Brexit from an Insolvency Perspective
A ‘No Deal’ Brexit will break the agreements the UK has in place with EU countries governing the treatment of insolvencies across EU borders. Under present EU arrangements regulations are in place to ensure insolvency procedures and judgments are automatically recognised across all EU countries. When a company enters liquidation, restructures or enters a voluntary arrangement in the UK the other EU member states recognise the legal rights of the liquidator or arrangement supervisor to deal with a company’s assets and interest held in EU countries. A ‘No Deal’ Brexit would cause the loss of these arrangements.
The present arrangements provide UK insolvency practitioners with a streamlined means to restructure a company and recover European held interests through the courts of those countries. The UK insolvency practitioner, acting as liquidator or supervisor of a voluntary arrangement, is recognised across the EU. They have the same legal standing to recover assets located in EU countries as they do at home.
A ‘No Deal’ Brexit will require separate insolvency procedures in each EU country in which the liquidator or supervisor requires legal recognition to deal with assets or business interests. The loss of the EU arrangements will lead to increased costs additional layers of legal processes are required though each the national courts of each country in which assets are held. In turn this will inevitably result in a reduced and delayed return to the UK creditors.
A ‘No Deal’ Brexit will cause innumerable logistical and legal obstacles for UK businesses. There are countless arrangements set out in the EU legislation that govern the terms of business both inside members countries and between those countries. It is the experience of the insolvency profession that businesses often struggle to adapt in order to overcome changes in regulations and changing market places. This is rarely avoidable by those steering the business when legislation prevents drastic restructuring outside of insolvency. A ‘No Deal’ Brexit will bring a challenging environment for UK businesses. It is important that if we do find ourselves there the Government acts to empower the insolvency sector to maintain the best, and swiftest, returns for creditors.