On 21 April 2026, new EU rules on insolvency entered into force. By 22 January 2029, every EU Member State must update its national insolvency law accordingly. Here is what businesses, creditors, directors and other stakeholders need to know.
Why Did Europe Need This?
EU insolvency law already rests on two pillars. The Recast Insolvency Regulation (EU) 2015/848 establishes common rules on jurisdiction, applicable law, and the cross-border recognition of insolvency proceedings. The Preventive Restructuring Directive (EU) 2019/1023 took a further step, requiring Member States, to introduce pre-insolvency restructuring frameworks and second-chance discharge procedures. Neither instrument, however, sought to harmonise the substance of national insolvency law — the rules that determine what happens inside a proceeding once it is opened.
That gap is what the new Directive (EU) 2026/799 addresses. It targets certain areas of material insolvency law, such as the rules on clawing back assets, tracing hidden funds, rescuing businesses as going concerns, and holding directors to account. Despite previous EU initiatives, applicable regimes remained highly divided, particularly in areas such as avoidance actions, asset recovery and procedural tools. These divergences mean increased legal uncertainty for cross-border investors, reduced predictability of recovery outcomes, and higher transaction and enforcement costs.
By aligning selected substantive rules, the Directive seeks to improve recovery values, shorten proceedings and lower the cost of capital for companies seeking finance across borders. It is the third — and most substantive — piece of this evolving EU framework, and it sits at the heart of the EU’s Capital Markets Union agenda.
The 5 Target Areas
1. Avoidance Actions — Clawing Back Unfair Transfers
When a company slides into insolvency, assets can disappear beforehand: rushed payments to favoured creditors, below-market sales, or last-minute security arrangements. The Directive sets minimum EU-wide standards to reverse such transactions. Three categories of avoidance action are defined:
- Preferential transactions — payments or security arrangements that benefit one or more creditors to the detriment of the general body: challengeable if made within 3 months before the insolvency filing
- Transactions for no or manifestly inadequate consideration — below-market transfers or gifts: challengeable within 12 months before filing
- Transactions with intent to prejudice creditors — deliberate asset stripping: challengeable within 2 years before filing, provided the other party knew of the intent (knowledge is rebuttably presumed for closely related parties)
Important carve-outs protect ordinary business: transactions at equivalent value in the ordinary course, and protected financial-market operations such as close-out netting, are excluded. The look-back periods are minimum standards — Member States with stricter existing rules may keep them.
| What this means for creditors: Greater confidence that the insolvency estate will not be stripped before proceedings begin — and a more level playing field for all creditors. |
2. Asset Tracing — Following the Money Across the EU
Locating assets of an insolvent company spread across multiple EU countries has historically been slow and expensive. The Directive introduces a two-tier access system through the EU’s Bank Account Register Interconnection System (BARIS):
- Bank account information: designated courts or administrative authorities may access national and cross-border bank account registers at the request of an insolvency practitioner. Member States may go further and allow practitioners direct access.
- Beneficial ownership information: insolvency practitioners must be granted timely direct access through interconnected national registers.
BARIS-related obligations have their own deadline: Member States must comply by 10 July 2029 at the latest, reflecting the technical build-out required.
| What this means for creditors: Faster, more effective identification of assets across borders — increasing what is ultimately available for distribution. |
3. Pre-Pack Proceedings — Saving Businesses, Not Just Closing Them
A pre-pack allows the sale of an insolvent business to be negotiated before formal insolvency proceedings begin, then executed quickly once they open. The Directive introduces a harmonised EU-wide pre-pack framework for the first time — with 19 articles making it the most detailed of the five pillars.
Preparation phase
An independent monitor is appointed, free from conflicts of interest. The monitor runs a competitive, transparent and fair sale process. A stay of enforcement actions (moratorium) is available during this phase, comparable to the moratorium under the 2019 Preventive Restructuring Directive.
