R3 warns of impact of ‘no deal’ Brexit on insolvency
A North West insolvency practitioner has warned of the potential impact of a ‘no deal’ Brexit on cross-border insolvency cases following the publication of new Government technical guidance.
Paul Barber, North West chair of the insolvency and restructuring trade body R3, said leaving the EU without a deal would make it harder for fraud victims to retrieve assets transferred to Europe and for businesses to recover debts from insolvent companies in the EU.
It would also be more difficult to rescue companies with a presence in multiple EU countries, which could threaten jobs.
Paul, who is also a partner at Begbies Traynor, said: “At the moment, UK insolvency and restructuring procedures and judgments are automatically recognised across the EU and vice versa, so it’s relatively quick and cost-effective to retrieve assets within the EU, and insolvencies of pan-European companies can be dealt with by one procedure.
“Without this framework it will become much more expensive and difficult to resolve cross-border cases. This would jeopardise creditor returns, businesses, jobs and investment, and damage the UK’s reputation as a place to do business.”
Mr Barber said in some cases people moved money or bought property overseas before becoming insolvent.
A recent case involved a bankrupt person who owed significant sums to UK creditors, but had money in a Spanish bank and a house in Spain.
Under the current rules, notice of bankrupty can be registered at the Spanish land registry to stop unauthorised dealings in a property, and it is easier for UK-based creditors to pursue claims.
The loss of automatic recognition of UK court rulings in the EU would have made it much more difficult to have the court’s bankruptcy ruling recognised, making the process of tracing and recovering Spanish-based assets slower, less certain and more expensive for creditors.
Another case involved the collapse of a German company. Its 80 UK staff had not been paid for two months but would have lost their entitlement to redundancy pay had they resigned.
The rules meant UK administrators could be appointed without delay to help them claim redundancy, and to help suppliers to submit claims.
Under a ‘no deal’ Brexit, staff would be left in limbo and suppliers would have to deal with the German administrators.
Tom Parkinson, of Iberian Property Consultants, a former Wigan surveyor who now works on the Costa del Sol helping insolvency practitioners recover assets in Spain, said: “A ‘no deal’ Brexit will make those trying to recover property more reliant on the Spanish courts.
“Currently we can often find ways to avoid court action and all the time and expense this entails.”