Documents considered by the Committee on 23 May 2018 Contents

3Insolvency, Restructuring and Second Chances for Business and Entrepreneurs

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; scrutiny waiver granted for a partial general approach on 4–5 June; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details

(a) Proposed Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU; (b) Opinion of the European Central Bank on proposal (a).

Legal base

(a) Articles 53 and 114 TFEU; ordinary legislative procedure; QMV;(b)—

Department

Business, Energy and Industrial Strategy

Document Numbers

(a) (38313), 14875/16 + ADDs 1–2, COM(16) 723; (b) (38828), 10182/17

Summary and Committee’s conclusions

3.1This proposed Directive (document a) aims to harmonise aspects of insolvency laws across the EU to support business rescue and afford a second chance to entrepreneurs. It is a significant first attempt by the EU to harmonise national insolvency laws, with previous insolvency measures providing for mutual recognition and judicial cooperation on cross-border insolvency proceedings.30

3.2The full background to this proposal, a summary of its provisions and how these have changed during negotiations in the Council can be found in our previous Reports on this proposal.31

3.3As the Minister for Small Business, Consumers and Corporate Responsibility (Andrew Griffiths) now confirms,32 it is unlikely that the UK would be required to implement the proposed Directive before the end of the proposed transition/implementation period (31 December 2020). He explains that the initial Government view to this effect is further supported by the revision of the text during the 2017 Estonian Presidency to allow Member States three years before having to implement the proposal (once adopted) into national law. So even if the proposal was adopted at the end of this year, it would not have to be implemented until 2021. This would be after the transition/implementation period, when EU law would no longer apply to the UK under the terms of the proposed Withdrawal Agreement.33

3.4He also now writes to update us on the Council negotiations and to seek a scrutiny waiver for a partial general approach (PGA) at the JHA Council of 4 and 5 June. He explains:

3.5The Minister also informs us that the most substantive part of the proposal on restructuring procedures will not be included in any partial general approach. There was some progress on this during the 2017 Estonian Presidency. This partly met UK concerns about greater flexibility and the need to better balance creditor and debtor interests whilst facilitating business rescue. However, there has been little discussion to date during the current Bulgarian Presidency of restructuring procedures, though these are now expected to commence in Council Working Groups.

3.6We thank the Minister for advance notice of the potential agreement of a partial general approach at the meeting of the JHA Council of 4 and 5 June. We also note his further clarification of the Government’s view that the UK is unlikely to be under a legal obligation to implement the proposed Directive into national law before the end of the proposed transition/implementation period.34

3.7We turn to his request for a scrutiny waiver for that Council meeting. We appreciate that it may well be in the UK’s interests to support a favourable EU text aligned to a UK approach to business rescue. This might facilitate future EU-UK trade once the UK is no longer subject to EU law.35 We are therefore content to grant a scrutiny waiver to allow the Government to support a partial general approach in line with the Government’s views set out in the Minister’s letter of 9 May.36

3.8We request the Minister to update us promptly on the outcome of that Council meeting, and to provide us with a copy of any resulting text. We would expect that update to:

3.9In the meantime, we retain both documents under scrutiny and draw these documents to the attention of the Business, Energy and Industrial Strategy Committee.

Full details of the documents

(a) Proposed Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU: (38313), 14875/16 + ADDs 1–2, COM(16) 723; (b) Opinion of the European Central Bank on proposal (a): (38828), 10182/17.

Previous Committee Reports

(a) and (b): Twelfth Report HC 301–xii (2017–19), chapter 2 (31 January 2018); First Report HC 301–i (2017–19), chapter 2 (13 November 2017); (a) Thirty-fourth Report HC 71–xxxii (2016–17), chapter 2 (8 March 2017); Twenty-sixth Report HC 71–xxiv (2016–17), chapter 2 (18 January 2017).


30 Most of the provisions in the 2015 recast EU Regulation 2015/848 on Insolvency Proceedings started to apply to Member States from 26 June 2017.

31 See paragraphs 3.1-.5 of this Report.

32 Letter from Andrew Griffiths to Sir William Cash of 9 May 2018

33 Draft Withdrawal Agreement, 19 March 2018

34 The proposed transition/implementation period is scheduled to end on 31 December 2020, as per the 19 March text of the proposed Withdrawal Agreement.

35 See footnote 3.

36 As reported in this chapter. See link to this letter provided at footnote 1.




Published: 29 May 2015