ECOFIN - Economic and Financial Affairs Council

06/12/2025 | Press release | Distributed by Public on 06/12/2025 04:10

EU insolvency law: member states agree position on bringing national insolvency standards closer

Today the Council agreed its position (so-called general approach) on an EU directive harmonising certain aspects of insolvence law. By bringing national insolvency regimes nearer to each other the EU will become more attractive for foreign and cross-border investors. Currently, investors have to take different national insolvency rules into account when investing in other EU countries than their home country.

This law is an important step forward to make the EU more attractive for investors. It can be a drawback to investment decisions when insolvency laws deviate too much between member states and with this law we will cut down on these divergences.

Adam Bodnar, Polish Minister of Justice

The pre-pack mechanism

Under the new rules, a pre-pack mechanism will become available in all EU member states. In a pre-pack mechanism, the sale of the debtor's business (or part of it) is prepared and negotiated before the formal opening of the insolvency proceedings. This makes it possible to execute the sale and obtain the proceeds shortly after opening the formal insolvency proceedings intended to liquidate a company.

As part of a pre-pack mechanism it will be possible to automatically transfer executory contracts, i.e. contracts which are essential for the continuation of the business, from the debtor to the buyer of the business without the consent of the debtor's counterparty. However, the Council included a number of safeguards to protect the freedom of contract.

Creditors' committee

Another novelty of the law is that creditors' committees will, under certain circumstances, have to be set up in all member states. The creditors' committee strengthens the position of the creditors in the insolvency procedure. It ensures the involvement of individual creditors who might otherwise not participate in the proceedings, for instance due to limited resources or lack of geographic proximity.

The law harmonises certain characteristics of the creditors' committee across member states such as its composition , the rights and duties of the committee as well as the personal liability of its members.

According to the compromise member states have the possibility to narrow down the establishment of the creditors' committee to large enterprises.

Other provisions

In December 2024, the Council already reached a compromise on other aspects of the draft directive and in particular on measures to preserve the insolvency estate, the duties of directors to request the opening of insolvency proceedings and on transparency obligations.

Next steps

On the basis of the position reached today the Council will be able to start negotiatons with the European Parliament - as soon as it has defined its position - in order to settle on a final law.

Background

The directive was proposed by the Commission on 7 December 2022, together with other measures intended to further develop the EU's capital markets union.

The lack of harmonised insolvency regimes is a barrier to cross-border investments. More harmonised insolvency rules contribute to improved certainty and cost reductions for (foreign) investors.

  • Insolvency law: Council settles on position for core capital markets union legislation (press release, 13 December 2024)
  • Directive harmonising certain aspects of insolvency law (general approach), 23 May 2025
  • European capital markets (background information)
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