Directive (EU) 2019/1023 even in cases where no insolvency proceedings can be opened in accordance with national law over the debtor on the ground that the latter has no assets or its assets are not sufficient to cover the cost of the proceedings or the cost for the involvement of the insolvency practitioner.

4. Member States may adopt or maintain laws which establish simplified winding-up proceedings for microenterprises.

Article 3b Protection of workers

This Directive is without prejudice to Union and national law on the rights of workers in relation to the matters governed by this Directive, including the involvement of workers’ representatives and appropriate measures to inform and consult workers’ representatives, in particular:

(a) the rights guaranteed by Directives 98/59/EC , 2001/23/EC and 2008/94/EC;

(b) the right to information and consultation in accordance with Directive 2002/14/EC , and Directive 2009/38/EC

Title II AVOIDANCE ACTIONS

Chapter 1 General provisions

Article 4 General prerequisites for avoidance actions

Member States shall ensure that legal acts which have been perfected prior to the opening of insolvency proceedings to the detriment of the general body of creditors are void, voidable or unenforceable under the conditions laid down in Chapter 2.

Member States may provide that a legal act, the effects of which are conditional upon its entry in a public register, is considered perfected as soon as all the other requirements for its effectiveness have been met.

Chapter 2 Specific conditions

Article 6 Preferences

1. Member States shall ensure that detrimental legal acts benefitting a creditor or a group of creditors by satisfaction or collateralisation are void, voidable or unenforceable if they were perfected:

(a) within three months prior to the submission of the request that led to the opening of the insolvency proceedings, or, in the absence of a formal request, of the date of the resolution to commence insolvency proceedings, provided that the debtor was unable to pay its debts as they fall due in accordance with national law; or

(b) after the submission of the request or the date of the resolution referred to in point (a) and before the opening of insolvency proceedings.

2. If a due claim of a creditor was satisfied or secured as owed, Member States shall ensure that a detrimental legal act is void, voidable or unenforceable at least if:

(a) the conditions laid down in paragraph 1 are met; and

(b) that creditor knew that the debtor was unable to pay its debts as they fall due in accordance with national law, that a request for the opening of insolvency proceedings had been submitted or that in the absence of a formal request a resolution to commence insolvency proceedings had been made.

For the purposes of the first subparagraph, point (b), such knowledge shall be presumed if the creditor was a party closely related to the debtor. That presumption shall be rebuttable.

3. Paragraphs 1 and 2 do not apply to the following legal acts:

(a) legal acts performed directly against fair consideration to the benefit of the debtor’s assets;

(b) payments on bills of exchange or cheques where the law that governs bills of exchange or cheques bars the recipient’s claims arising from the bill or cheque against other bill or cheque debtors such as endorsers, the drawer, or the drawee if the drawee refuses the debtor’s payment;

(c) legal acts that are not subject to avoidance actions in accordance with Directive 98/26/EC and Directive 2002/47/EC;

(ca) where relevant, in accordance with national law, legal acts the purpose of which is to satisfy or collateralise claims by social security authorities.

(cb) the entering into netting arrangements, including close-out netting, in financial markets, energy markets or other commodity markets as well as legal acts supporting the operation of such arrangements.

For the purposes of the first subparagraph, point (b), Member States shall ensure that the amount paid on the bill or cheque be restituted by the last endorser or, if the latter endorsed the bill on account of a third party, by such party, if the last endorser or the third party knew that the debtor was unable to pay its debts as they fall due in accordance with national law or that a request for the opening of insolvency proceedings had been submitted at the moment of endorsing the bill or having it endorsed. Such knowledge shall be presumed if the last endorser or the third party was a party closely related to the debtor. That presumption shall be rebuttable.

Article 7 Legal acts against no consideration or against manifestly inadequate consideration

1. Member States shall ensure that legal acts of the debtor against no consideration or against a manifestly inadequate consideration are void, voidable or unenforceable where they were perfected within one year prior to the submission of the request that led to the opening of insolvency proceedings, or in the absence of such a formal request, the date of the resolution to commence insolvency proceedings, or after the submission of such request and before the opening of the insolvency proceedings.

2. Paragraph 1 shall not apply to gifts and donations of symbolic value.

Article 8 Legal acts intentionally detrimental to creditors

1. Member States shall ensure that legal acts by which the debtor has intentionally caused a detriment to the general body of creditors are void, voidable or unenforceable where both of the following conditions are met:

(a) those acts were perfected either within two years prior to the submission of the request that led to the opening of the insolvency proceedings or, in the absence of such a formal request, of the date of the resolution to commence insolvency proceedings, or after the submission of such request and before the opening of the insolvency proceedings;

(b) the other party to the legal act knew of the debtor’s intent to cause detriment to the general body of creditors

For the purposes of the first subparagraph, point (b), such knowledge shall be presumed if the other party to the legal act was a party closely related to the debtor. That presumption shall be rebuttable.

Chapter 3 Consequences of avoidance actions

Article 9 General consequences

1. Member State shall ensure that the claims, rights or obligations resulting from legal acts which are void, unenforceable or have been voided pursuant to Chapter 2 cannot be invoked to obtain satisfaction from the insolvency estate concerned.

2. Member States shall ensure that the party which benefitted from the legal act that is void, unenforceable or has been voided is obliged to return the benefits obtained in kind, or in their monetary equivalent.

