A leading North East 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.
Andrew Haslam, regional chair of insolvency and restructuring trade body R3, has highlighted concerns that leaving the EU without a deal would make it harder for North East fraud victims to retrieve assets transferred to Europe and for businesses to recover debts from insolvent companies in the EU.
Any failure to reach an exit agreement would also be more difficult to rescue companies with a presence in multiple EU countries, which could threaten jobs.
Andrew Haslam, who is also head of specialist business advisory firm FRP Advisory LLP’s Newcastle office, says: “At the moment, UK insolvency and restructuring procedures and judgments are automatically recognised across the EU and vice versa.
“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, which would jeopardise creditor returns, businesses, jobs and investment, and damage the UK’s reputation as a place to do business.”
In some instances, people move money or buy property overseas before becoming insolvent, such as in a recent case involving 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 therefore easier for UK-based creditors to pursue claims.
The loss of automatic recognition of UK court rulings in the EU would make 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 where its 80 UK staff had not been paid for two months, but would have lost their entitlement to redundancy pay had they resigned.
The present 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 have been left in limbo, and suppliers would have had to deal with the German administrators.
Tom Parkinson of Iberian Property Consultants, a former surveyor who now works on the Costa del Sol helping insolvency practitioners recover assets in Spain, says: “A ‘no deal’ Brexit will make those trying to recover property more reliant on the Spanish courts, whereas as things stand, we can often find ways to avoid court action and all the time and expense this entails.”
Andrew Haslam continues: “A ‘no deal’ Brexit would be bad for businesses and creditors alike in insolvency cases, and would also damage investors’ confidence in UK businesses with a presence in the EU.
“The Government has repeatedly outlined a desire to seek a post-Brexit agreement which closely reflects the principles of mutual cooperation that exist under the current EU framework, and R3 is happy to support the Government’s pursuit of its objective.”