In today's economic landscape, many companies are organised into company groups A parent company controls one or more subsidiaries, sometimes in different countries. While this structure offers advantages during periods of growth, it becomes a real headache when the group, or one of its components, encounters major financial difficulties with a European dimension. How do you deal with the insolvency of a complex group whose entities are legally distinct but economically linked, and scattered across the EU? For a long time, European law was silent on this issue. The new European regulation on insolvency proceedings (n° 2015/848) has also introduced specific rules for groups, designed to facilitate coordinated management. This article explains these important changes.
Why a specific treatment for groups?
Previously, European law treated each company in the group as an isolated entity. If insolvency proceedings were opened against the parent company in France and another against its subsidiary in Germany, these proceedings were largely independent, even though the companies were linked. This 'company by company' approach often led to :
- A lack of overall vision of the Group's real economic situation.
- Difficulties in selling the Group or its activities in a coherent way.
- Conflicts between the various procedures and their administrators/liquidators.
- Increased costs and lead times.
- The results are sometimes sub-optimal for all creditors.
The new European Regulation (in Chapter V) recognises this reality and aims to go beyond the purely individual approach. The aim is not to merge procedures or assets (each company remains a separate entity), but to facilitate coordination between the various proceedings opened against group members. The aim is to improve the efficiency of insolvency management, increase the chances of overall recovery and optimise the value of liquidated assets, in the interests of all stakeholders.
For the purposes of these rules, a "group of companies" is defined simply as a parent undertaking and all the undertakings (subsidiaries) which it controls, directly or indirectly (Article 2 of Regulation 2015/848).
Enhanced cooperation between proceedings targeting group members
The first pillar of the new system is the introduction of a general obligation to cooperate between all actors involved in the different insolvency proceedings opened against companies of the same group within the EU (Article 56 of Regulation 2015/848).
This cooperation must take place between :
- The insolvency practitioners (court-appointed agents, liquidators, etc.) appointed in each procedure.
- The courts who initiated these proceedings.
- The practitioners and the courts of the various procedures.
In practical terms, this cooperation involves :
- La communication of information between the different procedures (while protecting confidentiality where necessary).
- La coordinating strategiesThese include, for example, the administration of assets, the search for buyers, or the concerted sale of assets.
- The possibility of concluding agreements or protocols to organise this cooperation more formally.
To facilitate this coordination, the Regulation grants specific rights to insolvency practitioners. For example, the liquidator of a German subsidiary may :
- Ask to be heard by the French court dealing with the parent company.
- Propose a coordinated restructuring plan for several Group entities.
- Request the temporary suspension of the sale of the parent company's assets in France, if it considers this necessary for better coordination (Article 60).
The new collective group coordination procedure (Article 61 et seq.)
Purpose and nature
Its aim is to provide a formal framework for organising the coordination of different insolvency procedures against members of the group. The aim is NOT to merge these procedures, but to make them work together more effectively. It is a procedure volunteer It can only be set up at the request of one of the insolvency practitioners, and the other practitioners concerned may refuse to take part. Its success therefore depends largely on the consensus and willingness of the players to cooperate.
Commencement of proceedings
- Who's asking? An insolvency practitioner (trustee, liquidator, etc.) appointed in the proceedings of one of the companies in the group.
- In which court? Any court in the EU that has opened proceedings against a group member can be seized. Ideally, practitioners can agree to choose the most appropriate court (for example, the one handling the parent company's proceedings).
- Opening conditions : The court will check whether the coordination will facilitate the efficient management of the various proceedings, whether it risks placing certain creditors at a financial disadvantage, and whether the person proposed as "coordinator" is independent and qualified.
- Information and objections : The court informs all other practitioners involved. They have 30 days to object to the participation of their procedure or to the person proposed as coordinator. If a practitioner objects to participation, his procedure remains outside the collective coordination.
The group coordinator
If the proceedings are opened, the court appoints a coordinator.
- Who is it? An independent person, who cannot be one of the practitioners already appointed in the individual proceedings. This person must be qualified to practise as an insolvency practitioner in a Member State and have no conflict of interest.
- What are its missions?
- Main topics : Draw up recommendations for the coordinated conduct of the various procedures; propose a "collective coordination programme" (overall plan suggesting restructuring measures, solutions to disputes within the group, agreements between practitioners, etc.).
- Accessories (optional) : To be heard in the various procedures, to help resolve disputes between practitioners, to request information, to ask for the temporary suspension (up to 6 months) of an individual procedure if necessary for coordination.
- What powers does it have? The coordinator has no direct management powers on companies or individual procedures. It is a facilitatora nominatora mediator. Its role is to initiate and organise coordination.
- What is the scope of its recommendations? The practitioners of each individual procedure must take into account the recommendations of the coordinator and the coordination programme. However, they retain control of their own procedure and may decide not to follow these recommendations, provided they give reasons for their decision.
Financing
In principle, the costs of the coordinator's mission are divided between the different pools of assets of the companies participating in the coordination, according to an estimate approved by the court.
What are the benefits for companies and creditors?
These new rules on groups of companies are intended to bring a number of benefits:
- For Group companies : A coordinated approach can increase the chances of survival of the group or its viable parts, thanks to a more global and coherent restructuring. It can also reduce the costs and delays associated with the multiplicity of procedures.
- For creditors : Coordination can lead to a better valuation of the assets of the group as a whole and a potentially larger and fairer distribution of the funds recovered (even if the assets of each company remain separate). They also benefit from a clearer view of the overall situation.
However, the success of these tools will depend heavily on the genuine willingness to cooperate of the various practitioners and courts involved. The practical implementation of the collective coordination procedure, in particular, could prove complex.
The insolvency of a group of companies is one of the most difficult situations in insolvency law. The new European rules now offer specific tools to try to manage this complexity better, by encouraging cooperation and coordination. Understanding these mechanisms is essential if your company is part of a group with European activities, or if you are a creditor of such a structure. If your group or one of its subsidiaries runs into difficulties, a coordinated strategy should be considered as soon as possible. Our firm has the expertise to help you through these complex procedures. Contact us to discuss your situation.
Sources
- Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (in particular Chapter V, Articles 56 to 77).
- Commercial Code, articles L. 694-1 to L. 695-4 and R. 694-1 to R. 695-4 (French provisions adapting national law to these European rules on groups and cooperation).
EN 
FR