Minimum Standards and Pre-Pack Procedures
The European Union continues to work on aligning selected areas of insolvency law. At the end of 2025, the EU Council and the European Parliament reached a political agreement on a compromise text for a new directive aimed at harmonizing certain core insolvency issues across the union at a minimum level. The goal is greater legal certainty, better comparability, and the reduction of competitive distortions in the internal market.
Following the formal adoption of the directive, the implementation phase begins: Member states must transpose the requirements into national law within two years and nine months. As typical for directives, there is room for maneuver in the precise formulation, as long as the minimum requirements are met.
The EU has previously provided reform impulses, particularly in the area of preventive restructuring frameworks. In Germany, these requirements were implemented, among others, through the Act to Stabilize and Restructure Companies (StaRUG). While preventive restructuring aims at reorganization before insolvency maturity occurs, the new directive focuses more on the initiated insolvency procedure or its immediate prelude. Thus, procedures and instruments come into focus that are intended to preserve company values and support more efficient processing.
Important: The planned directive does not aim for complete unification of national insolvency laws. Rather, it focuses on central issues that are particularly relevant for cross-border situations and establishes minimum standards for these.
Minimum Standards in Insolvency Avoidance
A key focus is on insolvency avoidance. It serves to undo certain legal actions taken shortly before the opening of proceedings, which can favor individual creditors or reduce the insolvency estate. In the EU, there are currently sometimes significant differences in this regard—such as in avoidance periods, requirements (e.g., knowledge or disadvantage elements), as well as burden of proof and presumption rules.
For lenders, suppliers, and M&A actors, this can complicate risk assessment in cross-border transactions: Depending on the legal system, the scope and enforceability of recovery claims can differ significantly. Union-wide minimum standards are intended to increase predictability and improve the calculability of risks, without prohibiting stricter or system-compatible further developments by member states.
Supplementary Practical Note: For contract design (e.g., securities, payment modalities, cash pooling), greater harmonization can mean that risk assessments can be more standardized. Nevertheless, national peculiarities—such as in property and security law—regularly remain important.
More Efficient Utilization of Assets
Another regulatory field concerns the utilization of assets in insolvency. The draft directive provides guidelines intended to increase transparency and competition intensity in disposal processes, among other things, through structured procedures and, if necessary, digital or electronic publication and sales channels.
A comprehensible, market-oriented process can increase the realization proceeds and thus improve creditor satisfaction. At the same time, minimum guidelines are intended to help prevent non-transparent direct sales, conflicts of interest, or abusive setups. For international investors, a clear process increases planning certainty, especially when parties from multiple jurisdictions are involved.
Duties of Management in Crisis
Duties of management in corporate crises are also regulated differently across the union. In some member states, there are strict filing obligations and liability sanctions, while other systems rely more on flexible restructuring incentives. The directive proposal aims to establish minimum requirements for crisis management: Managers should take appropriate damage mitigation measures in the event of impending insolvency, such as obtaining timely information, seeking qualified advice, and examining restructuring or insolvency options.
This does not create a completely uniform liability regime. However, the minimum standards are intended to reduce false incentives and strengthen creditor interests. In practice, this means a greater emphasis on documented, early reactions to crisis signals (e.g., liquidity bottlenecks, covenant breaches, payment interruptions).
Supplementary Legal Note: National core provisions, particularly regarding filing obligations, payment prohibition rules, management liability, and criminal risks (e.g., in case of delayed insolvency, depending on national design) remain regularly unaffected. Companies should therefore continue to examine country-specific obligations and deadlines.
The Pre-Pack Procedure (Art. 19–35): Accelerated Transferring Reorganization
The introduction of a union-wide structured pre-pack procedure is of high practical relevance. This refers to a prepared company sale that is organized before the formal opening of insolvency proceedings and implemented immediately after the proceedings are opened. The goal is to secure the going-concern value and avoid value losses that can occur due to delays, reputational damage, customer attrition, or disruptions in supply chains.
The draft directive provides for a two-stage model:
- Preparation Phase: Upon request, a court-appointed procedural administrator can be deployed to oversee the structured sales process. The focus is on a competitive, transparent bidding process and the documentation of market address, selection criteria, and decision bases.
- Phase after Opening Proceedings: After opening, the responsible court examines whether the legal requirements have been met. If the examination is positive, the prepared sale can be approved and executed quickly.
For Germany, the basic idea is not entirely new: transfer reorganizations can already be prepared and implemented today within the framework of established insolvency instruments, sometimes also using pre-insolvency or insolvency-near procedures. However, a union legal codification would, for the first time, provide binding minimum structures and could trigger adaptation needs in the insolvency code. Practically decisive is a balanced relationship between speed and creditor protection—especially with regard to transparency, equal treatment, conflicts of interest, and judicial control.
Supplementary Note on Legal Classification: In pre-pack structures, labor, corporate, and antitrust legal issues regularly also play a role (e.g., business transfer, consent requirements, transaction structure, approvals). Insolvency acceleration does not replace these checks, but can compress them time-wise.
More Predictability in Cross-Border Matters
EU harmonization will not completely standardize the insolvency law of member states. However, it specifically targets internal market-relevant issues: insolvency contestation, management duties in crisis, realization of assets, and the structured pre-pack procedure. For companies, investors, and advisors, this could mean more predictability in cross-border engagements in the medium term – while national peculiarities continue to exist.
Note: This article serves for general information and does not replace individual consultation. The legal situation may change through further legislative processes and national implementation.
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