The fact that the enrichment resulting from the void, voidable or unenforceable legal act is not available anymore in the property of the party which benefited from that legal act (‘lapse of enrichment’) can only be invoked if that party was not aware of the circumstances on which the avoidance action is based.

3. Member States shall ensure that the limitation period for all claims resulting from the void, voidable or unenforceable legal act against the other party is no longer than three years from the date of the opening of insolvency proceedings. Member States may provide that the limitation period is counted from the moment in time, when the insolvency practitioner became aware of the facts that give rise to the claim against the other party. National law regulating the suspension or interruption of the limitation period referred to in subparagraph 1 shall not be affected by this Directive.

4. Member States shall ensure that a claim for the return of benefits obtained in kind or in their monetary equivalent pursuant to paragraph 2 can be assigned to a creditor or a third party.

5. Member States shall ensure that the party that has been obliged to return benefits obtained in kind or in their monetary equivalent pursuant to paragraph 2 cannot offset that obligation with its claims that it would otherwise have to pursue in the insolvency proceedings.

6. This Article is without prejudice to actions governed by civil and commercial law for compensation of damages suffered by creditors as a result of a legal act that are void, voidable or unenforceable.

Article 10 Consequences for the party that benefitted from the legal act that is void, voidable or unenforceable

1. Member States shall ensure that if, and to the extent that, the party that benefitted from the legal act that is void, voidable or unenforceable returns the benefits obtained in kind or in their monetary equivalent in accordance with Article 9, any claim of that party which was satisfied with that legal act revives in accordance with national law.

2. Member States shall ensure that any counter-performance of the party which benefitted from the void, voidable or unenforceable legal act performed after or in an instant exchange for the performance of the debtor under that legal act shall be refunded from the insolvency estate to the extent that the counter-performance is still available in the estate in a form that can be distinguished from the rest of the insolvency estate or the insolvency estate is still enriched by its value.

In all cases not covered by the first subparagraph, the party which benefitted from the void, voidable or unenforceable legal act may file claims for the compensation of the counter-performance.

Article 11 Liability of third parties

1. Member States shall ensure that Articles 9 and 10 are applicable to any heir or another universal successor of the party that benefitted from the legal act that is void, voidable or unenforceable. The extent of the liability of the heirs shall be governed by national law.

2. Member States shall ensure that Article 9 is applicable to any individual successor of the other party to the legal act that is void, voidable or unenforceable if

the successor knew the circumstances on which the avoidance action is based.

The knowledge referred to in the first subparagraph, point (b), shall be presumed if the individual successor is a party closely related to the party which benefitted from the void, voidable or unenforceable legal act. That presumption shall be rebuttable.

Article 12 Relation to other instruments

This Title does not affect Directives 98/26/EC, 2002/47/EC and (EU) 2019/1023.

Where, during preventive restructuring proceedings under Directive (EU) 2019/1023, the debtor becomes unable to pay its debts as they fall due and the benefit of a stay is kept in place in accordance with Article 7(3) of that Directive, Member States may provide that, with respect to legal acts performed during the stay, a party’s knowledge that the debtor was unable to pay its debts as they fall due in accordance with national law does not give rise to avoidance actions under Article 6 (2) of this Directive.

Title III TRACING ASSETS BELONGING TO THE INSOLVENCY ESTATE

Chapter 1 Access by designated courts and administrative authorities to bank account information

Article 13 Designated courts and administrative authorities

1. Each Member State shall designate the courts or administrative authorities that are authorised to access and search its national bank account registers and those authorized to access and search cross-border according to Article 14(2) (‘designated courts or administrative authorities’).

2. Each Member State shall notify the Commission of its designated courts or authorities by … [36 months from the date of entry into force of this Directive], and shall notify the Commission of any changes thereto without undue delay. The Commission shall publish the notifications in the Official Journal in the European e-Justice Portal.

Article 14 Access to and searches of bank account information by designated courts and administrative authorities

1. Member States shall ensure that the designated courts or administrative authorities have the power to access and search, directly and immediately, bank account information where the following conditions are met:

(a) the insolvency practitioner appointed in ongoing insolvency proceedings, including interim proceedings, requests bank account information; and

(b) the bank account information is necessary for the purposes of identifying and tracing assets belonging to the insolvency estate in those proceedings, as well as assets subject to avoidance actions.

2. In facilitating cross-border access, Member States shall ensure that the designated courts or administrative authorities have the power to access and search, directly and immediately, bank account information in other Member States available through the bank account registers interconnection system (BARIS) referred to in Article 16(6) of Directive (EU) 2024/1640 of the European Parliament and of the Council where the following conditions are met:

(a) the insolvency practitioner appointed in ongoing insolvency proceedings, including interim proceedings, requests bank account information in other Member States; and

(b) the bank account information is necessary for the purposes of identifying and tracing assets belonging to the insolvency estate of the debtor in those proceedings, as well as assets subject to avoidance actions.

3. Information additional to that referred to in paragraphs 1 and 2 that Member States deem essential and include in the bank account registers pursuant to Article 16(5) of Directive (EU) 2024/1640 shall not be accessible and searchable by designated courts or administrative authorities.

