R3 voices no deal Brexit insolvency framework concerns

The prospect of a ‘no deal’ Brexit and the potential impact on cross‐border insolvency cases is deeply concerning, according to insolvency and restructuring trade body R3.

A government technical note suggests that such an outcome is unlikely, however R3 President Stuart Frith has voiced concern over how it will impact on the nation’s insolvency and restructuring framework.

“The strength of the UK’s insolvency and restructuring framework partially depends on its pan‐ European reach,” he said.

He explained that UK restructuring and insolvency procedures are recognised across Europe before adding that a loss of that recognition would be “bad news for UK businesses and creditors”.

Under current insolvency procedures, the insolvency of a company with a European‐wide presence can be dealt with under one insolvency procedure.

Not only does this keep costs to a minimum, but Mr Frith said it also increases the chances of business rescue, which boosts returns to creditors.

He added that a potential no deal Brexit could damage the existing framework, potentially making it far more difficult and expensive to overcome UK and EU insolvency cases.

“This will jeopardise creditor returns, business and job rescue, lending and investment, and it will damage the UK’s reputation as a place to do business,” Mr Frith said.

He also suggested that changes to the restructuring and insolvency framework could hit business and investor confidence when faced with insolvency proceedings.

Making the process more difficult, or adding barriers to it, could mean that businesses are less prepared to lend or invest as they may be less willing to take risks.

R3 has backed the government’s objective for a post‐Brexit agreement that “reflects the principles of mutual cooperation” that currently exist, although concerns remain over what a reformed insolvency framework may look like.

By Phil Smith




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