This regulation establishes a common framework for insolvency proceedings in the European Union (EU). The purpose of harmonised arrangements regarding insolvency proceedings is to avoid assets or judicial proceedings from being transferred from one EU country to another in order to obtain a more favourable legal position to the detriment of creditors (“forum shopping”).
It should be noted that one quarter of cases of insolvency in the EU are associated with late payments.
Cases of insolvency with cross-border implications affect the proper functioning of the internal market. With a view to developing more uniform procedures that will discourage the parties from transferring assets or judicial proceedings from one EU country to another in order to obtain a more favourable legal position, the proposed solutions rely on the principle of proceedings with universal scope. At the same time, they retain the possibility of opening secondary proceedings within the territory of the EU country concerned.
The regulation applies to “collective insolvency proceedings that entail the partial or total divestment of a debtor and the appointment of a liquidator”. It applies equally to all proceedings, whether the debtor is a natural or a legal person, a trader, or an individual. A “liquidator” is a person or body that administers or liquidates the assets of which the debtor has been divested or supervises the administration of his/her affairs. Annex C of the regulation lists the persons or bodies who are authorised to exercise this function in each EU country.
However, the regulation does not apply to insolvency proceedings concerning:
- insurance undertakings;
- credit institutions;
- investment undertakings that provide services involving the holding of funds or securities for third parties;
- collective investment undertakings.
The regulation defines the concept of “court” as a judicial or other competent body that is authorised in national law to open proceedings. The courts with jurisdiction to open the main proceedings are those of the EU country where the debtor has his/her centre of main interests. This should be the place where the debtor usually administers his/her interests and that is verifiable by third parties. In the case of a company or legal person, this is the place of the registered office, in the absence of proof to the contrary. In the case of a natural person, in principle it is the place where his/her work is domiciled or the place of his/her usual residence.