The U.K.’s exit from the EU will have a major impact on corporate insolvency in the sovereign state, according to Andrew Tate, president of U.K. insolvency trade body R3. “The U.K.’s insolvency regime does not exist in a vacuum,” Tate said. “It is entwined with rules on employment, tax, property and more; and all of these are linked with European rules.”
Tate recommends that businesses seek professional advice to help address issues early. “The sooner they seek advice, the more options they will have,” he said.
“While domestic insolvency legislation itself is likely to be unaffected, the insolvency profession is involved in a lot of cross-border work in Europe,” Tate said in statement. “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 U.K. leaves, a U.K. insolvency practitioner’s powers may no longer be automatically recognized elsewhere in Europe, nor will U.K. insolvency proceedings enjoy automatic recognition. New deals will need to be negotiated.”
Senior Associate Malti Shah, of London-based international law firm Taylor Wessing, noted the following in a July 4 blog:
- The European Commission intends to issue a consultation document later this year seeking views on harmonization of restructuring legislation across member states.
- Other member states are reviewing their insolvency and restructuring regimes.
- These changes may mean that forum shopping to make use of English restructuring and insolvency processes, particularly in cross-border cases, may dwindle. However, if adequate mirroring provisions are put in place, the impact could be minimal.
Attorneys John Alderton, partner at Squire Patton Boggs, and Helen Kavanagh, senior associate and professional support lawyer, considered what the EU referendum means for restructuring and insolvency attorneys and their clients when dealing with cross-border insolvencies. The mini-report titled Leave or Remain? What the EU referendum means for restructuring and insolvency lawyers finds the U.K. would have to enact similar rules or the Cross-Border Insolvency Regulation 2006 would have to be expanded.
Courtesy National Association of Credit Management / FCIB July 11, 2016