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    How will Brexit affect insolvencies?


    While Britain’s impending departure from the EU is unlikely to have an immediate impact on corporate insolvencies in the UK, Harrison Drury insolvency lawyer James Robbins believes changes are likely to materialise in due course, particularly for cross-border insolvency cases.

    Cross-border Insolvency

    EC Regulation on insolvency proceedings provides rules for determining the proper jurisdiction and applicable law to the most common forms of insolvency proceedings.

    It ensures that UK insolvency proceedings are recognised across the EU, meaning that, for example, an administrator of a UK company can deal with assets in France without the need for separate insolvency proceedings in that country.

    It isn’t known what agreement will be negotiated with the EU and therefore whether the regulation, and its replacement which is due to come in to force on 26 June 2017, will continue to apply.

    If it doesn’t, however, then in dealing with assets in other member states, UK insolvency practitioners would either have to open secondary proceedings or apply for recognition on a case-by-case basis, which would lead to more cost and uncertainty.

    The task of UK insolvency practitioners would be easier in cases where the separate UNCITRAL insolvency regime applies, but as the only EU countries which have signed up to this are the UK, Greece, Poland, Romania and Slovenia, such cases could be few and far between.


    Insolvency Reform

    The government is currently consulting on a number of reforms to the insolvency regime, including the introduction of a moratorium of up to three months to allow firms to negotiate a restructuring with creditors without the risk of some of them taking precipitous action. These reforms may now be delayed as government attention is diverted towards other matters.

    Employee Rights

    The government might relax or repeal the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), which has the effect of automatically transferring existing contracts of employment when a business is sold and is said by some to hinder the sales of insolvent businesses as going concerns.

    State Aid

    The rules on state aid may no longer apply, in which case the government would be free to provide rescue packages to struggling companies.

    James Robbins is a specialist insolvency solicitor at Harrison Drury dealing with all aspects of business recovery. For more information on any of the issues raised in this article, or any other insolvency matter, email James or call him on 01772 258321. Harrison Drury have experienced insolvency lawyers based in Lancaster, Preston, Garstang, Kendal and Clitheroe.

    To read more about our specialist legal services related to this topic, please visit our Insolvency & Business Recovery page.

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