Under the EU 2015/848 Insolvency Regulation (recast) of 20 May 2015 insolvency proceedings of members of a group of companies have their own set of rules, see Chapter V (Article 56 et seq.). Prior to these rules, the restructuring and insolvency of parents and subsidiaries was not regulated. Practitioners however have over the last couple of years developed efficient and pragmatic solutions, resulting in synthetic group restructuring and insolvency procedures to overcome the downsides of a strict legal entity approach: i.e. meaning every company is a single debtor and has its own insolvency proceeding, its own court and its own insolvency practitioner. Basically, that is still the underlying rationale in the Regulation. However, Articles 61 to77 Insolvency Regulation (Recast) provide for rules on coordination of proceedings of members of groups of companies by request to a court having jurisdiction over the insolvency proceedings of a member of a corporate group and also make provision for their conduct and closure.
This CERIL Working Party aims to issue recommendations to enhance the effectiveness and practical value of the group coordination system designed in the Insolvency Regulation (Recast). It also will provide guidance and best practice in unregulated areas to avoid delays, costs or litigation, whilst maximising the value of the group’s assets and operations for all stakeholders involved.
The central idea under the Insolvency Regulation (recast) is that the various insolvency practitioners and the courts involved are under an obligation to cooperate and communicate with each other. However, cooperation between the insolvency practitioners should not run counter to the interests of the creditors in each of the proceedings, and such cooperation should be aimed at finding a solution that would leverage synergies across the group. In this area, many terms and expressions used are new (such as ‘synergies’), whilst certain concepts have to be aligned with EU directives on company law or those on a company’s financial statements.
Also, the person of a ‘group coordinator’ is new. His or her role is drafting a group coordinating plan and to take specific steps that lead to its implementation, be it that such a plan is of a voluntary nature (for the member of the group to be included in group coordinating proceedings) with the consequence that a group coordinator can only suggest actions of a non-binding nature. In literature and practice these provisions have had a mixed reception. Finally, certain matters are beyond the Insolvency Regulation (recast), such as the group corporate interest, cross-border intercompany claims, directors of a parent or a subsidiary having multiple company board functions, issues regarding tax or pension rights or relationships with companies established in non-EU Member States.