The EU Insolvency Harmonisation Directive

From proposal to adopted insolvency harmonisation directive

The insolvency harmonisation directive is the EU's first attempt to align core parts of national corporate insolvency law, rather than only pre-insolvency restructuring. The Commission proposed it in December 2022 (COM(2022) 702) as part of the Capital Markets Union, arguing that diverging insolvency rules deter cross-border investment because investors cannot predict recovery values. After a political agreement between the European Parliament and the Council in November 2025 (Commission announcement), the Parliament adopted its first-reading position on 10 March 2026 and the Council approved it on 30 March 2026 (procedure 2022/0408/COD).

The result is Directive (EU) 2026/799 harmonising certain aspects of insolvency law, published in the Official Journal on 1 April 2026 (Directive (EU) 2026/799). Member States must transpose it by 22 January 2029. The final text is narrower than the Commission's proposal in some respects and leaves many details to national law, but it will require changes to the German Insolvency Code (Insolvenzordnung, InsO), most visibly through the introduction of pre-pack proceedings.

Scope and structure of the directive

The directive lays down common rules on six topics: avoidance actions, tracing of assets belonging to insolvency estates, pre-pack proceedings, the duty of directors to request the opening of insolvency proceedings, creditors' committees and key information factsheets on national insolvency law (Article 1(1)). The rules on avoidance actions, asset tracing and creditors' committees apply to collective insolvency proceedings within the meaning of the European Insolvency Regulation, but not to preventive restructuring procedures such as the German StaRUG. Insurers, credit institutions and certain other financial entities are excluded.

The insolvency harmonisation directive is largely an instrument of minimum harmonisation. Member States may maintain or adopt laws giving greater protection to the general body of creditors on avoidance actions and directors' filing duties, greater creditor participation in committees and broader access to information for practitioners (Article 4). For Germany, which already has strict avoidance rules and short filing deadlines, this means that many existing rules can stay in place.

Avoidance actions

Title II requires Member States to ensure that three categories of detrimental legal acts perfected before the opening of insolvency proceedings are void, voidable or unenforceable. Preferences, meaning acts satisfying or securing a creditor, are covered if perfected within three months before the request while the debtor was unable to pay its debts, or after the request. Where a due claim was satisfied or secured as owed, the creditor must have known of the illiquidity or the request, with a rebuttable presumption of knowledge for closely related parties (Article 7).

Acts for no or manifestly inadequate consideration are covered within 12 months before the request (Article 8), and acts intentionally detrimental to creditors within two years, if the other party knew of the intent (Article 9).

The directive also harmonises consequences. The beneficiary must return the benefit or pay its monetary equivalent, the claim can be assigned to a creditor or third party, set-off against the return obligation is excluded, and the limitation period for avoidance claims may not exceed three years from the opening of proceedings (Article 10).

Cash transactions for fair consideration, netting arrangements and collateral protected under the Financial Collateral Directive are exempt from the preference rules. German law largely meets or exceeds these standards; see our insight on insolvency contestation under § 133 InsO. Title II will apply only to legal acts perfected after the national transposition rules enter into force (Article 55(2)).

Tracing assets of the insolvency estate

To help insolvency practitioners find assets, including assets moved abroad, Title III requires Member States to designate courts or authorities that can search national bank account registers and, through the interconnection of those registers, bank account information in other Member States on a practitioner's request. Practitioners must also have timely access to beneficial ownership information in the interconnected central registers and direct access to national registers and databases listed in the Annex, such as land and company registers, on the same terms as domestic practitioners.

Practitioners appointed in another Member State must not face less favourable conditions when bringing proceedings to claim assets (Article 20). For German administrators pursuing assets in other EU states, and for foreign practitioners seeking assets in Germany, these rules should make investigations quicker.

Pre-pack proceedings

The most significant innovation for Germany is the pre-pack. The insolvency harmonisation directive requires Member States to make pre-pack proceedings available at least for debtors likely to become insolvent (Article 21). In a confidential preparation phase, a court-appointed monitor who is independent of the debtor oversees a competitive, transparent and fair sale process meeting market standards and recommends the best bidder (Articles 23 and 24). The debtor remains wholly or at least partially in control of its business and can benefit from a stay of individual enforcement actions.

