European Commission proposes new approach to business insolvency
On 22 November 2016, the European Commission proposed a new directive on business insolvency. The proposed Directive focuses on three key elements:
- Common principles on the use of early restructuring frameworks;
- Rules to allow entrepreneurs to benefit from a second chance, as they will be fully discharged of their debt after a maximum period of three years.
- Targeted measures for Member States to increase the efficiency of insolvency, restructuring and discharge procedures.
The new rules will observe the following key principles to ensure insolvency and restructuring frameworks are consistent and efficient throughout the EU:
- Companies in financial difficulties, especially SMEs, will have access to early warning tools to detect a deteriorating business situation and ensure restructuring at an early stage.
- Flexible preventive restructuring frameworks will simplify court proceedings. Where necessary, national courts must be involved to safeguard the interests of stakeholders.
- The debtor will benefit from a time-limited ''breathing space'' of a maximum of four months from enforcement action in order to facilitate negotiations and successful restructuring.
- Dissenting minority creditors and shareholders will not be able to block restructuring plans but their legitimate interests will be safeguarded.
- New financing will be specifically protected increasing the chances of a successful restructuring.
- Throughout the preventive restructuring procedures, workers will enjoy full labour law protection in accordance with the existing EU legislation.
- Training, specialisation of practitioners and courts, and the use of technology (e.g. online filing of claims, notifications to creditors) shouldimprove the efficiency and length of insolvency, restructuring and second chance procedures.
To read Factsheet on the issue, click here.
New rules for the recovery and resolution of CCPs
On 28 November 2016, The European Commission proposed new rules to ensure that systemic market infrastructures in the financial system, known as Central Counterparties (CCPs), can be dealt with effectively when things go wrong.
There are already high regulatory standards in place for EU CCPs, set out in the European Market Infrastructure Regulation (EMIR). However, no EU wide rules are in place for the unlikely scenario where CCPs face severe distress or failure and therefore need to be recovered or resolved in an orderly manner. Today's proposal aims to put into place a recovery and resolution framework to CCPs which are systemically important for the financial system.
To read the opening statement by Vice-President Valdis Dombrovskis at the press conference on the recovery and resolution of Central Counterparties, click here.
To read the full press release, click here.
Parliament and Council passes one-year PRIIPs delay
On 8 December 2016, the Council and the European Parliament approved the regulation postponing the application date of rules on packaged retail and insurance-based investment products (PRIPPs) by twelve months. The ‘PRIIPS’ rules will now be applied from 1 January 2018, instead of 31 December 2016.
Firms will now have to produce a key information document (KID) when providing certain investment products to retail investors.
The one-year delay will enable regulatory technical standards to be defined, leaving sufficient time for the industry to adapt to the new rules. This comes after the European Parliament objected to regulatory technical standards that were initially adopted by the Commission. New regulatory technical standards are being prepared by the European Supervisory Authorities.