1. Harmonization of Pre-packs
The European Union seeks to harmonize European Insolvency Law. It has proposed a Directive for the harmonisation of certain aspects of insolvency law across Member States, including pre-packs.[1] The Commission’s ambition is to have this Proposal for a European pre-pack adopted as a Directive already by January 2026 (“the Proposal”).[2]
A pre-pack is a prepared insolvency procedure in which the sale of the business to a new owner is arranged prior to the opening of insolvency proceedings. Normally, this sale process takes place in a closed bidding environment and even in secrecy, in order not to disrupt the business and to ensure value maximization for creditors. Once the company is declared insolvent, the first thing that will typically happen is that the court appointed trustee will transfer the business to the highest bidder coming out of the sale process.[3]
Pre-packs have a tainted reputation, at least in jurisdictions where they are being used.[4] In part this is due to the highly legal nature of a pre-pack which overrides what people see in the street. In case of a prepack, a company as legal entity is declared insolvent by the court, but the business uninterruptedly continues to operate with a new owner. Creditors can no longer pursue their claim against the business (which is transferred to the new owner) and will have to file their claim with the trustee of the bankrupt entity. As long as pre-packs are conducted with outside parties, there is however little room for abuse. The procedure would then simply seek to ensure that the business is sold to the highest bidder in the interest of the joint creditors.[5] The prevention of damage caused by disruption by ensuring a confidential preparation only maximizes value. If this is what the pre-pack is all about, there is little cause for the tainted reputation.
However, in case a pre-pack is conducted with the old owners, shareholders and/or directors (“related party/parties”) pre-packs are very much prone to abuse and opportunistic behaviour. In such a related party transaction, typically such party will set up a new company and acquire all the assets out of the insolvency procedure. In such cases, not only the business will continue operating, but also the ultimate beneficial owner will be the same prior to and after conducting a pre-pack. Such a procedure will in the end not primarily be aimed at the interest of the joint creditors, [6] but will rather be aimed at ensuring that the related party can continue operating the business while getting rid of excess debt and/or personnel. Related party acquisitions can be carefully planned and arranged with legal advice to ensure that the related party will actually be the acquiring party. If pre-packs can also be conducted with related parties, the tainted reputation is fully understandable. The confidential pre-pack phase in fact only ensures the avoidance of competition of third parties. Many Member States quite understandably have rules against pre-packs with related parties.
The European Union now wants to harmonize insolvency law in different fields and has also included pre-packs in the Proposal. The EU wants to force all Member States to allow for pre-packs also with related parties, thereby opening the door for different ways of abuse and opportunism.
We will first discuss how a pre-pack procedure can be used by related parties to further their own interests rather than those of creditors (§2). Subsequently, we will discuss different measures taken by Member States to restrict pre-packs with related parties (§ 3). We will then discuss the Proposal and the illogical and surprising choice to force all Member States to allow for pre-packs with related parties. We will also make suggestions for necessary yet simple and effective changes to the Proposal (§ 4 and § 5).
2. Pre-packs with related parties; not for creditors, but for related parties
Advocates of the pre-pack present it as a tool to protect creditors. The pre-pack would seek to ensure that the business is sold to the highest bidder without disruption and loss of value.[7] However, in case related parties acquire the business, this logic creates at least three problems.
The first problem is related to the nature of pre-packs, namely the closed bidding environment. In order to keep suppliers supplying, customers buying and workers working, it merits to have a closed bidding procedure. This, however, has the risk of not reaching all possible buyers. A public bankruptcy sale normally seeks to reach as many buyers as possible, but this has the negative effects of disruption of the business.
The second problem arises if related parties (such as the previous owner) are also interested in acquiring the business. Related parties have the insurmountable advantage of inside information: they know the business, the clients and the risks and are thus able to make the best offer in the short period of available time, but are also able to restrict this offer to the bare minimum. This was evidenced by the pre-pack that gave rise to the Estro-case.[8]
The third and most difficult problem is that, in case of pre-packs with related parties, such acquisitions can be carefully planned and arranged with legal advice to ensure that the shareholder will be the acquiring party. One popular way to do so, is to take out key assets, such as IP rights or real estate. This is referred to as asset partitioning. Asset partitioning is not necessarily aimed at creating a better position in case of insolvency. It can also be the result of careful fiscal or estate planning. Whatever the motive has been for asset partitioning, the result will be that it is more difficult or even impossible to transfer a business stand alone, because those essential contracts are controlled by related parties. By and large, the Member States of the European Union have not yet come to terms with these practices.[9]
3. The current, sceptical European landscape as to related party pre-packs
The pre-pack is not yet a phenomenon that is facilitated by all Member States.[10] Already therefore, one would expect the European Union, if it demands Member States to implement a new procedure, to not force implementation of the most contentious version thereof as a pre-pack with related parties. Different Member States that are experimenting with pre-packs, have different rules on pre-packs or other forms of acquisition out of insolvency by related parties.[11] These different rules reveal different strategies, ranging from full out bans, to increased creditors participation and the involvement of outside experts.