3a. Member States shall ensure that the designated courts or administrative authorities or other competent courts or authorities verify whether the conditions referred to in paragraphs 1 and 2 are met. If those conditions are met, Member States shall ensure that the designated courts or administrative authorities transmit the relevant bank account information obtained by accessing and searching bank account information pursuant to paragraphs 1 and 2 to the insolvency practitioner who requested it.

3b. Access and searches pursuant to paragraphs 1 and 2 shall be without prejudice to national procedural safeguards and Union and national rules on the protection of personal data. Member States shall ensure that bank account information obtained pursuant to paragraphs 1 and 2 is processed only for the purposes for which it was obtained, including where it is processed by insolvency practitioners.

3c. Member States shall ensure that insolvency practitioners, when processing bank account information obtained pursuant to paragraphs 1 and 2, have in place relevant internal procedures for appropriate management of confidential information.

4. For the purposes of paragraphs 1 and 2, access to and searches of bank account information shall be considered to be direct and immediate, inter alia, where the national authorities operating the bank account registers transmit the bank account information expeditiously by an automated mechanism to the designated courts or administrative authorities, provided that no intermediary institution is able to interfere with the requested data or the information to be provided.

Article 15 Conditions for access to and searches of bank account information by designated courts and administrative authorities

1. Member States shall ensure that access to and searches of bank account information in accordance with Article 14 is performed only on a case-by-case basis by the staff of each designated court or administrative authority that has been specifically appointed and authorised to perform those tasks.

2. Member States shall ensure that:

(a) the staff referred to in paragraph 1 maintain high professional standards of confidentiality and data protection and are of high integrity and appropriately skilled;

(b) technical and organisational measures are in place to ensure the security of the data to high technological standards for the purposes of the exercise by designated courts and administrative authorities of the power to access and search bank account information in accordance with Article 14.

Article 16 Monitoring access to and searches of bank account information by designated courts and administrative authorities

1. Member States shall provide that the authorities operating the bank account registers ensure that logs are kept for each time a designated court or administrative authority accesses and searches bank account information. The logs shall include, in particular, the following:

(a) the case reference number;

(b) the date and time of the query or search;

(c) the type of data used to launch the query or search;

(d) the unique identifier of the results;

(e) the name of the designated court or administrative authority accessing or searching the register;

(f) the unique user identifier of the staff member of the designated court or administrative authority who made the query and, where applicable, of the judge or official who ordered the query or search and, where available, of the requesting insolvency practitioner.

2. The authorities operating the bank account registers systems shall check the logs referred to in paragraph 1 regularly.

3. The logs referred to in paragraph 1 shall be used only to monitor compliance with this Directive and with applicable Union law on data protection. The logs shall be protected by appropriate measures against unauthorised access and shall be erased five years after their creation, unless they are required for monitoring procedures that are ongoing.

Chapter 2 Access by insolvency practitioners to beneficial ownership information

Article 17 Access by insolvency practitioners to beneficial ownership information

Member States shall ensure that, for the purposes of identifying and tracing assets relevant for the insolvency proceedings for which they are appointed, insolvency practitioners have timely access to the following information on the beneficial owners of legal entities and of legal arrangements held in interconnected central beneficial ownership registers, and that such access is provided without alerting the entity, the arrangement or the beneficial owner concerned:

(a) the name of the beneficial owner;

(b) the month and year of birth of the beneficial owner;

(c) the country of residence and nationality or nationalities of the beneficial owner;

(d) for beneficial owners of legal entities, the nature and extent of the beneficial interest held;

(e) for beneficial owners of express trusts or similar legal arrangements, the nature of their beneficial ownership.

Chapter 3 Access by insolvency practitioners to national registers and databases

Article 18 Access by insolvency practitioners to national registers and databases

1. Member States shall ensure that insolvency practitioners, regardless of the Member State in which they have been appointed, have direct and expeditious access to information necessary for the purposes of identifying and tracing assets belonging to the insolvency estate, as well as assets subject to avoidance actions, that are held in existing national registers and databases listed in the Annex , in accordance with conditions provided for by national law.

2. With respect to access to the national registers and databases listed in the Annex, a Member State shall ensure that the insolvency practitioners appointed in another Member State are not subject to access substantive conditions that are de jure or de facto less favourable than those applicable to the insolvency practitioners appointed in that Member State.

2a. Member States shall notify the Commission the lists of national registers and databases referred to in paragraph 1 by…[36 months from the date of entry into force of this Directive], and shall notify any changes thereto.

The Commission shall publish those lists in Official Journal of the European Union and on the e-Justice portal.

Chapter 4 Access to courts by insolvency practitioners of another Member State

Article 18a Access to courts by insolvency practitioners of another Member State

With respect to the right to initiate proceedings or appear before courts or authorities in order to claim assets on behalf of the insolvency estate, Member States shall ensure that insolvency practitioners appointed in another Member State are not subject to conditions that are less favourable than those applicable to the insolvency practitioners appointed in that Member State.

Title IV PRE-PACK PROCEEDINGS

Chapter 1 General provisions

Article 19 Pre-pack proceedings

1. Member States shall ensure that pre-pack proceedings are at least available for debtors, which are likely to become insolvent in accordance with national law. Member States may provide that the preparation phase cannot be initiated in cases where the debtor is unable to pay its debts as they fall due in accordance with national law.

