In a press release dated 19 November 2025, the Council of the European Union announced that the Danish presidency and the negotiators of the European Parliament had reached an agreement on the upcoming directive aimed at harmonising the core rules of insolvency proceedings across all Member States. The objective is to make Europe more attractive to cross-border investors by eliminating the current regulatory fragmentation, which forces investors to assess up to 27 distinct national regimes when operating across borders.
The agreement represents the concrete result of a process initially promoted by the European Commission, which on 7 December 2022 formally presented the proposal for a Directive of the European Parliament and of the Council harmonising certain aspects of insolvency law. The initiative—first announced by the Commission in September 2020 - was born out of the need to overcome fragmentation and regulatory inconsistency, long recognised as one of the main obstacles to the free movement of capital within the EU and to the efficiency of the Single Market.
As explained in the European Commission’s press release of 20 November 2025, the new directive is designed to foster cross-border investment within the EU Single Market through targeted harmonisation of insolvency procedures. In particular, the rules it contains will address three fundamental pillars of insolvency law: recovering assets into the insolvency estate, increasing procedural efficiency, and ensuring a predictable and equitable distribution of recovered value among creditors.
The directive will introduce highly innovative instrument, most notably the so-called “pre-pack proceedings”, a modern and efficient tool allowing the negotiation and preparation of a business sale—of the whole undertaking or part of it—even before the formal opening of insolvency proceedings. This approach enables operational continuity and allows essential (i.e., executory) contracts to be immediately transferred to the new purchaser without requiring the consent of counterparties, while still respecting contractual freedom and safeguarding workers’ rights.
To ensure that creditors can recover maximum value from the undertaking being liquidated, the Council and the European Parliament propose that Member States designate competent courts or administrative authorities which, at the request of the insolvency practitioner, may access and consult centralised national bank account registers, as well as registers of bank accounts held in other Member States through the interconnected bank account register system. This would allow practitioners to obtain information on assets belonging to the insolvency estate. Access to these registers will be governed by specific rules setting out the conditions for consultation and the monitoring of how such access is carried out. Insolvency practitioners will also have access to beneficial ownership registers and to certain national registers and databases, with the aim of improving the ability to locate and recover assets regardless of the country in which they are held.
The directive will also align national rules concerning directors’ obligations to file for insolvency in a timely manner, requiring - unless equivalent alternative measures already apply - that they initiate insolvency proceedings within three months from the moment they become aware of the company’s state of financial distress.
To guarantee a fair and transparent distribution of the realised assets, the harmonised framework will require, under certain circumstances, the establishment of a creditors’ committee. Its composition, operating rules, and responsibilities will be defined uniformly, though Member States may choose to limit this requirement to so-called large enterprises.
Finally, to increase transparency in national insolvency procedures, the directive provides that each Member State publish a factsheet - standardised and multilingual - summarising the main features of its insolvency regime. This document will be made available on the European e-Justice Portal.
The agreement must now be confirmed by the Council and Parliament and then formally adopted. Member States will subsequently have two years and nine months to transpose the directive into national law.
This initiative is not an isolated measure but rather a crucial element within a broader effort to strengthen and integrate European financial markets. As early as 2020, the Capital Markets Union action plan identified disparities in insolvency legislation among Member States as a key obstacle to cross-border investment.
Against this evolving legal backdrop, European businesses face a period of opportunity tempered by interpretative and compliance challenges. The introduction of a harmonised insolvency regime will call for a careful reassessment of investment strategies, corporate operations, and restructuring plans, taking into account the new common rules and national transposition timelines.