French law simply bans acquisition by related parties. French law provides for a prohibition in art. 642-3 Code du Commerce. Art. 642 concerns the sale of a business out of a ‘concilation’ procedure, which can be qualified as a continuation of the business out of insolvency. Art. 642-3 Code du Commerce prohibits direct or indirect acquisition by both directors and shareholders for a period up to five years after the transaction.[12]
Spain provides for a de facto ban on related party acquisitions in case of pre-packs. In case of a related party acquisition, debts transfer along with the business.[13] The rule already applies to shareholders holding 10% or more of the shares.[14]
Germany provides for a procedure referred to a restructuring transfer (übertragende Sanierung). In selecting the acquiror, the court appointed trustee, must take into account the interests of the creditors. Art.162 InsO puts additional hurdles in case a related party as provided in art. 138 InsO wants to acquire the business, by providing that in such a case the meeting of creditors has to consent.[15]
Polish law does allow for a pre-pack[16] and also for pre-packs with related parties. In case of pre-packs with related parties, the law introduces additional requirements and creditors can object. If the acquiror is a related party, the court will appoint an expert to conduct an independent valuation. Polish law provides in art. 56b of the Polish Insolvency Act that the judge will only sanction a pre-pack if the price will not fall below the independent valuation.[17]
The Belgian legislator has recognized the risk of aggressive asset partitioning which would give the related party acquiror an unjust advantage. Belgian law provides that a shareholder may only make a bid if it also makes available for sale any assets it controls, so that an outsider can acquire the entire business.[18] A similar provision can be found in the laws of Luxemburg in art. 58/2 of the relevant Act.[19]
Countries without limitations on related party pre-packs, quickly derail and see the pre-pack develop into a tool where in a very significant part[20] or even the majority of cases the shareholders or other related parties are the ones to acquire the business out of insolvency.[21] In legislating the issue, one should therefore realize that as soon as one opens the door for related party pre-packs, these are likely to form the majority of cases as a result of the problems of abuse of confidentiality, information asymmetry and asset partitioning.
4. EU Proposal for related party pre-packs
The EU has selected the topic of pre-packs as a topic for harmonization. We are sympathetic towards allowing for non-related party pre-packs. We do have serious concerns as to related party acquisitions.
The general rules can be found in article 22 Proposal providing for the appointment of a monitor and article 22a (Principles of the preparation phase), which provides that Member States shall ensure that the sale process is competitive, transparent, fair, and meets market standards.[22]
4.1 Proposed pre-pack with related parties: bad for creditors
The key provision dealing with related party transaction is to be found in art. 32 Proposal. Art. 32 does two things. The first and most important element is that art. 32 Proposal forces Member States to allow for related party acquisitions. The second element is that it tries to place some safeguards, some mandatory and some optional. The Proposal reads as follows:
Article 32: Parties closely related to the debtor in the sale process:
1. Member States shall ensure that parties closely related to the debtor are eligible to acquire the debtor’s business or part thereof, provided that all of the following conditions are met:
(a) the parties closely related to the debtor disclose in the bid to the monitor their relation to the debtor;
(b) other parties than those referred in point (a) to the sale process receive adequate information on the existence of parties closely related to the debtor and their relation to the latter;
(ba) in the case under article 26(1), point (a), a valuation of the business as a going concern is carried out for the purposes of the statement of the monitor referred to in Article 22a(2), point (c).
(d) parties not closely related to the debtor are granted sufficient time to make an offer.
Member States may provide that, where it is proven that a party closely related to the debtor failed to comply with the conditions under the first subparagraph, point (a), the court or competent authority revokes the benefits referred to in Article 28(1).
2. Where the offer made by a party closely related to the debtor is considered as the best offer, Member States may introduce additional safeguards for the authorisation and execution of the sale of the debtor’s business or part thereof.
