For seizes to function, as insolvency law dramatically reduces

For a better analysis and understanding of the new framework on
cross-border insolvency of groups of companies, it is vital to determine the
context of the term “group of companies”.

The notion
of “group
companies”, also commonly referred to as an “enterprise or corporate group”,
covers different forms of economic organisations, whose size, complexity,
degree of integration, and structure may vary, not always be apparent, and thus, require
special legislative treatment1.
This kind of structure may involve a number of wholly or partly owned
subsidiaries, operating subsidiaries, sub-subsidiaries, equity ownership and so

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Corporate groups are the most common structure of modern business
corporations and are widely recognised due to the principle of company’s
distinct legal personality, which is separate from identities of its
shareholding members and, to the benefits of limiting the holding company’s
liabilities for subsidiaries’ debts2.
However, despite the maintenance of separate legal identities within an
enterprise group, its components are often interdependent, particularly in
cases where the group carries out a more or less integrated business. The
latter refers to a coherent business carried out by the member companies, which
have divided certain tasks between themselves, with most typical the example of
a parent company producing goods, while subsidiaries located in different
Member States are distributing these goods3.

Usually such subsidiary companies have a similar function and an
identical management with the parent company by virtue of the relevant company
law that provides for an organizational framework promoting coordination of the
group, and thus ensuring dominant influence of the parent company over the

However, as soon as insolvency proceedings are opened against a
subsidiary company, this organizational framework seizes to function, as
insolvency law dramatically reduces the influence of the management in the
company, as the liquidator takes over the business. Usually the liquidator has
to follow the insolvency law rules which might be detrimental to the
functioning of the business as a whole and probably not serve the interests of
the whole group, especially when not all the companies involved necessarily
have to become insolvent. In this context, a scenario would be, for example,
when the parent company wants to stay in the market of the subsidiary, but the
liquidator must shut down the latter, following its obligations under
insolvency law, or when only the parent or an intermediary company becomes
insolvent, or when the whole group needs to become insolvent but without a
coordinated proceeding it might be harmful for the interests of creditors, the
employees etc. Such scenarios are an obvious impediment to the effective
liquidation or recovery of the business as a whole, especially in transnational


It must be taken into account also the fact that groups of companies
come in all shapes and sizes5,
and thus problems are created when it comes to a more complicated structure,
not so obvious as the one of a fully integrated business in the form of the
“parent-subsidiary”. Such corporate structures often involve holding or
intermediary companies, located in specific jurisdictions, sometimes not
operative but constituting investment vehicles serving tax or regulatory
purposes. Moreover, the case where different shareholders are involved in
different levels of the group of companies should be also considered. Another
complexity is connected to the fact that not all the companies involved have
their COMI within one state, and it is frequent their COMI to be even outside
of the EU, thus creating difficulties in any form of coordination in insolvency


Such complex situations require a special treatment which not all the
national insolvency laws had developed until the adoption of the new
Regulation, and at least not with a similar approach.

This disparity (or often absence) of rules treating GoCs
and the separate legal personality doctrine prevented legislators
from reaching a comprehensive approach and providing for a
coherent set of rules regarding group of companies and more specifically the
group insolvency.


Having regard to these, he Recast Regulation creates a
specific legal framework to deal with the insolvency of members of a group of
companies while wisely respecting the separate legal personality doctrine and
following the entity-by-entity approach as expressed in Eurofood’s dictum and underlid the original Insolvency Regulation.

The new Regulation also fills the gap of its predecessor and provides for a
definition for the GoCs, by determining them as a number of
companies consisting of parent and subsidiary companies6,
where the latter is being controlled (directly or indirectly) by the first.
Where an undertaking prepares consolidated financial statements in accordance
with the EU Accounting Directive (2013/34/EU) it is deemed to be a parent
The definition provided by the Recast Regulation limits the applicability of
the provisions of Articles 56-77 to so called ‘vertically integrated groups’,
and excludes groups that are made up by companies on the same level
(‘horizontally integrated groups’)8.

Financial directive?

As will be analysed, the
main approach that the Regulation supports – in line with the Eurofood case findings of the CJEU- is
that each company belonging to a group maintains its separate legal personality,
is subject to its own jurisdiction9, and
thus, its COMI has to be determined separately.

Bork/Mangano, (2012), “European Insolvency Law, Text and Cases”, Wolters Kluwer
Deutchland, Cologne, p. 340; UNCITRAL Legislative Guide on Insolvency Law, Part
three: Treatment of enterprise groups in insolvency, para. 2

Irit Mevorach, Appropriate treatment of corporate groups in insolvency: a
universal view, European Business Organization Law Review, 2007, 8(2), pp.
179-194, p. 180; UNCITRAL Legislative Guide on Insolvency Law Part three:
Treatment of enterprise groups in insolvency, 2012, pp. 5-6.

3 See e.g Rover
case, High Court of Justice Birmingham, 30.3.2006, NZI 2006, p.416,
annotated by Mankowski.

4 Paul Oberhammer, “External Evaluation of Regulation No. 1346/2000 on Insolvency
Proceedings”, JUST/2011/JCIV/PR/0049/A4, p.221


5 Paul Oberhammer, “External Evaluation of Regulation No.
1346/2000 on Insolvency Proceedings”, JUST/2011/JCIV/PR/0049/A4, p.222.

Article 2 Para. 13.

Article 2 Para. 14

Christoph Thole and Manuel Dueñas, Some Observations on the New Group
Coordination Procedure of the Reformed European Insolvency Regulation,
International Insolvency Review, Winter2015, Vol. 24 Issue 3, pp. 221-22.

ECJ Case C-341/04 (2006), Eurofood IFSC Ltd. ECR 2006 I-3813, para. 30.