The European Commission’s proposals to extend cross-border insolvencies to rescue proceedings has received backing from the European Parliament today (5 February), with 580 votes in support.
The proposed changes received only 69 votes in opposition and 19 abstentions.
As the proposal has been approved by one of the European Union’s two co-legislators, the focus will shift to the member states in the Council to reach an agreement on the draft law along with the European Parliament for it to enter the EU’s statute book.
The proposal suggested the removal of out of court proceedings from the scope of the EU legislation and would introduce a three-month “look-back” period to allow companies to exercise their right to free movement subject to the laws of the originating member state.
Viviane Reding, justice commissioner for the EU, said: “Europe needs modern rules on cross-border insolvency to help service our economic engine. The first option for viable business should be to stay afloat rather than liquidating.”
Should the new laws come into force, they are set to modernise the existing rules in order to support the restructuring of businesses in difficulties and serve creditors’ interest, making them more likely to get back their money.
The revision of the EU Insolvency Regulation also seeks to increase legal certainly by providing clear rules in determining jurisdiction, and ensuring cooperation between the different proceedings if a debtor faces insolvency proceedings in several member states.
Reding added: “I want to thank the Members of the European Parliament, and particularly its rapporteur, Klaus-Heiner Lehne for their support.
“I will continue working closely with the European Parliament and Ministers in the Council so that the modernised insolvency rules are adopted swiftly. Businesses are waiting and we have no time to lose.”
The Law Society of England and Wales, which last week criticised the proposed rule changes, declined to comment.