Harmonising EU Insolvency Law: Co-legislators Reach Agreement On Compromise Text For A New Directive — Key Changes And What Is Next

EU directive harmonising certain aspects of insolvency law

Overview and status

The European Parliament and the Council (the co-legislators) reached political agreement on the proposed Directive harmonising certain aspects of insolvency law on 19 November 2025. The final compromise text was confirmed and circulated in early December 2025. The proposed Directive is a minimum-harmonisation instrument aimed at reducing internal-market frictions arising from divergent national rules by setting targeted common standards that improve efficiency, predictability and recoveries in cross-border cases.

The proposed Directive focuses on five core areas: avoidance actions; tracing of assets (including access through the EU's bank account registers interconnection system, BARIS); an EU-wide pre-pack instrument for going concern sales; a harmonised duty for directors to request the opening of insolvency proceedings; creditors' committees; and a standardised key-information factsheet on national insolvency laws. It does not seek to alter fundamental threshold concepts such as what constitutes 'insolvency'; those remain matters for national law.

Avoidance actions: minimum standards to protect the insolvency estate

Member States must ensure effective avoidance action regimes to reverse legal acts detrimental to the general body of creditors that were perfected prior to the opening of insolvency proceedings. Detriment is assessed taking into account the definition of the insolvency estate under national law and the participating creditors.

The Directive sets out specific grounds, including: preferences perfected within three months when the debtor was unable to pay debts as they fell due (with actual knowledge required on the part of the creditor for due-and-owing payments, rebuttably presumed for closely related parties); transactions at no or manifestly inadequate consideration within one year; and acts intentionally detrimental to creditors within up to two years, with a rebuttable presumption of knowledge for closely related parties. Presumptions and reliefs reflect proportionality and legitimate counterparty expectations.

Carve-outs exclude, among others, ordinary-course congruent exchanges of equivalent value benefiting the debtor's assets, certain negotiable-instrument payments subject to claw-back against endorsers with knowledge, and protected financial-market operations (including close-out netting). Member States must provide for compensation or return of benefits to the estate and may adopt stricter national rules consistent with minimum harmonisation.

Asset tracing and information access, including BARIS

To improve recoveries and reduce value leakage, designated courts or administrative authorities in each Member State must, upon an insolvency practitioner's (IP) request, have direct and immediate access to national centralised bank account registers and – crucially – cross-border access to other Member States' registers via BARIS. Access is case-by-case, purpose-bound to identifying and tracing estate assets (including those subject to avoidance), and subject to data-protection and procedural safeguards. Member States may allow direct IP access nationally, but must ensure non-discriminatory access for foreign IP's; access conditions for foreign IP's cannot be more onerous than for domestic ones.

Beyond bank accounts, Member States must ensure effective, timely access to beneficial-ownership information through interconnected national registers and to specified national asset registers and databases (e.g., vehicles, real estate and securities records), again on a non-discriminatory basis. Procedural aspects such as language and verification of access conditions are governed by the law of the Member State hosting the register or database.

EU-wide pre-packaged going-concern sales

The Directive establishes a two-phase pre-pack available across the EU. A confidential preparation phase, overseen by an independent monitor, identifies a buyer and prepares a sale; a liquidation phase then opens under court or competent-authority control to approve and execute the sale and distribute proceeds. The liquidation phase should be carried out by means of an "insolvency proceeding" (other than a "preventive restructuring proceeding") within the meaning of the Insolvency Regulation (Recast) (EU) 2015/848 and shall constitute a "bankruptcy or analogous proceeding" within the meaning of Article 5(1) of the Transfer of Undertakings Directive 2001/23/EC. Accordingly, the Directive codifies the jurisprudence of the Court of Justice of the European Union, including Smallsteps (2017) and Heiploeg (2022), thereby confirming that the "bankruptcy exception" in Directive 2001/23 applies to this proceeding.

Member States may align pre-pack elements with national law, but must ensure monitor independence and a sale process that is competitive, transparent, fair and consistent with local M&A standards, unless a court-run public auction is conducted in the liquidation phase. Where used, the monitor-selected offer can serve as a "stalking horse" bid, with calibrated break-up fees or expense reimbursements permitted if they remain proportionate and do not deter competition.

To preserve going-concern value, essential executory contracts necessary for business continuity transfer to the acquirer without counterparty consent, subject to safeguards. Member States may require consent depending on contract type, party quality or where assignment imposes a disproportionate burden. Counterparties retain remedies for non-performance and, in defined cases, may be granted a right to terminate on notice where continued performance would cause unfair prejudice. Purchasers acquire the business free and clear of debts and liabilities; creditors are paid from sale proceeds. Additional protections apply where closely related parties bid, including disclosure duties and the ability for courts or competent authorities to revoke benefits for non-compliance. Where a closely related party's offer is considered as the best offer, Member States may introduce enhanced safeguards.

