In Focus Risk
Ready to say no?
Creditor returns may be severely impacted if no post-Brexit deal is agreed
Stuart Frith President, R3
The potential impact of a ‘no deal’ Brexit on cross-border insolvency cases, as set out by the government in its technical note published last month, is deeply concerning. The strength of the UK’s insolvency and
restructuring framework partially depends on its pan-European reach. At the moment, European Union (EU) regulations mean UK insolvency and restructuring procedures and judgments are automatically recognised across the EU – and vice versa. A loss of this recognition, as would happen in a ‘no deal’ situation, would be bad news for UK businesses and creditors.
Reciprocal recognition Reciprocal automatic recognition means it is relatively quick and cost effective to retrieve the assets of insolvent UK-based companies or individuals wherever those assets are in the EU. It means the insolvencies of companies
with a presence across the EU can be dealt with through one insolvency procedure rather than several. This keeps costs down and increases the
chances of business rescue, which, in turn, boosts returns to creditors. If the current EU-UK insolvency
framework is not preserved post-Brexit then it will become much more expensive and difficult to resolve UK and EU insolvency cases where UK-EU cross-border work is required.
Creditor returns This will jeopardise creditor returns, business and job rescue, lending and investment, and it will damage the UK’s reputation as a place to do business.
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Adding barriers to this process where a UK company has a presence in the EU would damage confidence in trading with, lending to, and investing in that company
The insolvency and restructuring
framework is there to provide businesses, lenders, and investors with the confidence that, in the event of an insolvency, they will see at least some of their money back. Adding barriers to this process where a UK
company has a presence in the EU would damage confidence in trading with, lending to, and investing in that company.
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Post-Brexit agreement The government has repeatedly outlined a desire to seek a post-Brexit agreement which closely reflects the principles of mutual cooperation that exist under the current EU framework. This is welcome and R3 is happy to support the government’s pursuit of its objective. In the event of a ‘no deal’, it is important
that the government takes steps to improve the domestic insolvency framework in order to maintain its international competitiveness. The government has just published plans
to deliver a package of major insolvency reforms first proposed in 2016, but the timetable for introducing them is not clear. Introducing the reforms would be a good step towards mitigating some of the problems which the loss of automatic recognition might cause. CCR
October 2018
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