EU Insolvency Law

Overview of EU Insolvency Law

EU insolvency law operates as a supranational regulatory framework that coordinates and harmonizes the insolvency regimes of Member States, rather than constituting a single substantive insolvency code. The two principal instruments are the Recast Insolvency Regulation — Regulation (EU) 2015/848 (the EIR Recast) — which governs cross-border insolvency proceedings within the Union, and Directive (EU) 2019/1023 on preventive restructuring frameworks (the Preventive Restructuring Directive), which mandates minimum substantive standards for pre-insolvency restructuring across Member States. These instruments are supplemented by Regulation (EU) 2021/2260 (amending the EIR Recast) and various implementing acts concerning insolvency databases and the interconnection of national registers.

Centre of Main Interests (COMI)

The centre of main interests (COMI) is the foundational concept of EU cross-border insolvency law. Under Article 3(1) of the EIR Recast, the courts of the Member State where the debtor’s COMI is situated have jurisdiction to open main insolvency proceedings with universal scope — that is, encompassing all of the debtor’s assets and creditors throughout the Union. The COMI is defined by a rebuttable presumption: for legal persons, it is presumed to be the place of the registered office; for individuals, the place of habitual residence. The Court of Justice of the European Union (CJEU) in Interedil Srl v Fallimento Interedil Srl (Case C-396/09) clarified that the COMI must be determined by reference to objective factors ascertainable by third parties, particularly creditors — including the location of the debtor’s headquarters, principal place of business, and the place where major assets are held. The debtor may rebut the registered-office presumption by demonstrating that its actual administration and supervision are located in a different Member State.

The EIR Recast introduced enhanced safeguards against COMI shifting — forum shopping — by extending the temporal requirement that a debtor must have moved its COMI within the jurisdiction for at least three months (for legal persons) or six months (for individuals) before a main proceeding may be opened (Articles 3(1) and 4). This provision was a direct response to practices observed following the CJEU’s judgment in Eurofood IFSC Ltd (Case C-341/04), which confirmed that COMI jurisdiction is determined at the time of the application and that deference must be accorded to the first-opened proceeding absent manifest abuse.

Establishment and Secondary Proceedings

Where a debtor has an establishment — defined as any place of operations where the debtor carries out a non-transitory economic activity with human means and goods (Article 2(10)) — in a Member State other than that of the COMI, the courts of that Member State may open secondary insolvency proceedings (Article 3(2)). Secondary proceedings are territorial in scope, limited to assets located within that Member State, and must be liquidation proceedings unless the main proceedings are restructuring proceedings that provide adequate protection for local creditors.

The EIR Recast reformed the relationship between main and secondary proceedings. The insolvency practitioner in the main proceedings may now give an undertaking (Article 36) to local creditors that they will be treated as if secondary proceedings had been opened, thereby avoiding the cost and complexity of parallel proceedings in multiple jurisdictions. This mechanism, known as the synthetic proceeding, has been widely used in large group restructurings, including the Steinhoff International and HNA Group cases.

Insolvency Databases and Interconnection

The EIR Recast required each Member State to establish a publicly accessible insolvency register (Article 24) and mandated the interconnection of these registers through the European e-Justice Portal (Article 25). The registers must contain basic information about each insolvency proceeding: the debtor’s name and address, the court opening the proceeding, the date of opening, the appointment of the insolvency practitioner, and the type of proceeding. The interconnection — operational since 2019 — enables a creditor or court in any Member State to search for insolvency proceedings opened against a debtor across the Union through a single multilingual interface.

Group Insolvency

The EIR Recast introduced a comprehensive regime for group insolvency (Articles 56–77), recognizing that the single-entity model is inadequate for corporate groups with subsidiaries in multiple Member States. The regime provides for:

1. Cooperation and communication obligations between courts and officeholders in group proceedings (Articles 56–60);
2. The appointment of a single insolvency practitioner for multiple group members where compatible with the applicable law (Article 62);
3. Group coordination proceedings (Articles 61–77), whereby a court in the Member State where the group’s COMI is located may open a voluntary coordination proceeding. A group coordinator is appointed to propose a group coordination plan (Article 72), which recommends coordinated measures for the restructuring or rescue of the group. Group members may opt out, and the plan is not binding unless adopted by the relevant officeholders.

Group coordination proceedings remain opt-in and have been used sparingly in practice, but large cross-border restructurings — such as the Groupe Fnac Darty and Casa cases — have demonstrated their potential utility.

The Preventive Restructuring Directive

Directive (EU) 2019/1023 — adopted on 20 June 2019 and required to be transposed by 17 July 2021 (with extensions for certain provisions) — introduces minimum harmonization standards for preventive restructuring frameworks. Key requirements include:

• Early access: debtors must be able to access restructuring mechanisms before falling into insolvency under national law, based on a likelihood of insolvency threshold;
• Moratorium of at least four months (renewable to a maximum of twelve months) during which individual enforcement actions are stayed;
• Cram-down across classes: the restructuring plan may be imposed on dissenting classes provided the plan satisfies the best-interests test (no creditor receives less than in liquidation) and the absolute priority rule;
• New financing protection: providers of new or interim financing may benefit from a priority status in subsequent insolvency proceedings to incentivize funding;
• De minimis discharge for entrepreneurs: within three years of the restructuring, honest but insolvent entrepreneurs should have access to a discharge of residual debt, with limited exceptions (Articles 20–23).

The Directive has been transposed into national law through instruments such as Germany’s StaRUG (2021), France’s Ordinance 2021-1193, and the UK’s (pre-Brexit) Corporate Insolvency and Governance Act 2020, which incorporated elements paralleling the Directive even though the UK was no longer bound after transition.

Relationship with the UNCITRAL Model Law

The EU insolvency framework interacts with the UNCITRAL Model Law on Cross-Border Insolvency (1997) in a complex relationship. Twenty-three Member States have adopted the Model Law, including the United Kingdom (Cross-Border Insolvency Regulations 2006), Poland, Greece, and Romania. However, within the EU, the EIR Recast takes precedence as a matter of Union law (Article 84). The Model Law applies to relations with third countries (non-Member States) and to cases that fall outside the scope of the EIR Recast (e.g., proceedings concerning debtors whose assets are primarily outside the EU). The CJEU’s judgment in Rastelli Davide e C. v Jean-Charles Hidoux (Case C-191/10) confirmed that the EIR Recast’s COMI-based jurisdictional rules cannot be modified by the Model Law as regards intra-Union relations.

The European Account Preservation Order and Insolvency

Regulation (EU) No 655/2014 establishing a European Account Preservation Order (EAPO) interacts with insolvency proceedings: an EAPO obtained before the opening of insolvency proceedings is subject to the automatic stay under the applicable national law, but the Regulation explicitly provides (Article 14) that the preservation order shall not affect the application of insolvency law, including the rules on avoidance actions and priorities.

Conclusion

EU insolvency law establishes a sophisticated framework for the coordination of cross-border insolvency proceedings through the COMI concept, the establishment mechanism, secondary proceedings, and group coordination. The Preventive Restructuring Directive has driven substantial harmonization of pre-insolvency restructuring across Member States, while the interconnected insolvency registers enhance transparency. Despite persistent challenges — divergent national transpositions, residual forum shopping, and the limited uptake of group coordination — the EU insolvency framework represents the most advanced regional system of cross-border insolvency regulation globally and exerts significant influence on international insolvency law development.