This article foremost forces Member States to allow for related party pre-packs. In case of related party pre-packs the Proposal requires an adequate valuation. The Proposal then opens the possibility that additional safeguards are introduced including a revocation of the loss of debts and liabilities, meaning that liabilities do transfer. There are also additional safeguards suggested.[23] According to Preamble 26 the process should include an invitation to potentially interested parties disclosing ’the same information’ to potential buyers. And finally, Preamble 28d demands that ‘the eligibility of closely related parties to bid should, nevertheless, be balanced with enhanced scrutiny of the bidding process’.[24]
All the suggested safeguards in the end will not really create a level playing field for related parties and external parties. These measures cannot adequately take away the information advantage build up over years and can also not remedy that many businesses cannot easily be sold stand alone. Of course, the court could theoretically simply deny sanctioning a pre-pack in case the court believes an undue advantage for a related party remains.[25] Here, however, the judge is put in a position that he has to choose the lesser of two evils: i) sanctioning a dubious pre-pack or ii) being strict and thereby denying the sanctioning of the pre-pack which will most likely make the creditors worse off compared with the dubious pre-pack. We quote here a Dutch Supervisory Judge’s vision on these theoretical possibilities contained in a previous Dutch bill on pre-packs:
“Although it is theoretically correct that the ordinary creditors could, as stated in the explanatory memorandum, request the court not to sanction the pre-pack, this theoretical possibility has no practical relevance. The goal of the pre-pack is to facilitate a continuation of the business as quickly as possible and the pre-pack will be sanctioned on the day of the opening of the insolvency procedure. At that time, there is not even yet a formal public proclamation of the opening of the insolvency procedure and creditors have not been notified. The request filed by creditors on the basis of article 69 Bankruptcy Act, will simply be too little too late (like mustard after the meal). It very much remains to be seen whether any potential benefit to be gained by the ordinary creditors (by contesting the pre-pack, added authors) will outweigh the loss of their position in case of a pre-pack in case the company enters a normal liquidation procedure.”[26]
Related party acquisitions are and will remain very much prone to abusive practices. The best way to prevent this, is to simply ban related party acquisitions.[27] In the Proposal we do not see adequate checks against aggressive asset partitioning nor sufficient safeguards that the old shareholder truly is willing to let go of the business.[28] The safeguards that are suggested are not mandatory and do not really solve the three problems that we have identified. In case of secured shareholder loans, the Proposal also seems to want to allow for credit bids.[29]
We see many objections against pre-packs with related parties. On the other hand, we see no compelling case for unrestricted related party pre-pack acquisitions, nor are any clear reasons offered in the Proposal.[30] The Proposal does not make clear in which cases it would even be likely that it is actually the shareholder that will make the highest bid while at the same time the pre-pack procedure would be fair, transparent and competitive.
One should realize that if allowed, the pre-pack will typically not be primarily in the interest of creditors. Even if creditors grudgingly accept by not actively opposing a pre-pack, this does not in any way mean that the pre-pack has been conducted in the interest of creditors. As long as it is possible that the related party can make an abusive offer in which the creditors will receive out of the pre-pack value (slightly) above liquidation value, this is not in the interests of creditors: it is in the interest of the related party.
It is also not clear how the Proposal should be positioned in relation to EU Preventive Restructuring Directive adopted in 2019.[31] The Pre-pack Proposal undermines the working of the Preventive Restructuring Directive which has a more balanced approach. There are significant barriers in the Preventive Restructuring Directive against shareholders retaining value in case of a restructuring procedure where creditors are not paid in full.[32] The pre-pack Proposal circumvents this ‘problem’ for shareholders all together, by allowing for the acquisition by the shareholder of the entire business out of pre-pack, without creditors voting. The new preventive restructuring proceedings provide for a debtor in possession insolvency proceeding which provides sufficient time for the debtor to prepare and present a plan. In the legislative overall framework, this debtor in possession procedure can be supplemented with a pre-pack procedure where also some breathing space is provided in case of a contemplated sale of the business to third parties. In the Pre-pack Proposal, there is no analysis and no argument provided why related parties should be given the possibility to acquire the business in the closed bidding environment of the pre-pack, while they can already make use of preventive debtor in possession procedures. Allowing related party pre-packs only further enlarges the natural advantages of such related parties.
The general justification for the entire harmonisation Proposal also does not convince in as far as related party pre-packs are concerned. The Preamble states that the measures will be adopted to further the free movement of capital in accordance with the principle of subsidiarity and proportionality as set out in Article 5 of the Treaty on European Union.[33] We, however, simply do not see how this case can be made as to forcing Member States to introduce related party pre-packs and leaving open the possibility of an aggressive approach and exploiting the three problems we have identified. Although we are sympathetic to non-related party pre-packs, we already have some difficulty seeing how allowing for such non related pre-packs would really foster the free movement of capital. It might very well be the other way around, that cross border lenders become reluctant to lend cross border if they know parties in foreign jurisdiction can simply continue the business while leaving creditors unpaid. This will be much more the case, if related parties can continue the business after acquiring it out of a controllable pre-pack.