2. Pre-pack proceedings may in accordance with national law be separate proceedings or part of existing insolvency proceedings.

3. Member States shall ensure that debtors who enter the pre-pack proceedings remain totally, or at least partially, in control of their assets and the day-to-day operation of their business during the preparation phase.

4. National law applies to matters not regulated by this Title, including the ranking of claims, the distribution of proceeds, the responsibilities and liability of the debtor and the debtor’s directors, the remuneration of the insolvency practitioner and the nature, scope and form of creditors participation, except, where applicable, with respect to approval of the sale.

Article 20 Relationship with other Union legal acts

1. The liquidation phase shall be carried out by means of insolvency proceedings other than preventive restructuring procedures. In Member States where Regulation (EU) 2015/848 applies, the liquidation phase shall be carried out by means of insolvency proceedings as set out in Annex A to Regulation (EU) 2015/848 other than preventive restructuring proceedings.

2. This Directive is without prejudice to Council Directive 2001/23/EC and national rules implementing it.

For the purposes of Article 5(1) of Council Directive 2001/23/EC, when it takes place in proceedings which can end in the liquidation of the debtor, the liquidation phase shall be considered to be bankruptcy proceedings or any analogous insolvency proceedings instituted with a view to the liquidation of the assets of the transferor under the supervision of a competent public authority.

Chapter 2 Preparation Phase

Article 22 Appointment of the monitor

1. Member States shall ensure that at the initiative of the debtor the preparation phase starts when a monitor is appointed. The procedure for the appointment of the monitor shall be set by national law.

2. Member States shall ensure that the monitor is independent from the debtor and any party closely related to the debtor. Member States may provide for additional requirements regarding the monitor’s independence from equity holders or creditors.

3. Member States shall ensure that only persons who

satisfy the eligibility criteria applicable to insolvency practitioners in the Member State where the pre-pack proceedings is used can be appointed as monitor.

Article 22a Principles of the preparation phase

1. Member States shall ensure that the sale process carried out during the preparation phase is competitive, transparent, fair and meets market standards.

Member States shall ensure that the monitor, if necessary with the assistance of the debtor:

(a) justifies why it considers that the requirement under paragraph 1 is fulfilled;

(b) recommends the best bidder as the pre-pack acquirer, in accordance with Article 30;

(c) states that, on the basis of its assessment, the best bid does not constitute a breach of the best-interest-of-creditors test.

The monitor shall document and report each step of the sale process. The documents and reports of the monitor shall be done in writing, and shall be made available in digital format and in a timely manner. Member States shall ensure that, the monitor is subject to the same confidentiality requirements as an insolvency practitioner.

3. Member States may provide that a public auction be conducted in accordance with Article 26(2) in order to ensure the realization of a fair market price. Member States may provide that such public auction is conducted, in particular, in situations where one or more creditors demonstrate reasonable doubt that the best bid recommended by the monitor reflects the fair market price. Where such a public auction is conducted, Member States may provide that the obligations set out in paragraph 1 and paragraph 2, point (a), do not apply to the monitor.

4. Member States may provide that, where the recommendation referred to in paragraph 2, point (b), is approved by creditors in accordance with national law, paragraph 1 and paragraph 2, point (a), do not apply.

5. Member States shall ensure that:

(a) if no subsequent liquidation phase ensues, the remuneration of the monitor is paid by the debtor;

(b) if the liquidation phase ensues, the renumeration is borne in the insolvency estate.

Article 23 Stay of individual enforcement actions

Member States shall ensure that, during the preparation phase, where the debtor is in a situation of likelihood of insolvency or is insolvent in accordance with national law, the debtor can benefit from a stay of individual enforcement actions in accordance with Articles 6 and 7 of Directive (EU) 2019/1023, either in the preparation phase or in the context of another type of insolvency proceedings, in which the debtor remains totally, or at least partially, in control of its assets and day-to-day operation of its business and in which the sale of the business of the debtor, or part thereof, as a going concern can be continued and concluded.

Article 23a Suspension of the opening of the liquidation phase

Member States may provide that when a creditor files for insolvency during the preparation phase, the opening of the liquidation phase can be suspended if, taking into account the circumstances of the case, that opening would not be in the general interest of creditors.

Article 23b Termination of the preparation phase

1. Member States shall provide that the preparation phase is limited in time.

2. Member States may provide that the preparation phase can be terminated if:

(a) the debtor fails to provide the necessary assistance in accordance with Article 22a (2);

(b) the debtor fails to conduct the preparation phase with due diligence; or

(c) the preparation phase does not have any reasonable prospects of success.

Chapter 3 Liquidation Phase

Article 25 Liquidation phase

The liquidation phase starts when a decision on the opening of the insolvency proceedings referred to in Article 20(1) is taken, in accordance with national law.

Article 26 Principles applicable to the liquidation phase

1. Member States shall ensure that, when the liquidation phase is opened, the court or competent authority authorises the sale of the debtor’s business or part thereof, at least in one of the following cases:

(a) the acquirer is proposed by the monitor, provided that the monitor has issued an opinion confirming that the sale process that took place during the preparation phase complied with the requirements laid down in Article 22a (1) ) and the court or competent authority is satisfied that the requirements under Article 22a (1) and(2) are complied with;

(b) the acquirer is selected in the public auction, where Member States provide for such an auction in accordance with Article 26 (2); or

(c) the sale to the acquirer is approved by the creditors as referred to in Article 22a (4).

