What is in a Name? Group Coordination or Consolidation Plan—What is Allowed Under the EIR Recast?

• DOI: http://doi.org/10.1002/iir.1263
• Published date: 01 December 2016
• Author: Michele Reumers
• Date: 01 December 2016

What is in a Name? Group Coordination or

Consolidation Plan—What is Allowed Under

the EIR Recast?

Michele Reumers*

Open Universiteit, Heerlen, the Netherlands

Abstract

The European Insolvency Regulation Recast allows for group coordination

proceedings if insolvency proceedings have been opened against different

companies belonging to a single group. Group coordination proceedings imply

the drafting of a group coordination plan in order to define an integrated solution

to the group’s problems. This plan shall not include recommendations as to any

consolidation of proceedings or insolvency estates. Against the backdrop of the

evolving notion of ‘procedural consolidation’and the fact the insolvency

practitioners and courts concerned have to cooperate and communicate with each

other, this prohibition is misplaced and should be interpreted to mean only

that main or secondary proceedings opened in a member state cannot be

transferred to another jurisdiction. The effective administration of insolvency

proceedings of related group companies often demands an integrated solution to

the group’s problems, which will inevitably lead to some form of consolidation.

Copyright © 2016 INSOL International and John Wiley & Sons, Ltd.

I. Introduction

In 2011, the European Parliament called attention to the fact that the European

Insolvency Regulation 1346/2000 (hereafter EIR) does not address the insol-

vency of groups of companies.

1

The underpinning of the EIR is that separate

*E-mail: michele.reumers@ou.nl

1. Note that enterprises are not always carried on by

groups of companies. Other types of legal person can

also be group members. For the sake of convenience

and because the EIR Recast uses the term (articles 2

(13) and 56 ff. EIR Recast), I will, however, use the

term ‘company’throughout this article for all group

members.

Copyright © 2016 INSOL International and John Wiley & Sons, Ltd Int. Insolv. Rev., Vol. 25: 225–240 (2016)

Published online 17 October 2016 in Wiley Online Library

(wileyonlinelibrary.com). DOI: 10.1002/iir.1263

insolvency proceedings must be opened for each company. However, where

(insolvent) groups of companies often form a single enterprise, it proved difficult

to reorganize the group as a whole, with consequent losses for creditors, employees

and shareholders. Thus, the European Parliament recommended specific rules to

address this problem, varying from coordination and cooperation duties for

insolvency practitioners and courts to consolidation of the estates of different

companies under special circumstances.

2

In 2012 the European Commission also

acknowledged the problems surrounding insolvent groups of companies. It pub-

lished a proposal for a regulation amending the EIR that contained cooperation

and communication duties for insolvency practitioners and courts involved in

insolvencies of group companies.

3

In 2013, the European Parliament Committee

on Legal Affairs took things one step further and—inspired by a German

legislative proposal to introduce a ‘Koordinationsverfahren’

4

—additionally

proposed ‘group coordination proceedings’to improve the coordination of

insolvency proceedings of group companies that belong to the same group.

5

Following negotiations between the institutions, and following several amendments

to the proposal, the European Parliament and the Council adopted an EIR Recast

in 2015.

6

The EIR Recast contains cooperation and communication duties for

insolvency practitioners and courts involved in insolvency proceedings of group

companies and the possibility to open group coordination proceedings.

7

During

the group coordination proceedings, a coordinator shall propose a group

coordination plan setting out an integrated approach to the resolution of the

group members’insolvencies. This plan shall not include recommendations as

to any consolidation of proceedings or insolvency estates.

8

However, the

EIR Recast requires insolvency practitioners and courts involved in

insolvencies of group members to cooperate and communicate, which means

that they have to consider coordinated restructuring plans, coordination of

hearings, etc.

9

Against the backdrop of the evolving interpretation of the notion

2. European Parliament, Resolution of 15 November

2011 with recommendations to the Commission on

insolvency proceedings in the context of EU company

law (2011/2006(INI)), especially Part 3.

3. European Commission, Proposal for a Regulation of

the European Parliament and of the Council

amending Council Regulation (EC) No. 1346/2000

on insolvency proceedings, COM (2012) 744 final,

proposed Chapter IVa.

4. Gesetzentwurf der Bundesregierung. Entwurf eines

Gesetzes zur Erleichterung der Bewältigung von

Konzerninsolvenzen, available via www.bmjv.de,

visited June 27, 2016. See about the progress of

the German initiative: http://dipbt.bundestag.de/

extrakt/ba/WP18/555/55535.html, visited June 27,

2016.

5. European Parliament Committee on Legal Affairs,

Report on the proposal for a regulation of the

European Parliament and of the Council amending

Council Regulation (EC) No 1346/2000 on insolvency

proceedings (COM(2012)0744 –C7-0413/2012 –

2012/0360(COD)), A7-0481/2013, 20 December

2013.

6. See about the legislative process: M. Weiss, ‘Bridge

over Troubled Water: The Revised Insolvency

Regulation’,INSOL International Insolvency Review 2015,

p. 193–195.

7. Regulation (EU) 2015/848 of the European

Parliament and of the Council of 20 May 2015 on

insolvency proceedings (recast), OJ L 141/19, 5 June

2015. Similar to the EIR, the EIR Recast does not

apply to Denmark. The EIR Recast entered into force

on the 20

th

day following publication in the Official

Journal of the EU, and the majority of its rules shall

apply from 26 June 2017, see article 92 EIR Recast.

8. Articles 70, and 72(1) and (3) EIR Recast.

9. Articles 56–60 EIR Recast.

International Insolvency Review226

Copyright © 2016 INSOL International and John Wiley & Sons, Ltd Int. Insolv. Rev., Vol. 25: 225–240 (2016)

DOI: 10.1002/iir