Clifford Chance
EU Proposal for a Directive of the European Parliament and of the Council harmonising certain aspects of insolvency law
23 December 2024
On 13 December 2024, the European Council issued a press release announcing its position on the core Capital Markets Union (CMU) legislation, specifically aimed at harmonising certain aspects of insolvency laws across EU Member States.
The harmonisation proposals are expected to have a positive impact on cross-border investment and ultimately reduce the cost of capital. In this briefing we look at the changes made to the proposals which are designed to make it easier for investors when assessing risks.
European Council press release.
Key Updates:
Avoidance actions: The clawback period for avoidance actions that are considered to be intentionally detrimental to creditors has been reduced from 4 to 2 years. Certain presumptions have also been expressed to be rebuttable. Additionally, there is now an express carve-out for netting agreements, including close-out netting agreements in the financial markets, energy, or other commodities sectors.
Directors' duties: The obligation for directors to file for formal insolvency within three months of insolvency remains. Insolvency is to be determined by reference to national law provisions. A new provision has been included to allow this duty to be displaced if steps are taken to protect creditors' interests. The current wording in this respect, may benefit from further refinement.
Tracing assets: The proposals include measures that will benefit insolvency practitioners by improving access to national assets registers and beneficial ownership information. Designated courts or authorities will have direct access to national and cross-border bank account registers which insolvency practitioners can apply to the courts to have information provided to them. Access to the information is limited and only for the purpose of identifying and tracing assets that belong to the insolvency estate.
