The United Kingdom formally left the European Union on 31st January 2020 and entered into a period of transition. This transition period largely maintained the ‘status quo’ with regards to insolvency law and practice, primarily due to the United Kingdom having secured ratification of the withdrawal agreement.
The Recast European Insolvency Regulation 2015/848 (EUIR) was incorporated into English law following the end of the transition period, however, this was significantly tempered by the Insolvency (Amendment) Regulations 2019, thus, relatively few active provisions of the EUIR were incorporated into English law in practice.
The Recast Insolvency Regulation retains the effect of the EUIR post-transition period in respect of insolvency proceedings commenced prior to or during the transition period.
The Recast Insolvency Regulation provides that where the centre of main interests (COMI) of a debtor is located in an EU member state, insolvency proceedings initiated in that member state are known as ‘main proceedings’ and are automatically recognized and effective as such throughout the EU. The laws of that member state will then govern the insolvency proceedings and their effects throughout the EU, subject to limited exceptions.
A consequence of the Recast Insolvency Regulation in the United Kingdom, whilst it was a member of the EU, were whether any corporate debtor with its COMI could be wound up or placed into administration in the United Kingdom. In addition, whether an individual could be made bankrupt in the United Kingdom. This was ultimately determined in the Recast Insolvency Regulation.
With the United Kingdom now designated a ‘third country’ from the EU’s perspective, the recognition and enforcement mechanisms embodied within the EUIR have ceased to apply in relation to new insolvency proceedings, creating immediate consequences for the manner in which cross-border insolvencies are dealt with as between the United Kingdom and remaining EU member states.
From 1st January 2021, the law throughout the United Kingdom and the domestic laws of each EU member state effectively replaced the legal framework of the EUIR for the purposes of dealing with new insolvency proceedings concerning cross-border assets and interests as between the EU and United Kingdom. The shift away, from the uniform regulation of cross-border insolvencies under the EUIR, towards a patchwork of disparate insolvency regimes across individual member states, will inevitably make matters less straightforward.
On 15 January 2021, the Insolvency Service published guidance for insolvency professionals setting out the applicable framework for the recognition and enforcement of United Kingdom insolvency proceedings in certain key EU jurisdictions from the 1 January 2021. What is plainly apparent in the Guidance is what is required in each case differs vastly between member states.
If you desire further information on this topic or on any other legal area, please contact John Szepietowski at Audley Chaucer Solicitors on 01372303444 or email us at email@example.com or visit our Linkedin page.