Changes from report parliamentary committee draft to plenary report

The proposal for a Directive on harmonizing certain aspects of insolvency law within the European Union was adopted by the European Commission on 7 December 2022.

The Rapporteur welcomes this legislative proposal which aims to establish a more uniform and efficient insolvency framework across all Member States, ensuring legal clarity and better protection for businesses, creditors, and other stakeholders, encouraging cross border investment within the single market and remove obstacles to further develop Capital Markets Union.

The Rapporteur has conducted an in-depth assessment and considers that certain modifications to the Commission proposal are necessary to enhance legal precision and coherence. The objective of these changes is to ensure that the proposed insolvency framework is both effective and legally sound while preventing potential loopholes that could be exploited to the detriment of creditors or other parties involved in insolvency proceedings. The Rapporteur suggests adjustments to clarify procedural requirements and ensure consistency with national legal frameworks.

The Rapporteur is of the opinion that the minimum standards provided for in the Directive will approximate the laws of the Member States in the field of insolvency, in particular by improving the efficiency of insolvency proceedings both in terms of costs and in terms of improving the prospects and fair distribution of value among creditors, and preserving the activity and viability of the companies. The amendments of the draft report promote the harmonization of national insolvency rules by setting minimum standards for key procedural aspects. These provisions reflect a clear intention to create a more predictable and integrated European insolvency framework​.

One of the key modifications focuses on avoidance actions, ensuring that transactions detrimental to creditors can be challenged more effectively. The amendments clarify the conditions to close loopholes that previously allowed transactions to escape scrutiny, strengthening creditors’ protection.

Another set of important amendments concern asset tracing mechanisms. The amendments propose granting insolvency practitioners timely and easy access to national bank account registers, direct access to central beneficial ownership registers, and other relevant registers. The Rapporteur believes that this change will facilitate the identification and recovery of debtor assets, particularly in cross-border cases, addressing a long-standing issue of insolvency practitioners encountering significant obstacles when tracing assets in different jurisdictions.​

Another element in the Commission proposal is the introduction of pre-pack proceedings, designed to expedite the sale of distressed businesses as going concerns before the formal opening of insolvency proceedings. The proposed framework establishes a two-phase approach: a preparation phase for identifying potential buyers and a liquidation phase for executing the sale. The Rapporteur believes that this mechanism will help to maximize asset value and preserve business continuity, however additional safeguards should be introduced to ensure transparency and fairness.

Microenterprises, due to their smaller scale and limited resources, require tailored insolvency procedures that provide a balance between efficiency and creditor protection. Following extensive consultations with stakeholders, including legal experts, industry representatives, and financial institutions, the Rapporteur has identified that significant legal uncertainties, risks of abuse and administrative burden transferred to SMEs can be caused/ triggered by the provisions related to simplified winding-up proceedings for microenterprises under Title VI. The framework lacks adequate protections for creditors and other stakeholders, potentially resulting in financial losses and reduced trust in insolvency proceedings.

Given these concerns, the Rapporteur has concluded that the best course of action is to remove Title VI from the draft Directive entirely. This decision reflects the need to ensure that insolvency rules are both robust and resistant to manipulation.

The amendments also strengthen directors’ responsibilities. Additionally, the introduction of creditors' committees as formalized entities ensures that creditors have a stronger voice in insolvency proceedings, increasing transparency and participation.

While these reforms represent significant progress, their effectiveness will depend on how consistently they are implemented across Member States. If properly executed, these amendments will enhance investor confidence, improve creditor recoveries and contribute to a more resilient and dynamic EU economy.