Introduction

On 23 June 2016 the UK population voted for the UK's exit from the European Union (EU). The applicable exit procedure and certain possible legal consequences of Brexit for Insolvency & Restructuring will be discussed below in the form of a Q&A.

If 2016 ended with more questions than answers as to how Brexit would take shape, 2017 began with at least a little more clarity.

While the number of corporate insolvencies in Germany has declined over the last couple of years, the general market perception is that the number of insolvencies may increase again in 2017. Also, as more larger companies are facing distressed situations, the overall value of distressed debt is therefore expected to rise as well.

The legal framework for restructuring & insolvency in Germany will also change in 2017, not only based on domestic legislation, but also because of developments on the EU level.

2017 will see major changes to the UK legal landscape, with Article 50 of the Treaty on European Union expected to be triggered by the end of March 2017 to begin the Brexit process. The legal implications of Brexit will be hugely significant; preparing for their impact will be a substantial challenge across every industry sector. Our Preview of 2017 outlines these implications, as well as identifying other trends and issues we expect to be on the legal agenda this year.

The uncertainties of the UK’s Brexit negotiations with the remaining 27 EU member states are weighing heavily on the UK economy. The 2 years of negotiations will not even begin until notice is served under Article 50 and the procedure as to how Article 50 can be triggered will be the subject of a Supreme Court decision expected later this month.

Major legislative changes

Reform of English corporate insolvency framework

The Insolvency Service is reviewing responses to its consultation on significant reforms designed to improve the restructuring tools available to companies. These include:

The recast European Insolvency Regulation – impact on distressed debt investors

What's happening? 

In 2002, the European Insolvency Regulation (EIR) introduced a regime governing the administration of insolvent corporates or individuals which operate in more than one member state of the European Union (EU). A "recast EIR" will apply to insolvency proceedings commenced on or after 26 June 2017. 

Why are the EIRs important? 

The consequences for cross-border insolvencies will largely depend on how Brexit is implemented, but will not affect schemes of arrangement

Foreword

Understanding and mastering cross-border insolvency requires a thorough knowledge of the different domestic insolvency regimes, all of which have distinctive procedures and rules on jurisdiction and recognition of foreign proceedings. Creditors and debtors look for the most favourable system: in this framework, the UK insolvency system is usually considered “creditor-focused”.

For more information, please contact the relevant Herbert Smith Freehills partner referred to in the contact list or Simone Pearlman, head of legal knowledge on +44 (0) 20 7466 2021 or email simone. [email protected]. This is a guide to key legal developments in the coming months and years ahead (UK perspective).

Brexit

The potential impact of Brexit on securitization transactions

Impact of the referendum

Following the vote in the UK referendum on 23 June 2016 to leave the EU, there is some uncertainty as to how this will impact transactions.