Insolvency trade body R3 attacked the plans, noting that the new European Account Preservation Order (EAPO) comes without the protections that are crucial to similar procedures in English Law.
Frances Coulson, president of R3, said the new measure would “drive a coach and horses” through attempts to rescue businesses whether formally or informally.
She added: “Cash flow is critical during delicate rescue work. Removing access to substantial funds without notice gives a single creditor the right to jeopardise hopes of business preservation, harming creditors as a whole.”
In a statement to market issued today, R3 said that while the order is intended to help creditors to protect assets from concealment or removal by directors, the EAPO's loose drafting enables the measure to be granted for a range of unrelated reasons.
As a result the trade body warns they risk being routinely granted in cross-border debt recovery cases.
Coulson explained: “The UK is seen as an international leader in business rescue, benefitting creditors who usually receive higher returns in rescue than terminal procedures.
"If EAPOs are supposed to protect assets from dodgy directors, the new regulation should reflect this objective. As they stand, the proposals are dangerous and draconian.”
The UK Government now must decide whether to opt out of the plans, which are moving apace.