1a. Member States may provide that the sale of the debtor’s business or part thereof under paragraph 1 point c) is approved by the creditors without the authorisation of the court or competent authority where, under national law, the sale of the debtor’s business or part thereof requires the consent of the creditors.

2. The public auction referred to in Article 22a (3), shall last no longer than three months. The offer selected by the monitor shall be used as the initial bid in the public auction. Member States shall ensure that the protections granted to the initial bidder in the preparation phase are commensurate and proportionate.

2a. Member States shall provide that the court or the competent authority can decide that a valuation of the business of the debtor as a going concern is carried out on the ground that the best bid might not meet the best-interests-of-creditor-test.

Where, under national law, the sale of the debtor’s business or part thereof requires the consent of the creditors, Member States may provide that the decision referred to in the first subparagraph can be taken by the creditors without the involvement of the court or competent authority.

Article 27 Assignment or termination of executory contracts

1. Member States shall ensure that the acquirer of the debtor’s business, or part thereof, is assigned the executory contracts which are necessary for the continuation of that business and the suspension of which would lead to a business standstill. The assignment shall not require the consent of the debtor’s counterparty or counterparties.

2. Member States may provide that the consent of the debtor’s counterparty or counterparties is required depending on the type of contract, the quality of the parties, or the interests of the business.

3. Without prejudice to other termination rights, Member States may provide that the counterparty or counterparties can terminate the assigned contract under paragraph 1 subject to a notice period no shorter than three months of the assignment, provided that the assignment of the contract would unfairly prejudice the counterparty or counterparties.

4. The first paragraph shall not apply if the acquirer of the debtor’s business or part thereof is a competitor to the debtor’s counterparty or counterparties.

5. Member States may provide that executory contracts relating to licenses of intellectual and industrial property rights, of which the debtor is the licensor, are not terminated without the consent of the licensee.

Article 28 Debts and liabilities of the business acquired via the pre-pack proceedings

1. Without prejudice to Article 27 and Article 34 (3) and (4), as well as to the obligations arising from employment relations, concerned by the sale of business or part thereof, Member States shall ensure that the acquirer acquires the debtor’s business, or part thereof, free of debts and liabilities, unless the acquirer expressly consents to bear the debts and the liabilities of the business or part thereof.

2. Paragraph 1 is without prejudice to national laws providing that the conduct of the debtor is taken into account in the assessment the acquirer’s liability for damages, if that conduct is imputable to the acquirer under the applicable law.

Article 29 Suspensive effects of appeals

1. Member States may provide that, if national law provides for appeals of decisions of the court or the competent authority relating to the authorisation or execution of the sale of the debtor’s business or parts thereof, the appeals do not have suspensive effects unless adequate measures are taken to cover the potential damages caused by an unjustified stay of the realisation of the sale, such as the requirement of a security to be provided by the appellant or the liability of the appellant for such damages.

Chapter 4 Common provisions

Article 30 Criteria to select the best offer

Member States shall set the criteria for selecting the best bid in the pre-pack proceedings, and ensure that they are the same as the criteria used for selecting between competing offers in insolvency proceedings. Member States may include the preservation of employment in those criteria

Article 31 Civil liability of the monitor and of the insolvency practitioner

Member States shall ensure that the monitor and the insolvency practitioner are liable for the damages caused to creditors by their intentional or negligent failure to comply with their obligations under this Title.

Article 32 Parties closely related to the debtor in the sale process

1. Member States shall ensure that parties closely related to the debtor are eligible to acquire the debtor’s business or part thereof, provided that all of the following conditions are met:

(a) the parties closely related to the debtor disclose in the bid to the monitor their relation to the debtor;

(b) parties other than those referred in point (a) receive adequate information on the existence of parties closely related to the debtor and their relation to the latter.

(ba) in the case under article 26(1), point (a), a valuation of the business as a going concern is carried out for the purposes of the statement of the monitor referred to in Article 22a(2), point (c).

(c) parties not closely related to the debtor are granted sufficient time to make an offer.

Member States shall provide that, where it is proven that a party closely related to the debtor failed to comply with the conditions under the first subparagraph, point (a), the court or competent authority can revoke the benefits referred to in Article 28(1).

2. Where the offer made by a party closely related to the debtor is considered as the best offer, Member States may introduce additional safeguards for the authorisation and execution of the sale of the debtor’s business or part thereof.

Article 33 Interim financing

1. Where interim financing is needed, Member States shall ensure that:

(a) interim financing is not declared void, voidable or unenforceable; and

(b) the grantors of interim financing do not incur civil, administrative or criminal liability, on the ground that such financing is detrimental to the general body of creditors, unless national law provides for other grounds for such liability.

1b. Member States may provide that grantors of new or interim financing are entitled to receive payment with priority in the context of subsequent insolvency procedures in relation to other creditors that would otherwise have superior or equal claims.

2. Subject to the ranking priorities of claims arising during insolvency proceedings, Member States may provide that:

(a) security interests over the sale proceeds can be granted to providers of interim financing in order to secure reimbursement; and

(b) interim financing is eligible to be set-off against the price to be disbursed under the adjudicated offer, when provided by interested bidders.