Interim financing needed to bridge to closing is protected against avoidance and liability, with optional priority for repayment and the possibility, subject to national ranking rules and ex ante control, to grant security over sale proceeds or set off financing against the purchase price when provided by bidders.

Directors' duties: obligation to request opening of insolvency proceedings within three months

The Directive harmonises a core duty for directors to request the opening of insolvency proceedings no later than three months after they became, or should have become, aware that the company is insolvent under national law. Member States may provide limited alternatives, such as discharging the duty via public notification to enable creditor filings, or suspending the duty where directors take measures that afford equivalent protection to the general body of creditors. Civil liability arises for damages resulting from late filing or from measures that leave creditors worse off than a timely filing. As with the Directive's other provisions, these rules establish minimum harmonisation only; stricter national regimes are therefore preserved, including those that already impose similar duties but with materially shorter filing deadlines. Across the EU, comparable national regimes require filings within, for example, three weeks, 30 days, 45 days, or two months.

Creditors' committees

The Directive harmonises core features of creditors' committees, which can be established after opening of insolvency proceedings when creditors so decide, with Member States permitted to allow earlier constitution upon request in accordance with national law. It standardises working methods, enables participation and voting in person or electronically, and addresses personal liability of committee members by requiring Member States to provide either an exemption except in cases of wilful misconduct, gross negligence, fraud or fiduciary breach, or insurance borne by the estate.

Transparency: national key-information factsheets

To lower information barriers to cross-border investment, each Member State must publish a concise, non-technical key-information factsheet covering core features of national insolvency law, including opening conditions, claims processes, ranking and distribution rules, and average reported durations. Factsheets must be provided in an EU language and will be made publicly accessible on the e-Justice Portal in English, French, German and the original national language.

Scope: minimum‑harmonisation approach

The Directive applies to collective insolvency proceedings (excluding preventive restructuring) and does not apply to specified regulated financial entities or public bodies; Member States may also exclude additional financial entities under special arrangements. Titles IV (pre-pack) and VII (creditors' committees) apply to legal persons, and Member States may limit committees to large undertakings. Member States remain free to adopt stricter rules to protect creditors, to expand IP access to registers, or to strengthen committee participation. In exceptional emergencies that seriously disrupt economic activity, such as a global pandemic, Member States may temporarily derogate from certain provisions, subject to notification, proportionality and time limits.

Key changes compared to earlier drafts

Following the Commission's initial 2022 proposal and subsequent negotiations, the final compromise text introduces several significant changes. Most notably, the previously proposed duty on directors to file for the opening of insolvency proceedings has been qualified by a series of carve-outs and exceptions. Member States may instead ensure an equivalent level of protection for the general body of creditors through alternative mechanisms, such as public notification of a company's insolvency in an official register or other measures designed to safeguard the collective interests of creditors.

In addition, where earlier drafts contemplated that a creditor receiving payment on a due and payable claim could be exposed to a preference action if the creditor knew or ought to have known that the debtor was unable to pay its due debts, the standard has now been tightened. Only actual knowledge of such inability to pay will suffice to meet this test. In the same context, the original carve-out for transactions made directly for fair consideration "to the benefit of the insolvency estate" has been revised to refer to the "debtor's assets", which may indicate a broader scope for the exemption than was originally intended.

Why this Directive matters: market impact and practice

The Directive is a significant step toward greater coherence and predictability in European insolvency practice. By addressing pre-insolvency value leakage, enabling cross-border IP access to bank-account and beneficial-ownership data, facilitating going-concern sales and introducing filing discipline for boards, it supports the internal market and the Capital Markets Union, with the potential to strengthen investor confidence and make recoveries more predictable.

The scope is targeted. It does not harmonise the definition of insolvency or opening thresholds, and Member States can adopt stricter standards. In addition, EU-wide pre-packs with automatic assignment of essential executory contracts, a director's duty to file upon insolvency, and BARIS-enabled asset tracing will be novel in many jurisdictions and will require procedural, institutional and market-practice adjustments. Convergence will take time and will be shaped by national implementation choices.

Next steps and timing

Formal approval by the European Parliament and Council is expected to follow, most likely in January 2026. Once adopted and published in the Official Journal, Member States will have 33 months to transpose the Directive. BARIS-related access obligations will apply by the general transposition deadline or by 10 July 2029, whichever is later, reflecting the technical build-out of the interconnection system.

We will continue to monitor final adoption and national implementation, including consultations and draft laws on designated courts and authorities for BARIS access, pre-pack procedures and monitors, directors' liability standards and complementary creditor protections.