UK opts out of euro insolvency rule
Insolvency trade body R3 welcomes decision to reject European insolvency rule, which freezes bank accounts of businesses under investigated
THE UK GOVERNMENT has decided against joining forces with Europe over a controversial debt recovery rule to be implemented across the continent.
The European Account Preservation Order (EAPO) can be granted to administrators seeking to freezes bank accounts of a business while disputes over creditors and debts are resolved.
However, UK insolvency trade body R3 had repeatedly warned that the order would threaten rescue culture in the UK.
“Although they [EAPO] were designed to make it easier to recover debts in cross-border cases, in practice the plans would give courts anywhere in the EU (European Union) power to freeze funds in UK businesses’ banks accounts without warning,” said R3 president Frances Coulson (pictured).
“R3 has been liaising closely with officials, stakeholders and MPs to highlight the negative implications of the plans. Opting out of EU Regulations is a significant move,” she added.
According to a Ministry of Justice consultation earlier this year, doubts about the “lack of adequate safeguards” for defendants had been identified.
Two factors in particular caused concern: the threshold to grant an EAPO was considered too low, putting at risk possible rescue plans; and there was unlikely to be any compensation for losses incurred if a company received a wrongful order against it.