Published by Global Banking & Finance Review®
Posted on November 20, 2025
3 min readLast updated: January 20, 2026
The EU has agreed to harmonize insolvency laws to enhance cross-border investments and improve capital market liquidity.
By Jan Strupczewski
BRUSSELS (Reuters) -European Union governments and the European Parliament have reached agreement on harmonising the 27-nation bloc's insolvency laws to make it easier to invest across the EU and create a more liquid EU capital market, the EU Council said in a statement.
Work on harmonising some key aspects of the 27 different national bankruptcy laws has been going on for a decade, slowed down by vested interests, different national legal cultures and traditions and turf wars between justice and finance ministries. Because of the different insolvency laws, the time for investors to recover their money from a bankrupt company ranged between seven months and seven years depending on its location, while judicial costs could range from zero to more than 10%. The International Monetary Fund, the European Central Bank and all the EU institutions have pointed to the lack of a harmonised insolvency law as one of the key barriers to greater capital market integration in Europe. "The Danish presidency of the Council and European Parliament negotiators reached a provisional agreement on an EU directive harmonising certain aspects of insolvency law," the EU Council, which groups all EU governments, said in a statement. "Currently cross-border investors have to take up to 27 different insolvency rules into account when assessing an investment opportunity in a country different than their own," it said. Under the deal, EU countries will have to apply the same standards to prevent companies from moving or hiding assets before going bankrupt, called "avoidance actions", and will allow authorities to reverse transactions that unfairly reduce what creditors can recover. The agreement also provides that insolvency practitioners will get easier access to bank account registers through a shared system. They will also be able to check beneficial ownership and other national databases to help locate assets. The harmonisation makes company directors file for insolvency within three months of realizing the business is in serious financial trouble. This duty can be suspended if they take other steps to protect creditors.
Finally, each country will publish a factsheet explaining its insolvency laws in English, French, German and its own language. These will be available on the EU's e-Justice Portal to make cross-border investment less risky.
The provisional deal will now have to be formally adopted by both the Council of EU governments and the European Parliament, after which EU countries would have two years and nine months to transpose the agreement into national legislation.
(Reporting by Jan Strupczewski; Editing by Alex Richardson)
Insolvency is a financial state where an individual or organization cannot meet its debt obligations. It can lead to bankruptcy proceedings, where assets may be liquidated to pay creditors.
Cross-border investments refer to investments made in one country by individuals or entities from another country. These investments can include stocks, bonds, real estate, and businesses.
Avoidance actions are legal measures that allow insolvency practitioners to reverse transactions made by a company before it went bankrupt, aiming to recover assets for creditors.
A capital market is a financial market where long-term debt or equity-backed securities are bought and sold. It helps companies raise funds for expansion and growth.
A directive is a legal act of the European Union that requires member states to achieve a particular result without dictating the means of achieving that result.
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