Creditors and distressed-asset investors may get more insight from proposed European Union rules to publicize information on company insolvencies.
Judges and creditors need to know when insolvency cases in other countries begin to aid decisions on making claims, the European Commission said in the proposal. There is currently no EU requirement to publish decisions on the start of insolvency proceedings and no joint register to search bankruptcies across the 27-nation bloc.
“By publishing a list of companies in insolvency proceedings, businesses will be quickly and easily able to find out whether their business partners are solvent,” said Christoph von Wilcken, a lawyer at Schultze & Braun in Berlin. “It should be easy to implement and is a quick win that will bring benefits to the whole of the business community.”
The new EU rules, which need the support of EU governments and the European Parliament before they can be enforced, would clarify which country’s courts will handle cases and would require coordinating insolvencies for company units. The EU said the rules would increase the efficiency of cross-border insolvency proceedings that affect 50,000 companies in the bloc every year.
Courts in other countries would be also able to refuse so-called secondary proceedings if another jurisdiction was handling the case. This would bolster decisions such as those by U.K. courts to appoint English administrators to handle the liquidation of the European assets of Nortel Networks Inc., Collins & Aikman Corp. and MG Rover Group Ltd.
The EU also wants to offer bankrupt entrepreneurs a second chance and are encouraging governments to draft laws by 2013 that would result in so-called “honest entrepreneurs” having their debts discharged within three years after a bankruptcy, it said. Insolvency rules could distinguish between such cases and “dishonest” bankruptcies, where a business failure was caused by fraud or irresponsibility, regulators said.
Officials are also weighing rules on filing and verifying creditors’ claims “to reduce uncertainty and create equal treatment among creditors,” the EU document said.