Liquidation phase
Formal insolvency proceedings open. A court or competent authority authorises a sale to an acquirer proposed by the monitor, selected in a public auction, or approved by creditors. The monitor’s preferred bid can serve as a “stalking horse” bid — setting a floor price in the auction, with proportionate break-up fees permitted if the stalking-horse bidder is outbid. Essential executory contracts (e.g. key supplier agreements) transfer to the acquirer without counterparty consent, subject to safeguards. The buyer acquires the business free and clear of the seller’s debts and liabilities.
⚠️ A key practical warning for buyers and lenders: The “closely related party” definition in the pre-pack context is materially wider than for avoidance actions — it extends to any person with preferential access to non-public information about the debtor’s affairs. Creditor bidders who participate in an ad hoc lender committee and receive non-public information may fall within this definition, triggering enhanced requirements including a mandatory going concern valuation. Cross-border pre-packs, moreover, are not a seamless one-stop solution — their practical utility is currently greatest in purely domestic transactions.
| What this means for businesses: Viable operations can be preserved as going concerns — protecting jobs, client relationships and business value — rather than being broken up piecemeal. |
4. Directors’ Duty to File — No More Waiting Too Long
Directors of insolvent companies face a mandatory duty to request the opening of insolvency proceedings within three months of becoming aware — or when they ought reasonably to have become aware — of the company’s insolvency. Failure to comply triggers personal liability for the damage caused to creditors as a result of the delay.
The duty is not absolute. It may be suspended if directors take concrete measures — such as pursuing a restructuring — that are reasonably likely to produce an equivalent or better outcome for creditors. Directors who exercise this option must be able to document their reasoning.
Note that some Member States already impose stricter rules.
| What this means for directors: Acting early is no longer optional. Documenting the decision-making process during periods of financial difficulty becomes essential. |
5. Creditors’ Committees and Transparency — A Real Voice for Creditors
Creditors’ committees must be established at the request of creditors, with members fairly reflecting the various creditor groups. Committee members have the right to supervise the insolvency administrator and participate in key decisions during proceedings.
Alongside this, each Member State must publish a clear, standardised factsheet on its national insolvency rules on the EU’s e-Justice portal — so that any creditor or investor can understand the rules that apply in another country without needing expensive local legal advice just to find the basics.
| What this means for creditors: Structured participation rights in proceedings, plus accessible, reliable information about national insolvency rules across all 27 Member States. |
The Bigger Picture: Why This Matters for the Economy
More predictable insolvency outcomes are not just a legal technicality — they have a direct economic effect:
- Lower risk premiums → lenders can price credit more accurately → businesses access financing more easily
- More cross-border investment → investors and distressed debt funds are more willing to deploy capital across EU borders when they can predict insolvency outcomes
- Better restructuring results → viable businesses are more likely to be rescued, preserving employment and economic activity
- Stronger Capital Markets Union → the Directive is a core building block of the EU’s wider financial integration agenda, elevating foundational standards for insolvency, enhancing predictability, recovery and cross-border collaboration
Challenges in Lithuania and Central & Eastern Europe
The Directive’s ambitions are clear. But transposing it faithfully into national law is a significant legislative and institutional task — and experience with the 2019 Preventive Restructuring Directive shows that CEE Member States face specific headwinds.
Pre-pack proceedings are largely new. Most CEE jurisdictions, including Lithuania, do not have an established pre-pack framework. Building one requires drafting a two-phase procedure, establishing the monitor function, integrating employment law protections, creating court oversight mechanisms, and addressing the “closely related party” safeguards.
Creditors’ committees are underdeveloped. Formal creditor committees with defined rights and duties — including the right to supervise the insolvency administrator and participate in key decisions — are not a standard feature of most CEE insolvency systems.
Capacity constraints are real. During the transposition of the 2019 Directive, several CEE Member States lacked sufficient legislative capacity and insolvency law expertise at ministry level. Latvia and Slovakia required external EU support. The 2026 Directive is more technically complex in several respects.
BARIS integration requires infrastructure investment. Connecting national bank account registers to the EU-wide system is not a simple task — and the Directive’s BARIS obligations have their own deadline of 10 July 2029.