3. Member States may provide that paragraph 1 and 1a only apply to interim financing which has been subject to ex ante control.

Article 33a Pre-emption rights and credit bidding

Without prejudice to Article 34(3), Member States shall ensure that no pre-emption rights are granted to bidders. Member States may provide that statutory pre-emption rights not affected by the insolvency of the debtor are maintained and are enforceable.

2. Member States shall ensure that, where security interests encumber the business subject to the pre-pack proceedings, creditors who are the beneficiaries of those security interests may offset their claims against the purchase price only to an amount not exceeding the market value of the business.

Article 34 Protection of the interests of the creditors

1. Member States shall ensure that security interests or other encumbrances are released in the course of the pre-pack proceedings under the same requirements that would apply in the insolvency proceedings under national law.

2. Member States whose law makes the release of security interests conditional upon the consent of holders of secured claims to the insolvency proceedings may provide that such consent is not required.

Article 35 Impact of competition law procedures on the timing or the successful outcome of the bid

1. Member States shall ensure that, where there is an appreciable risk of a delay ensuing from a procedure based on competition law or of a negative decision by a competition authority in relation to an offer made in the course of the preparation phase, the monitor or the debtor takes appropriate steps to present alternative bids.

2. Member States shall ensure that the monitor may receive information on the applicable competition law procedures and their outcomes that may affect the timing or the successful outcome of the bid, provided that the disclosure of information by the competition authority is not contrary to national rules on the protection of business secrets. In that regard, the monitor shall be made subject to a duty of confidentiality in accordance with national law.

3. Member States shall ensure that, where an offer entails an appreciable risk of a delay as referred to in paragraph 1, that offer may be disregarded, provided that both of the following conditions apply:

(a) such offer is not the only offer;

(b) the delay in the conclusion of the sale to the bidder concerned would result in damage to the debtor’s business or part thereof.

Title V DIRECTORS’ DUTY TO REQUEST THE OPENING OF INSOLVENCY PROCEEDINGS AND CIVIL LIABILITY

Article 36 Duties of directors

1. Member States shall ensure that, where a company becomes insolvent in accordance with national law, its directors have the duty to submit a request for the opening of insolvency proceedings, with the exception of preventive restructuring proceedings. In Member States where Regulation (EU) 2015/848 applies, the duty to submit a request for the opening of insolvency proceedings refers to proceedings set out in Annex A to that Regulation, with the exception of preventive restructuring proceedings.

2. The request as referred to in paragraph 1 shall be submitted to the court or the authority competent for the insolvency proceedings within 3 months of the directors having become aware or being reasonably expected to have become aware that the company is insolvent in accordance with national law.

Article 36a Non-application or suspension of the duty to submit a request for the opening of insolvency proceedings

1. Member States may provide that the duty referred to in Article 36(1) does not apply to directors who are natural persons and are personally liable for all of the company’s debt.

2. Member States may provide that the duty referred to in Article 36(1) can be discharged by way of informing the public of the company’s insolvency through a notification in a public register, at the latest within the deadline referred to in Article 36 (2), in order to ensure that the creditors are able to request the opening of insolvency proceedings.

3. Member States may provide that the duty referred to in Article 36(1) is suspended if the directors take measures that are designed to avoid damage for the creditors of the insolvent company and ensure a level of protection of the general body of creditors that is equivalent to the protection provided by the duty referred to in Article 36(1).

Article 37 Civil liability of directors

1. Member States shall ensure that the directors of an insolvent company are liable, in accordance with national law, for damage caused to creditors as a result of their failure to comply with the duty referred to in Article 36.

2. If Member States have exercised the option provided for in Article 36(1a), they shall ensure that directors who take measures as referred to therein are liable, in accordance with national law, for damage caused to creditors that would not otherwise have been caused had the opening of insolvency proceedings been requested in accordance with Article 36(1).

3. Member States may provide that such liability is excluded where and to the extent that the directors can demonstrate, on the basis of objective circumstances, that the measures taken were reasonably likely to secure an equivalent or better outcome for creditors than that provided by the duty referred to in Article 36(1).

Article 37a Relation to other instruments

This Title shall not affect Article 7 of Directive (EU) 2019/1023.

Title VII CREDITORS’ COMMITTEE

Chapter 1 Establishment and members of the creditors’ committee

Article 58 Establishment of the creditors’ committee

1. Member States shall ensure that a creditors’ committee is established after the opening of insolvency proceedings if the general meeting of creditors so decides or requests or, where national law does not provide for a general meeting of creditors, if creditors so request in accordance with national law.

2. Member States may provide that, the creditors’ committee can be established before the opening of insolvency proceedings in accordance with national law.

Member States shall ensure that when the creditors’ committee is established, the composition of the creditors’ committee shall be decided upon.

3. Member States may provide that a creditors’ committee is not established where, due to circumstances related to the nature and scope of the debtor's business, it determines that the burdens of its establishment would outweigh the benefits. Member States shall ensure that these circumstances, which may include the low economic relevance of the insolvency estate, the low number of creditors, the small size of the debtor or the negative effect on the financial situation of the debtor caused by possible delays in the establishment of a creditors’ committee, are clearly defined in national law.

Article 59 Appointment and composition of the creditors’ committee

1. Where a creditors’ committee is established pursuant to Article 58, Member States shall ensure that the members of the creditors’ committee are appointed without undue delay either at the general meeting of creditors or by decision of the court.