In the subsequent liquidation phase, which is carried out within ordinary insolvency proceedings, the court authorises the sale to the recommended acquirer if the monitor confirms that the process met the requirements, or after a public auction, or with creditor approval (Article 29). The acquirer takes over the executory contracts necessary to continue the business without counterparty consent, unless it is a competitor of the counterparty (Article 30), and acquires the business free of debts and liabilities, subject to employment law obligations (Article 31).

Parties closely related to the debtor may bid if they disclose the relationship and other bidders have sufficient time (Article 35), and secured creditors may credit bid only up to the market value of the business (Article 37). These rules go well beyond the current German practice of asset sales by administrators described in our insight on buying assets from an insolvency administrator.

Interim financing, employees and competition law in pre-packs

Several further rules are designed to make pre-packs workable. Where interim financing is needed during the process, it must not be declared void, voidable or unenforceable, and its providers must not incur liability merely because the financing is detrimental to the general body of creditors (Article 36). Member States may give new or interim financing priority in subsequent insolvency proceedings, allow security over the sale proceeds and permit bidders who provide interim financing to offset it against the purchase price. No pre-emption rights may be granted to bidders, apart from statutory pre-emption rights unaffected by insolvency (Article 37).

Employee rights are expressly preserved. The directive is without prejudice to EU and national law on collective redundancies, transfers of undertakings and the protection of employees in the employer's insolvency (Article 5). For the purposes of the Transfer of Undertakings Directive, the liquidation phase is treated as bankruptcy proceedings instituted with a view to liquidation, which allows Member States to apply the exceptions available for such proceedings (Article 22(2)).

Where a bid carries an appreciable risk of delay from merger control proceedings, the monitor or debtor must seek alternative bids, and such a bid can be disregarded if it is not the only bid and the delay would damage the business (Article 39). Member States may also include the preservation of employment among the criteria for selecting the best bid (Article 33).

Directors' duties, creditors' committees and factsheets

Title V requires directors of an insolvent company to request the opening of insolvency proceedings within three months of becoming aware, or when they should reasonably have become aware, of the insolvency, and to be civilly liable for damage caused to creditors by a failure to do so (Articles 40 and 42). Member States may allow the duty to be suspended where directors take measures that give creditors equivalent protection. German law, with its three- and six-week deadlines in § 15a InsO and the liability rules in § 15b InsO, is stricter and can remain unchanged; see our insight on duties of directors in a crisis.

Title VI requires a creditors' committee to be established after the opening of proceedings if the general meeting of creditors decides so, with a composition that fairly reflects the creditors' interests, eligibility of workers' representatives and cross-border creditors, and rules on removal, conflicts of interest, information rights and liability insurance borne by the estate. The German rules on committees of creditors already go further in several respects. Finally, by 22 July 2029, each Member State must publish a key information factsheet setting out the conditions for opening proceedings, the lodging of claims and the ranking of claims (Article 51).

What the insolvency harmonisation directive means for Germany

Germany must implement the insolvency harmonisation directive by 22 January 2029, with some bank-register provisions due by 10 July 2029 at the latest. The main legislative task will be designing a German pre-pack procedure that fits with the existing insolvency proceedings, self-administration and protective shield proceedings.

Smaller changes may be needed to the avoidance rules, for example on the assignability of avoidance claims and the exclusion of set-off, and to the rules on asset tracing and creditors' committees. Until the German implementing act is published, the details remain open, and the current InsO rules continue to apply. Companies and investors should nonetheless review financing, security and group structures now, because transactions perfected after the German rules take effect will be assessed under the new avoidance standards. This page is general information, not legal advice.

How TRW & Co helps

We advise investors, lenders, distressed companies and insolvency practitioners on the effects of the insolvency harmonisation directive and its German transposition. We assess how the new pre-pack procedure can be used for acquisitions and restructurings, review the impact of the harmonised avoidance rules on financing and security structures, and advise on cross-border asset tracing and creditor participation. Our restructuring and insolvency team follows the legislative process closely. To discuss a matter, please contact us.