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England and Wales: Europe’s Top Forum Shopping

Destination for Bankruptcy

» Posted on: 3 May 2011

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The Enterprise Act 2002 brought in many useful reforms to streamline the insolvency process. The idea behind the major reform in bankruptcy legislation was to reduce the stigma associated with bankruptcy and present a more straightforward solution for insolvent individuals who could be categorised as honest bankrupts with the process making life more difficult for dishonest bankrupts. One of the unintended side effects of streamlining the procedure was to award the bankruptcy jurisdiction in England and Wales first prize in a beauty contest between Europe’s varying insolvency processes.

Currently in England and Wales the automatic discharge period is 12 months and it is possible for a bankrupt individual to be discharged from bankruptcy within one month, assuming that creditors do not object. By contrast, a person made bankrupt in Ireland will never be discharged unless able to show after 12 years that creditors have been paid in full. In Germany bankrupts can remain undischarged for 9 years. Reviewing every single one of the Member States’ insolvency jurisdictions would take more space than this article allows, but suffice it to say that nowhere in Europe is the bankruptcy process more lenient than in England and Wales.

This has led to a number of bankruptcy ‘tourists’ infiltrating the system by transferring their centre of main interests from their home Member State to England or Wales. Once they have relocated, they can present their own petition and take advantage of the relatively light regulation of the bankruptcy law in this jurisdiction. One high profile example is Cork based developer John Fleming whose Fleming Group incurred around €1bn worth of debt before Mr Fleming relocated to England and petitioned for his own bankruptcy in Southend County Court.

Taylors’ Business Recovery and Insolvency Department has significant recent experience of dealing with cases involving foreign national bankrupts. We appreciate the intricacies of such cases and the difficulties that can arise in trying to locate and realise assets situated in another Member State.

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