Yesterday, draft Insolvency (Amendment) (EU Exit) Regulations 2018 were published by the Government. In the event of a 'no deal' Brexit, the statutory instrument would amend UK legislation and EU legislation retained on exit day relating to insolvency.
Focusing on the cross-border aspects, the Regulations address the "deficiencies" that will arise from the EU regulation on insolvency proceedings (recast) (EUIR) not being applied by the continuing EU member states vis-à-vis the UK. The EUIR determines in which member state main insolvency proceedings may be opened and provides for compliant determinations to be recognised elsewhere. On a commercial level, applying this jurisdictional regime is an extremely significant indicator of restructuring and recovery prospects for insolvent businesses and their stakeholders.
Consistent with the Government's technical notice published in September (Handling civil legal cases that involve EU countries if there's no Brexit deal), the Regulations retain, but no longer restrict the UK to, the EUIR 'centre of main interests' (COMI) test as to where main insolvency proceedings should be opened. From exit day it would also be possible to open insolvency proceedings where any of the tests set out in UK domestic law are satisfied, regardless of whether (or where) the debtor is based in Europe.
Of course, the flip side of this new freedom would be that UK insolvency practitioners would need to make applications under a continuing EU member state's domestic law in order to have UK insolvency proceedings recognised there. However, there is thought to be a greater chance of recognition in cases in which the COMI test has been applied in opening main insolvency proceedings in the UK.
The Regulations also attempt to make transitional arrangements (to the extent that the UK can unilaterally do so), which will be of interest to those involved in unresolved cases in which main proceedings have been opened pursuant to the EUIR before exit day.