We believe that Member States should retain the freedom to simply ban related party pre-pack acquisitions. The Proposal would be much more in line with existing rules in the different Member States, if it would allow for this freedom and would then set minimum protection to be applied if Member States would opt for related party pre-packs. The beginning of the provision would then provide (suggested change given in capitals):
Article 32 Parties closely related to the debtor in the sale process
Member States MAY ALLOW that parties closely related to the debtor are eligible to acquire the debtor’s business or part thereof, provided that all of the following conditions are met: (…)
Furthermore, the checks and balance contained in article 32 Proposal in case of related party pre-packs should be mandatory and not optional. This is also in line with the Amendment proposed by the European Parliament in July 2025.[34]
4.2 Proposed pre-packs with related parties: really bad for employees
Especially problematic under the Proposal is the position of employee rights.
Under the Transfer of Undertakings and Business Directive employees automatically transfer to the acquirer in the event of a business transfer.[35] Member States may, however, make use of the so called ‘insolvency exception’, allowing Member States to provide that employees do not transfer in case an enterprise is sold out of an insolvency proceeding. Some Member States, such as the Netherlands, have opted for this exception. Others, including Germany, have not. However, even when a Member State has opted out, employees still do transfer when the insolvency proceeding is not genuinely ‘aimed at liquidation’. We understand the case law of the European Court of Justice (CJEU Estro-case and CJEU-Heiploeg case[36]) to mean that in case of a sale to a related party, employees do transfer.[37] This also makes perfect sense, since otherwise, transfers to related parties can easily be orchestrated while getting rid of employees.[38]
An important new feature of the envisioned European pre-pack is to remove this protection at a European level and simply provide at a European level that all pre-packs are aimed at liquidation. See article 20/2 Proposal Harmonisation Directive.[39] This will simply mean that employees can always be fired in case of pre-packs,[40] also if conducted with related parties.[41] Thereby, an important aspect of harmonised European Insolvency Law will be abolished. Europe will therefore be harmonising and strengthening the position of shareholders at the expense of workers.
Apparently the European Parliament also already believes the current commission Proposal goes too far. The European Parliament has put forth an amendment (in bold)
For the purposes of Article 5(1) of Council Directive 2001/23/EC40, the liquidation phase shall be considered to be bankruptcy or insolvency proceedings instituted with a view to the liquidation of the assets of the transferor under the supervision of a competent public authority, provided that the liquidation of the debtor’s business as a going concern satisfies to the greatest extent possible the claims of the creditors.[42]
From the wordings themselves, it is however not clear how this provision should be understood and applied. One could read it as an attempt to codify the case law by the Court of Justice of the European Union in CJEU Estro and Heiploeg. The addition is an almost literal quote from the CJEU Heiploeg case.[43] We would support such an interpretation. The entire article, however, then becomes rather complicated. The Proposal by the Commission clearly wants to reverse the case law by the CJEU yet the amendment by the European Parliament seems to want to codify it.
The better approach would be to recognize that pre-packs are indeed aimed at liquidation of the enterprise, unless the pre-pack is conducted with a related party. The text of art. 20/2 Proposal would become (suggested addition again in capitals to the current Proposal):
For the purposes of Article 5(1) of Council Directive 2001/23/EC16, when it takes place in proceedings which can end in the liquidation of the debtor, the liquidation phase shall be considered to be bankruptcy proceedings or any analogous insolvency proceedings instituted with a view to the liquidation of the assets of the transferor under the supervision of a competent public authority, UNLESS THE PRE-PACK IS CONDUCTED WITH A PARTY CLOSELY RELATED TO THE DEBTOR.[44]
We suggest that, regardless of whether the pre-pack with related parties indeed becomes optional instead of mandatory as we have suggested above, a related party pre-pack can never be considered to be aimed at liquidation of the enterprise. That way we do not put shareholders’ interests in insolvency above workers’ interests. At the same time, the Proposal should ensure that pre-packs with outside parties become more attractive than pre-packs with related parties. This would create a more level playing field. The proper procedure for related parties to follow would then not be the pre-pack procedure, but would be to use the new preventive insolvency procedures with involvement of creditors and submitting a plan to creditors’ vote.
