Profession wants clarity on cross-border insolvency
Responses to an Insolvency Service consultation shows the profession wants clearer definition on European insolvency cases
INSOLVENCY PROFESSIONALS have flagged up improvements to the processes behind cross-border insolvencies.
The Insolvency Service consultation highlights suggestions by the insolvency profession to improve European cross-border insolvency regulation, ECIR.
The insolvency industry is seeking a clearer outline on how to judge which country is responsible for a collapsed business if it trades across Europe.
The debate centres on a companies’ centre of main interest (COMI). Wherever the COMI is decided upon is where the business can enter into insolvency proceedings.
Previously the UK has come under fire as the so-called restructuring capital of Europe, because its insolvency proceedings can be more favourable to creditors. This has led to struggling companies looking to set up their COMI in the UK.
Respondents to the consultation want clarity on how a COMI is established, such as what key factors determine where a COMI is based particularly if a business has recently moved its centre of main interest.
The profession is also calling for rules to allow creditors or practitioners to appeal a decision made on where a business’ COMI is. For example, if a company changed its COMI from the UK to Greece then entered administration, creditors from the UK maybe unable to appeal the decision.
A response from PwC said: “It is vital that key stakeholders such as creditors should have the right to appeal.”
Ernst & Young’s, HMRC’s and PwC’s responses are all publicly available.
The Insolvency Service will continue discussions with the profession and submit its findings to the European Commission prior to its review of the ECIR on 1 June 2012.
