EU Insolvency Regulations: New Tendencies Fostering Entrepreneurship in Europe

Luigi Lai

2017 W: Przedsiębiorczość w teorii i badaniach : perspektywa młodych badaczy / Marcin Darecki, Agnieszka Postuła; Warszawa: Uniwersytet Warszawski, s. 79-95

Insolvency and entrepreneurship are different sides of the same coin. Any entrepreneurial activity has to face the prospect of insolvency. Insolvency is a possibility and this is why any entrepreneur needs to have some notions of insolvency law in order to safely direct the firm when unexpected market turbulence may lead it close to bankruptcy. In the United States many successful companies had their origin in a previous failure. Today, insolvency does not merely consist of aggressive procedures aimed at debtor divestment. On the contrary, the field of insolvency is now much more than that. The European Union is striving to create a friendly business environment and for this reason has implemented a new set of laws allowing for what may be called a “second chance.” This article conducts a legal analysis of aspects of EU insolvency regulations that may lead to the formation of a new generation of entrepreneurs who are conscious of the new possibilities given by the concrete effects of the “second chance theory.” After a brief description of the concepts of universality and territoriality, the article primarily describes the main characteristics of EU regulations as contained in insolvency law,

commonly known as “EIR.” Secondly, the article shows the main changes made to the EIR and its new Recast.

The paper methodology is based on analysis of the EIR’s main characteristics as well as some interesting decisions adjudicated by the European Court of Justice in the field of insolvency. The EIR and its Recast are an important step forward in achieving a more effective solution for cross border insolvency proceedings. Nonetheless, EU member states

are reluctant to devolve their competences on insolvency law to the European Union. It is for this reason that the EU legislator has been so timid in harmonization efforts. In the absence of true harmonization, stronger cooperation in the insolvency field should be fostered among courts in the European Union.

Often entrepreneurs, due to a lack of knowledge in the insolvency field, are not aware that insolvency is not just bankruptcy. For this reason they confine themselves to a narrow perimeter of action. Thus, they may lose the possibility of making complete and thoughtful decisions. The article hopes to contribute to disseminating among entrepreneurs a set of legal notions that may lead to better management and better prevision of cross–border insolvency situations before they happen (ex ante), not after (ex post). The successive article on this topic will analyze several interesting aspects of the national regulations of certain EU states.