At the end of 2014, EU ministers proposed a new insolvency regulation that would introduce a more ‘rescue orientated’ approach to cross-border insolvencies. However, the Insolvency Service is confident that existing UK procedures which presently facilitate business restructuring in order to avoid insolvency already embrace the spirit of these new EU proposals.

In seeking to confirm this view, the Insolvency Service has issued a discussion document intimating UK corporate insolvency laws already meet most of the criteria set out by the Commission. The government wishes ‘industry experts and other stakeholders’ to provide their views on how the UK currently compares against the proposed minimum standards in the context of the existing belief that ‘UK procedures are generally considered to rescue businesses faster and at a lower cost than many regimes around the world’. Responses to the Insolvency Service document are required by 17 March.

According to the discussion document, the existing UK regime offers the necessary flexibility to meet the new requirements, with many restructuring plans being negotiated outside of formal insolvency proceedings with the assistance of insolvency practitioners. However, the Commission’s recommendation to remove the distinction between secured and unsecured creditors when voting to adopt a restructuring plan (unless to the detriment of other creditors) if adopted, would be a shift away from the existing UK regime.

The principal aims of the proposals include the requirement for legislation to allow struggling businesses to restructure their debts at an earlier stage, without lengthy or costly procedures and before formal insolvency proceedings begin. A proposed restructuring plan should be based on increasing the chances of rescuing the business if it is viable and take account of the interests of both debtors and creditors.

Should your business be suffering some form of financial stress, restructuring may be an appropriate course of action. An initial consultation with one of our qualified advisors to explore potential strategies may be appropriate. Contact us.