Brexit - Restructuring & Insolvency
Insolvency law is fundamentally a matter of national law and therefore there will be a limit on the effect of Brexit on insolvencies where businesses or individuals are only domiciled and only trade in this jurisdiction. However, the short and long term impacts of Brexit on the economy will doubtless trickle down to impact on domestic insolvencies.
That being said, it is the particular effect of Brexit on cross border insolvencies that is expected to be significant.
Presently, when an insolvency is commenced relating to any person or company with its centre of main interests in an EU member state, the Insolvency Regulation applies to that insolvency.
The Insolvency Regulation provides a framework of rules governing where insolvency proceedings are to be commenced and how it is to be recognised in other member states.
After Brexit, the Insolvency Regulation will cease to apply in this jurisdiction unless some other arrangements are made (quite what arrangements these might be are currently unclear, but a possible option might be the extension of the application of the Insolvency Regulation to the UK).
If the Insolvency Regulation ceases to apply, relevant EU insolvency proceedings will no longer be automatically recognised in England & Wales (or the rest of the UK) and, similarly, insolvencies commenced in the UK would no longer enjoy automatic recognition in EU member states. It will therefore be harder for office holders to obtain recognition of the insolvency and their appointment in other jurisdictions, and rather than using the Insolvency Regulation to do so, practitioners will have to make use of local law (if possible) or rely on other arrangements.
One of these other arrangements is the UNICTRAL Model Law on Insolvency, although presently only Greece, Poland, Romania and Slovenia have implemented the Model Law, meaning that in the vast majority of situations the office holder may be required to rely on unsatisfactory or non-existent local law relating to recognition.
With business increasingly conducted on a continental or global level, more insolvencies than ever have a cross border element and can expected to be impacted by Brexit.
Read the following articles
What will a Brexit mean for the UK's Cross Border Insolvency involvement?
The UK is a well-established jurisdiction for cross border insolvencies, both within the EU and the rest of the world. The main piece of EU legislation that governs this area of law is the EC Council Regulation 1346/2000 ("the Insolvency Regulation").
Brexit - implications for insolvency practitioners?
On 23 June 2016, a 52% majority of the British people voted in favour of leaving the European Union. It is unclear the extent of the effect this will have, but restructuring and insolvency professionals face an uncertain future if the EC Regulation on Insolvency Proceedings 2000 and the Recast Insolvency Regulation, which replaces it in 2017, cease to apply to cross border restructurings in the UK.
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