PRACTICAL ASSISTANCE AVAILABLE UNDER THE EC REGULATION ON INSOLVENCY PROCEEDINGS 2000
The EC Regulation on Insolvency Proceedings 2000 (the “EC Regulation”) is concerned with insolvents who have their COMI (see paragraph 43.0.3) within an EU state, and sets rules to decide where the insolvency proceedings are opened, which country’s law takes precedence and the recognition of the proceeding and the person administering the proceeding.
This Part of the chapter does not intend to give full details of the EC Regulation, rather it gives advice and information on those aspects of the Regulation that may particularly assist the official receiver when dealing with the affairs of a foreign national.
A full overview of the Regulation may be found in Chapter 41.
Possibly the single most useful aspect of the EC Regulation is that the bankruptcy order made in England and Wales will be automatically and immediately recognised throughout the EU [note 1] (except Denmark – see paragraph 41.7), and, with certain exceptions (see paragraph 41.36 of Chapter 41) the law applicable to the administration of the bankruptcy will be the law of England and Wales [note 2].
In principle, therefore, the official receiver will avoid problems associated with having his/her jurisdiction recognised, and will be able to rely largely on the familiar principles of the law of England and Wales when dealing with the bankruptcy estate.
With certain exceptions (see paragraph 41.27 regarding secondary proceedings), the bankruptcy opened in England and Wales will have universal effect throughout the EU from the date of the making of the order, and it will not then be possible for a bankruptcy proceeding (or equivalent) to be opened in any other EU country.
In reality, despite the fact that the law of England and Wales generally takes precedence, there are sometimes practical obstacles to be overcome – particularly where the official receiver encounters one of the areas where the Regulation provides that the law of the country in which an asset is situated takes precedence (see paragraph 41.36 for more information on these areas).
Other Chapters give country-specific guidance of a practical nature to assist official receivers when dealing with assets situated in other countries, as follows:
Chapter 43.1 - Germany
Chapter 43.2 – Spain
Chapter 43.3 - United States of America
Chapter 43.4 – France
Chapter 43.5 – Belgium
Chapter 43.6 – Cyprus
Chapter 43.7 – Bulgaria
Chapter 43.8 – Republic of Ireland
Chapter 43.9 – ItalyChapter 43.10 - Northern Ireland
Chapter 43.11 - Portugal
Chapter 43.12 - Scotland
Chapter 43.13 - South Africa
Chapter 43.14 - Turkey
Chapter 43.15 - Latvia
Chapter 43.16 - Poland
The official receiver, when acting as trustee, is able use all the powers available to him/her under the Act when dealing with a bankrupt’s affairs in another EU country. In particular, he/she may remove the bankrupt’s assets from that country [note 3], but he/she must obey the laws of the country in which the asset is situated (for example, where a certain legal procedure must be followed to sell or remove an asset) [note 4].
In reality, for tangible assets, it is likely to be more cost effective to leave the asset in place and have it sold by agents appointed locally. Details of agents operating in other EU countries have been obtained for the following countries:
Germany (see paragraph 43.1.51)
The appointment of the official receiver is considered to be evidenced solely by a certified copy of both the bankruptcy order and notice of no meeting, and no other formality or legal process is required. It can be requested that these documents be translated into the official language (or one of the official languages) of the country in which the official receiver seeks to evidence his credentials [note 5]. Information about translation facilities available to the official receiver can be found here (http://intranet/PSC/Communications/translation.htm).
The official receiver, as trustee, may require that details of the bankruptcy are entered into any public register (such as that maintained in the UK by the Land Registry) maintained by another EU country [note 6].
It would be prudent for the official receiver to take advantage of this provision where he/she is dealing with land or property situated in another EU country.
The types of register maintained and the procedure for placing the required entry varies from country to country and register to register. Currently, information about the registration of bankruptcy information is available for the following countries:
Cyprus – see paragraph 43.6.15
France – see paragraph 43.4.18
Germany – see paragraph 43.1.14
Italy – see paragraph 43.9.13
Latvia - see paragraph 43.15.19
Poland - see paragraph 43.16.22
Portugal – see paragraph 43.11.13
Republic of Ireland – see paragraph 43.8.13
Spain – see paragraph 43.2.14
The official receiver, as trustee, may request that details of the bankruptcy are entered into any public register of bankruptcy (such as that maintained in England and Wales by The Service) maintained by another EU country [note 6].
Where the official receiver suspects that a bankrupt may have significant undisclosed liabilities or assets in another EU country, he/she may consider placing a notice of the bankruptcy in such a register to alert those with information regarding the bankrupt of the official receiver’s interest.
The types of register maintained and the procedure for placing the required entry varies from country to country. Currently, information about the registration of notices of bankruptcy is available for the following countries:
Germany – see paragraph 43.1.55
Latvia – see Chapter 43.15 Part 1
Republic of Ireland – see Chapter 43.8, Part 2
The official receiver does not have to advertise the making of the order in any country other than under any requirement to do so in the law of the UK (advertisement in the UK is at the discretion of the official receiver as trustee – see Chapter 5) [note 7].
In circumstances where the official receiver considers that it will be of a benefit to the estate (primarily, the protection of assets) or the conduct of his/her administration (to make creditors aware of the proceedings) he/she should not hesitate to place an advertisement in another EU country. See Chapter 5, Part 3 for matters to be taken into account when considering the benefit of placing an advertisement.
Currently, information about the advertisement of bankruptcy information is available for the following countries:
Germany (see paragraph 43.1.55).
Republic of Ireland – see Chapter 43.8, Part 2
So far, this Part has concentrated on those provisions of the EC Regulation that assist the official receiver when dealing with the affairs of a foreign national. There are a number of other provisions which, whilst not accurately described as helpful, impact on the work of the official receiver. These are covered in paragraphs 43.0.31 to 43.0.32.
The EC Regulation provides that the initial contact with creditors in other EU countries shall be in a particular format. See paragraph 41.58 for more information on this aspect.
The Regulation allows for limited insolvency proceedings to be opened in a EU country even though universal (main) proceedings (see paragraph 41.25) are already in force in the EU Member State where the debtor has his/her COMI (see Part 2). These proceedings are known as secondary proceedings [note 8] (or territorial proceedings if they are opened prior to the opening of main proceedings). They may be opened in a Member State where the debtor has an establishment (see paragraph 41.29) and are restricted to the assets of the debtor in that Member State .The person dealing with the main proceedings has power to apply for a stay of proceedings in the secondary proceedings [note 9].
Generally speaking, where the official receiver is dealing with the main proceeding there would be no benefit in applying for a stay of proceedings as it is likely to more cost effective for a “local” office holder to deal with the affairs of the bankrupt in that other country. The official receiver should remind the other office holder of his/her duty to co-operate and communicate with regards to the progress of the secondary proceedings [note 10]. The official receiver should also remind the other officer-holder that he/she has to remit any surplus in the secondary proceedings to the bankruptcy estate [note 11]. The letter attached ay Annex D may be used for this purpose.
Any territorial proceedings opened (prior to the making of the bankruptcy order) should be detailed in the bankrupt’s statement of affairs (or booklet). Where secondary proceedings (after the making of the bankruptcy order) are opened the official receiver will, to a certain extent, be reliant on the bankrupt, the bankrupt’s creditors or the foreign office holder to advise him/her of the opening of those proceedings.