3. Member States shall ensure that the composition of the creditors’ committee fairly reflects, as far as possible, the different interests of creditors. When workers are among the creditors, Member States shall ensure that those workers or their representatives are eligible for appointment to the creditors’ committee, unless there is another at least equivalent mechanism of representing the interests of workers in insolvency proceedings. Member States may provide that further persons and entities other than creditors are eligible for appointment to the creditors’ committee.

4. Member States shall ensure that cross-border creditors are eligible for the appointment to the creditors’ committee.

5. Member States shall ensure that, where national law provides for appeals, any interested party defined in accordance national law may challenge before the court the appointment of one or more members of the creditors’ committee on the ground that the appointment was not done in accordance with applicable law.

Article 62 Removal of a member and replacement

1. Member States shall lay down rules specifying the grounds and procedures for the removal and replacement of members of the creditors’ committee. Those rules shall also provide for the situation where members of the creditors’ committee resign or are unable to perform their duties.

2. Grounds for removal as referred to in paragraph 1 shall at least include an intentional or grossly negligent breach of duties of a serious nature with respect to the interests of the general body of creditors, such as situations of conflict of interests.

Chapter 2 Working methods and function of the creditors’ committee

Article 63 Working method of the creditors’ committee

1. Member States shall lay down rules specifying:

(a) the voting procedure, including eligibility to vote and the necessary quorum;

(b) conflict of interests;

(c) confidentiality of information.

(d) record keeping of the decisions taken by the creditors’ committee.

3. Member States shall ensure the possibility that the working methods may be further specified by means of protocols, provided that such protocols comply with the rules laid down in paragraph 1. Such protocol shall be made available at least to the court and the insolvency practitioner.

4. Member States shall provide that the members of the creditors’ committee may participate and vote either in person or via electronic means. Member States may provide that the members of the creditors’ committee are given the possibility to vote in writing.

5. Member States shall ensure that members of the creditors’ committee can be represented by a duly authorised person.

Article 64 Function, rights and duties of the creditors’ committee

1. Member States shall ensure that the creditors’ committee has rights that safeguard its involvement in the insolvency proceedings and enable it to examine the activities of the insolvency practitioners or, where the debtor remains in possession, of the debtor, including:

(a) the right to hear and be heard by the insolvency practitioner on matters of interest to the general body of creditors, including major decisions, such as the sale of assets outside the ordinary course of business;

(b) the right to be heard in insolvency proceedings;

(d) the right to request and receive relevant and necessary information from represented creditors and the insolvency practitioner or, where the debtor remains in possession, from the debtor;

1a. Member States may provide, that the creditors’ committee has the right to appoint a secretary and the right to request external advice on matters in which the creditors represented by the creditors’ committee have an interest."

1b. Member States shall ensure that the creditors’ committee in its activities represents the interests of the general body of creditors and acts independently of the insolvency practitioner. Member States shall ensure that the members of the creditors’ committee represent the interests of the whole body of creditors and act in good faith when carrying out the functions of the committee.

2. Member States may entrust the creditors’ committee with the power to approve certain decisions or legal acts. In such case, they shall clearly specify the matters on which such approval is required which may include all decisions of special importance to the proceedings.

2a. Member States shall ensure that creditors, members of the creditors’ committee and any professionals assisting the creditors’ committee maintain the confidentiality of confidential information obtained in connection with the committee’s activities.

Article 65 Expenses and remuneration

1. Member States shall specify who bears the expenses incurred by the creditors’ committee or its individual members in exercising the function referred to in Article 64.

2. Where the expenses referred to in paragraph 1 are borne by the insolvency estate, Member States shall ensure that the creditors’ committee or its individual members keep record of such expenses and the court, insolvency practitioners or competent authority has the authority to limit unjustified or disproportionate expenses.

3. Where Member States allow members of the creditors’ committee to be remunerated and such remuneration is borne by the insolvency estate, they shall ensure that the remuneration is proportionate to the function performed .

Article 66 Liability

1. Member States shall ensure that at least one of the following rules apply:

(a) members of the creditors’ committee are exempt from personal liability for their actions in their capacity as members of the committee unless they have been found to have violated their duties with respect to the creditors’ interests intentionally or in a grossly negligent manner;

(b) the personal liability of the members of the creditors’ committee for their actions in their capacity as members of the committee is covered by insurance which is borne by the insolvency estate in accordance with Article 65(2).

2. Where Member States entrust the creditors’ committee with the power to approve certain decisions or transactions, Member States may provide that the members of the creditors’ committee are held liable in the same manner as an insolvency practitioner.

Title VIII MEASURES ENHANCING TRANSPARENCY OF NATIONAL INSOLVENCY LAWS

Article 68 Key information factsheet

1. Without prejudice to paragraph 10, Member States shall provide the Commission, through the European e-Justice Portal, a key information factsheet on essential elements of national law on insolvency proceedings (the “key information factsheet”).

2. The content of the key information factsheet shall be concise, accurate, clear and non-technical and shall set out the information in a factual manner.

