European debt recovery tool threatens UK business rescue

The European Account Preservation Order (EAPO) is set to give courts anywhere in the EU the power to freeze funds in UK businesses’ banks accounts without warning.  The new measure comes without the protections crucial to similar procedures in English law.  

R3 President Frances Coulson comments:

“The new measure would drive a coach and horses through attempts to rescue businesses formally or informally. 

"Cash flow is critical during delicate rescue work.  Removing access to substantial funds without notice gives a single creditor the right to jeopardise hopes of business preservation, harming creditors as a whole.”  

Though intended to help creditors protect assets from concealment or removal by directors, the EAPO’s loose drafting enables the measure to be granted for a range of reasons unrelated to a serious risk to assets. 

As such, they risk being routinely granted in cross-border debt recovery cases.    

Coulson continues:

“The UK is seen as an international leader in business rescue, benefitting creditors who usually receive higher returns in rescue than terminal procedures.

"If EAPOs are supposed to protect assets from dodgy directors, the new regulation should reflect this objective.  As they stand, the proposals are dangerous and draconian.”

The UK Government now must decide whether to opt out of the plans, which are moving apace.