Chapter 6 Powers of Insolvency Practitioners

• Jurisdiction: United States

6. Powers of Insolvency Practitioners

The powers of insolvency practitioners depend on the character of the insolvency proceedings in which they have been appointed — i.e., main or secondary proceedings. Article 21(2) EIR Recast provides for the wide scope of powers conferred upon "main" insolvency practitioners, while Article 21(2) lists some of the more limited powers of "secondary" insolvency practitioners.

In principle, an insolvency practitioner appointed by a court that has jurisdiction pursuant to Article 3(1) EIR Recast (main insolvency proceedings) has the authority to exercise all the powers conferred on him/her by the lex concursus in other Member States (Article 21(1) EIR Recast). This comes from universality and the extension model, embraced by the EIR Recast. The lex concursus will define the content and nature of such powers and their legal effects. It is also decisive with respect to rights, duties and procedural issues of qualification, appointment and removal of insolvency practitioners. For example, in Dutch main insolvency proceedings, the appointed insolvency practitioner will be subject to supervision by the supervisory judge (rechter-commissaris) when taking steps in other Member States.

Notably, while the wording of Article 21 EIR Recast is largely similar to Article 18 EIR 2000, the latter refers only to the powers of the liquidator. As discussed above, the scope of the EIR Recast is rather broad and covers various types of public collective proceedings, including those having the purpose of rescuing or reorg anizing the ailing business (Article 1(1) EIR Recast). The adoption of a more general and neutral term "insolvency practitioner" against a more specific "liquidator" is explained by this extended scope. According to Article 2(5) EIR Recast, "insolvency practitioner" means any person or body whose function, including on an interim basis, is to:

1. verify and admit claims submitted in insolvency proceedings;
2. represent the collective interests of the creditors;
3. administer, either in full or in part, assets of which the debtor has been divested;
4. liquidate these assets; or
5. supervise the administration of the debtor's affairs.

The practical effect of this clarification is somewhat limited due to the fact that the EIR Recast lists all "insolvency practitioners" in Annex B. If not mentioned in Annex B while satisfying the definition of Article 2(5), the insolvency practitioner shall not be covered by the EIR Recast...