3. The key information factsheet shall

be drawn up and submitted to the Commission in an official language of the institutions of the Union by … [39 months from the entry into force of this Directive];

4. The key information factsheet shall include the following sections in the following order:

(a) the conditions for the opening of insolvency proceedings;

(b) the rules governing the lodging, verification and admission of claims;

(c) the rules governing the ranking of creditors’ claims and the distribution of proceeds from the realisation of assets ensuing from the insolvency proceedings;

(d) the average reported length of insolvency proceedings, as referred to in Article 29(1), point (b) of Directive (EU) 2019/1023.

5. The section referred to in paragraph 4, point (a), shall include:

(a) the list of persons that can request the opening of insolvency proceedings;

(b) the list of conditions that trigger the opening of insolvency proceedings;

(c) how and where to submit a request for the opening of insolvency proceedings;

(d) how and when the debtor is notified of the decision on whether to open insolvency proceedings.

6. The section referred to in paragraph 4, point (b), shall include:

(a) the list of persons that can lodge a claim;

(b) the list of conditions for lodging a claim;

(c) the time limit for lodging a claim;

(d) how to obtain the form for lodging a claim, if applicable;

(e) how and where to lodge a claim;

(f) how the claim is verified and validated.

8. Member States shall update the information referred to in paragraph 4 within 1 month of the entry into force of any relevant amendments to national law. The key information factsheet shall contain the following statement: ‘This key information factsheet is accurate as at … [the date of submission of the information to the Commission or the date of the update]’.

8a. The Commission shall ensure that the key information factsheet is available to the public in English, French and German and the original language, if different, on the European e-Justice Portal under the insolvency/bankruptcy section for each Member State.

9. The Commission shall be empowered to modify the format of the key information factsheet by way of implementing acts. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 69(2).

10. Member States where Regulation (EU) 2015/848 is applicable shall provide the key information factsheet referred to in paragraph 1 of this Article through the European Judicial Network in civil and commercial matters established by Council Decision 2001/470/EC in a manner consistent with Article 86 of that Regulation.

Title IX FINAL PROVISIONS

Article 68a Emergency measures

1. Member States may derogate from applying national provisions transposing Title II, V and VII in the event of extraordinary situations which seriously disrupt economic activities at the level of the Member States or their regions, where, and to the extent that, the application of the national provisions transposing those Titles would entail a risk of widespread insolvencies, including for companies that are viable under ordinary circumstances.

2. The derogation referred to in paragraph 1 and its duration shall be proportionate and limited to what is essential for containing, mitigating, resolving or preventing the serious disruption referred to in that paragraph.

3. The derogation referred to in paragraph 1 shall be notified to the Commission within a month from its entry into force.

When notifying the Commission in accordance with the first subparagraph, the Member States shall list the provisions of this Directive from which the measures derogate, the nature and extent of the exceptional circumstances on which the derogation is based, the duration of the derogation, and the reasons for which the derogation is considered essential for containing, resolving or preventing serious disruption to economic activities as referred to in paragraph 1. The Commission shall inform the other Member States thereof without undue delay.

4. The derogation referred to in paragraph 1 may have a maximum duration of one year.

Where and to the extent that the extraordinary situation which seriously disrupts economic activities persists, the derogation may be extended by periods of up to 6 months provided that the Member State notifies the Commission to that effect no later than 3 months before the expiration of the previous derogation period. That extension shall take effect unless the Commission objects, at the latest one month before the expiration of that previous derogation period, on the basis that the extension does not comply with the requirements referred to in paragraph 1 and 2.

Article 69 Committee

1. The Commission shall be assisted by the Committee on Restructuring and Insolvency (the ‘Committee’) as referred to in Article 30 of Directive (EU) 2019/1023 of the European Parliament and of the Council. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply

Article 70 Review

No later than [5 years after the deadline for transposition of this Directive and every five years thereafter], the Commission shall present to the European Parliament, the Council and the European Economic and Social Committee a report on the application and impact of this Directive. On the basis of that assessment, the Commission shall submit, if appropriate, a legislative proposal.

Article 71 Transposition

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by … [33 months from the entry into force of this Directive]. They shall forthwith communicate to the Commission the text of those provisions.

Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with Article 14, 15 and 16 of this Directive, to the extent they relate to the future EU bank account registers interconnection system (BARIS) referred to in Article 16(6) of Directive (EU) 2024/1640 of the European Parliament and of the Council by the date mentioned in the first subparagraph or by 10 July 2029, whichever is later in time.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

1b. Title II applies only to legal acts perfected after the date of the entry into force of the laws, regulations and administrative provisions necessary to comply with this Directive referred to in the first subparagraph of paragraph 1.

2. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 72 Entry into force

This Directive shall enter into force on the [...] day following that of its publication in the Official Journal of the European Union.

Article 73 Addressees

This Directive is addressed to the Member States.

Done at Brussels,

For the European Parliament For the Council

The President (...) The President (...)

ANNEX […]

National registers and databases referred to in Article 18

1. Cadastral registers;

2. Land registers;

3. Movable property registers including registers of vehicles, ships and aircrafts, where property rights are registered in such registers;

4. Register of donations;

5. Mortgage registers;

6. Registers or databases containing information on the ownership of securities, such as central securities depositories, as defined in Article 2 of Regulation (EU) No 909/2014;

7. Registers of pledges including lease agreements and sale-purchase agreements with retention of title;

8. Registers containing property seizure acts;

10. Registers of intellectual property rights, including patent and trademark registers.