'Silent bankruptcy' is removed
- Leila Mstoian - Leo Peeters
- Insolvency Law
- bankruptcy , continuity of enterprises , pre-pack , Directive 2001/23/EC , judgement of 22 June 2017
In a previous article on the modernisation and codification of the Bankruptcy Act and the Law
regarding the Continuity of Enterprises (LCE), we already mentioned a draft law that introduces the
'silent bankruptcy', also called 'pre-pack'. This system allows a company to
prepare a genuine bankruptcy in a discrete manner without publicity. A pre-curator may then be
appointed, to discretely look for a buyer for the business, or parts of it.
This system was meant to increase the chances of a quick handling of the bankruptcy and a higher return for creditors.
Several parties, however, expressed their concern that the system could be abused.
In addition, the European Court of Justice rendered a judgement on 22 June 2017 that undermines the system of 'silent bankruptcy' in large part. The Court has decided that workers' rights can not be compromised by this 'pre-pack' procedure. The working conditions and remuneration of existing employees must be protected in the context of a 'silent bankruptcy' procedure.
The Court stated its judgment as follows: "… the protection of workers guaranteed by Articles 3 and 4 of that directive (2001/23/EC of 12 March 2001) applies in a situation, such as that at issue in the main proceedings, in which the transfer of an undertaking takes place following a declaration of insolvency and in the context of a 'pre-pack' where that 'pre-pack' is prepared before the declaration of insolvency and put into effect immediately after that declaration, and, in particular, a court-appointed prospective insolvency administrator investigates the possibilities for continuation of the activities of that undertaking by a third party and prepares for acts which must be carried out shortly after the insolvency to enable such continuation and, moreover, it is irrelevant in that regard that the 'pre-pack' is also aimed at maximising the proceeds of the transfer for all the creditors of the undertaking in question."
The other provisions of the new insolvency law and the will be passed very soon.
We will keep you informed.