Background
Under German law, when a company becomes insolvent or over-indebted, its directors are obliged to file for insolvency. If they fail to fulfil this duty, according to s 64 German limited liability company Act (GmbHG) from this point in time onwards, they have to compensate the company for those payments which (objectively) would not have been made by a prudent businessman. Such imprudence is presumed.
In practice, s 64 is one of the most powerful tools available to insolvency administrators claiming against directors.
On June 26, 2017, the recast EU regulation on insolvency proceedings1 (the Recast Insolvency Regulation) came into force.
Existing Legislation
European Leveraged Finance Alert Series: Issue 6
Legislative changes in Italy (starting from 2012) facilitated leveraged transactions facilitating security in both bank and bond financings and aligning bond and bank finance options. These changes have catalyzed creditors’ appetite for Italian leveraged finance transactions and helped fuel a resurgence in M&A activity in Italy. Here are ten (plus one) things to consider when doing a leveraged finance deal in Italy:
A revised EU regulation applies to new insolvencies from 26 June 2017. Widely referred to as EIR Recast (EIR means European Insolvency Regulation), it replaces the regime that has been in place for over 15 years.
The official title of EIR Recast is Regulation 2015/848 of the European Parliament and of the Council of 20 May 2015. The commencement of EIR Recast is newsworthy for many reasons, not least because the United Kingdom (when it leaves the EU) will not have the benefit or the burden of the new regime.
The Recast Insolvency Regulation (Regulation 2015/848) (“Recast Regulation”) will apply to all member states of the EU (with the exception of Denmark) in relation to insolvency proceedings opened on or after 26 June 2017. The Recast Regulation takes a similar approach to that of the prior EU Insolvency Regulation (Regulation 1346/2000), which came into force in 2002. The Recast Regulation seeks to create a uniform code for insolvency jurisdiction, and cross-border recognition (within the acceding Member States).
As from today, the Insolvency Regulation Recast (EU) 2015/848 will apply to insolvency proceedings commenced on or after this date.
Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings comes into effect on 26 June 2017 for insolvency proceedings that are opened on or after that date. The Recast Regulation replaces the EC Regulation (1346/2000) on insolvency proceedings and has direct effect in the UK until such time as the UK leaves the EU.
The pre-pack procedure is not having an easy time of it. In a previous blog, we reported that the advocate general of the European Court of Justice (ECJ) had concluded that the Dutch pre-pack procedure cannot be regarded as bankruptcy or liquidation proceedings, and that the provisions for transfer of undertaking therefore also apply to pre-packs. The ECJ has now confirmed his standpoint.
Since May 2002, we have had a regime which ensures that an insolvency proceeding started in one of the EU’s member states is, without further formality, recognised in all other member states (except for Denmark) and which determines the law applicable to such proceedings. That regime is provided for in the EU Regulation on insolvency proceedings (1346/2000/EC) (the EIR).