Brussels, 24th September 2025

On June 12, 2025, the Council of the European Union (the Council) announced that it has agreed its general approach on a directive harmonising certain aspects of insolvency law. This agreement enables the Council to enter negotiations with the European Parliament, marking the next stage in the legislative process.

Background

The Commission proposed the directive in December 2022 as part of the Capital Markets Union Action Plan. Divergent insolvency rules across Member States have long been seen as a barrier to cross-border investment, adding costs and uncertainty for businesses and creditors. After partial agreement in December 2024, the Council finalised its overall position in May/June 2025.

Key features

• Pre-pack sales: All Member States must introduce a mechanism enabling sales to be prepared before insolvency and executed immediately once proceedings open. Essential contracts, such as executory contracts that keep the company running, may transfer automatically, with safeguards that protect contractual freedom.
• Creditors’ committees: Common rules will govern their composition, directors´ rights, duties and liability. Though committees may be required only in large enterprise cases to avoid unnecessary costs for smaller ones that do not have the resources large ones have.
• Safeguards for the estate: Minimum rules will safeguard the insolvency estate by enabling harmful transactions carried out before insolvency to be annulled. Practitioners will also gain access to bank and ownership registers to identify and recover assets.
• Directors’ obligations: Company directors will be required to file for insolvency within a defined timeframe, and Member States must provide standardised factsheets in several languages explaining their national insolvency frameworks.
• Microenterprises: Microenterprises will be able to use simplified and digital winding-up procedures, designed to be faster and cheaper, with the possibility of debt discharge.

Takeaways

The directive represents a significant step towards harmonising national insolvency regimes. It sets EU-wide minimum standards while leaving room for Member States to go further. Once adopted, governments will have three years, with an optional one-year extension, to transpose the rules. The reform is seen as a cornerstone of the Capital Markets Union, intended to reduce divergences, safeguard value in insolvency, and make the EU more attractive for investment.