After Brexit, creditors may be impacted when assets of insolvent companies are sought for recovery in Europe.
This was the view set out today by R3, the trade body for insolvency professionals, in a statement covering how the EU referendum result may affect the corporate insolvency process.
Andrew Tate, president of R3, said: “Leaving the EU will have a major impact on the way corporate insolvency works in the UK.
The UK’s insolvency regime does not exist in a vacuum. It is entwined with rules on employment, tax, property, and more; and all of these are linked with European rules.
“There will naturally be uncertainty for UK businesses and the decision to leave could create immediate problems for some. Businesses should seek out informed, professional, and regulated advice to help them navigate any uncertainties they encounter, and the sooner they seek advice, the more options they will have.”
He added: “While domestic insolvency legislation itself is likely to be unaffected, the insolvency profession is involved in a lot of cross-border work in Europe. One key change is that it could become much harder to retrieve assets on behalf of creditors from across Europe.
“With some exceptions, once the UK leaves, a UK insolvency practitioner’s powers may no longer be automatically recognised elsewhere in Europe, nor will UK insolvency proceedings enjoy automatic recognition. New deals will need to be negotiated.”
“The decision to leave comes as the government is in the middle of renewing the UK’s corporate insolvency framework. This is an incredibly complex and important project, but there may now be some uncertainty around the future of this work.
“Some of the proposals have their origin in EU harmonisation programmes, while it’s not clear where insolvency reform will fit on the government’s agenda in the next couple of months.”
By Marcel LeGouais