The “closely related party” rules require careful implementation. The definition is wider in the pre-pack context than for avoidance actions, and needs to be transposed with precision. Getting it wrong creates legal uncertainty that could undermine the attractiveness of the new pre-pack tool entirely.
What Should You Do Now?
The Directive does not yet apply — national law still governs. But the direction is set, and some actions are relevant right now.
If you are a director or board member
- Revisit your financial monitoring. The three-month filing window starts when a director knew or ought reasonably to have known about insolvency. Review what financial indicators your board receives — and how quickly warning signs are escalated. Gaps in monitoring are gaps in your legal defence.
- Document your decision-making. If your company is in financial difficulty and pursuing a restructuring instead of filing, keep a clear written record showing that the measures taken are reasonably likely to produce an equivalent or better outcome for creditors. This documentation is your primary defence against personal liability.
- Check your D&O insurance. The incoming directors’ liability rules will affect what claims need to be covered. Review your policy before transposition changes the risk landscape.
- Do not wait for your country to implement legislation. Courts and creditors will increasingly expect directors to have acted in line with the Directive’s underlying logic, even before the formal national deadline.
If you are a lender, bank or bondholder
- Review your loan documentation. Credit agreements and security arrangements designed under your current national framework may not reflect the incoming rules — particularly around avoidance look-back periods and security perfected during the suspect period. Flag agreements up for renewal in the next 12–24 months.
- Assess your preference risk. Any payment or security received from a distressed counterparty in the three months before its insolvency filing could be challenged. If a borrower appears distressed, take advice before accepting large prepayments or additional collateral.
- Prepare to use creditors’ committees actively. Once transposed, you will have a formal right to request a creditors’ committee. Start thinking now about how your organisation would use that right in significant exposures.
If you are a supplier or trade creditor
- Know your look-back exposure. Payments received from an insolvent customer within the three-months preference window could be reversed. If a customer shows signs of distress, consider the timing of any payments carefully and seek advice before accepting unusual payment arrangements.
- Monitor the EU e-Justice portal. Once Member States publish their insolvency factsheets, you can check the rules in any EU country where you have significant receivables — without needing expensive local legal advice just to understand the basics.
- Engage actively in proceedings. The Directive strengthens creditors’ participation rights. Passive creditors who do not engage tend to recover less.
If you are an investor or buyer of distressed assets
- Understand the pre-pack opportunity — and its limits. An EU-wide pre-pack framework creates more structured deal opportunities in distressed situations. But the cross-border pre-pack is not a seamless one-stop solution — its practical utility is currently greatest in purely domestic transactions.
- Watch the “closely related party” rules. If you receive non-public information about a debtor as part of a lender group or ad hoc committee, you may fall within the wider “closely related party” definition for pre-pack purposes, triggering a mandatory going concern valuation. Take advice before engaging in any pre-pack process.
- Factor avoidance rules into deal structuring. When acquiring distressed assets, map the avoidance look-back periods in the relevant jurisdictions — and how they will change post-transposition. Transactions structured safely today may carry avoidance risk under the new rules.
- Track the CEE transposition process. How Lithuania, Poland, Romania and other CEE countries implement the Directive — particularly the pre-pack and creditors’ committee provisions — will create material differences in deal structures across the region, even within a harmonised minimum framework.
| Questions about the EU Insolvency Harmonisation Directive? LYNX’s insolvency and restructuring team advises stakeholders like businesses, directors, lenders, creditors, investors and insolvency practitioners. We are closely monitoring the transposition process in Central Eastern Europe and the Baltic States, and we can help you assess your exposure and opportunities under the new framework. Contact us → Insolvency and Restructuring – LYNX |
Author: Frank Heemann, Partner, LYNX (Lithuania)
Source: Directive (EU) 2026/799 of the European Parliament and of the Council of 30 March 2026 harmonising certain aspects of insolvency law (OJ L, 1.4.2026)