4.3 Process itself: bad for democracy
It is not clear what the background of the current proposal on pre-packs with related parties has been. The pre-pack proposal is thereby both in content and in its genesis, very different from the other main topic for harmonization, being transaction avoidance.[45] The proposal for transaction avoidance has been the product of extensive comparative law analyses and several reports.[46] Very possibly because of this more deliberate approach, the proposal for transaction avoidance is a good fit with the existing legal rules in different Member States and provides for a decent level of protection of creditors. As the Proposal currently stands, this unfortunately cannot be said from the pre-pack proposal. There is no identifiable published underlying comparative legal analysis, nor does the current Proposal fit with the existing legal regimes. It does not provide a decent level of protection of creditors, nor for employees.
Pre-packs have, as said, a tainted reputation. In the Netherlands, this has led to heated debates as whether to formally implement new rules and how to deal with workers’ rights thereunder. After the Dutch labour union FNV has litigated its case all the way up to the CJEU, there is now a legislative proposal in the Netherlands to have all employees transfer along with the business.[47] The Proposal now seems to want to bypass national resistance to related party pre-packs by introducing something which is opposed at national levels via a European Directive.
5. Conclusion and 16 words of recommendations
The EU is rushing to introduce a pre-pack for related parties. The Proposal is a strong departure from what any of the Member States currently has in place. There is no ground and not even an analysis why Member States should introduce pre-packs with related parties. Pre-packs with related parties are typically not conducted for the sake of the creditors, but will be primarily conducted for the sake of the related parties. If the EU wants to explore this option, it should at most be an option for Member States. This suggested change in the Proposal, from its current version of forcing Member States to our suggested version of allowing Member States would provide for a different European insolvency law all together.[48] At the same time it can be achieved very easily by providing the following (suggested change given in capitals).
Article 32 Parties closely related to the debtor in the sale process
Member States MAY ALLOW that parties closely related to the debtor are eligible to acquire the debtor’s business or part thereof, provided that all of the following conditions are met: (…)
Furthermore, the safeguards provided in art. 32 Proposal should be made obligatory by changing “may” in “SHALL” in art. 32.1.d and 32. 2.
As to the position of employees, these currently derive protection in case of pre-packs from the Transfer of Undertakings and Business Directive, most notably if the acquiror is a related party. The Proposal seeks to abolish this protection and reverse the line of cases rendered by the Court of Justice of the European Union in CJEU Estro and CJEU Heiploeg. Hereby, pre-packs with related parties will most likely become a tool to get rid of personal.
The Proposal as to the position of employees in art. 20/2 should become (suggested addition again in capitals to the current Proposal):
For the purposes of Article 5(1) of Council Directive 2001/23/EC16, when it takes place in proceedings which can end in the liquidation of the debtor, the liquidation phase shall be considered to be bankruptcy proceedings or any analogous insolvency proceedings instituted with a view to the liquidation of the assets of the transferor under the supervision of a competent public authority, UNLESS THE PRE-PACK IS CONDUCTED WITH A PARTY CLOSELY RELATED TO THE DEBTOR.
Rolef de Weijs and Flip Schreurs
R.J. de Weijs is professor of Insolvency Law at the University of Amsterdam and attorney at Houthoff Amsterdam. Ph. W. Schreurs is partner at Boels & Zanders, PhD researcher at Radboud University Nijmegen and former chair of Insolad Netherlands. This contribution builds on earlier work of both authors, most notably Ph. W. Schreurs, ‘Terugblikken op en vooruitkijken naar de gelieerde doorstart’, Insolventie in Context, Liber Amicorum Vriesendorp, 2025 and R.J. de Weijs and J.P.H. Zwemmer, European harmonisation of Pre-packs: Initiating a European race to the bottom at the expense of employees – Corporate Finance Lab.
[1] We base our analysis on the Proposal for a Directive harmonising certain aspects of insolvency law, 23 May 2025, 2022/0408 (COD), (https://data.consilium.europa.eu/doc/document/ST-9257-2025-INIT/en/pdf) (hereafter ‘The Proposal’). Amendments have been proposed by the European Parliament on 1 July 2025 (A10-0126/2025). Other topics in the Proposal include transaction avoidance, asset tracing, directors’ duty to file and rules on creditor committees.
[2] See 2025-04-doc1 The European pre-pack is slowly being unpacked – Prof. Dr. Bob Wessels and https://transactions.freshfields.com/post/102kswv/eu-insolvency-law-momentum-builds-as-european-parliament-comments-on-the-draft-d.
[3] The trustee typically is also involved in the confidential pre-pack period. The Proposal refers to this role in the preparation phase as ‘monitor’.
[4] See the executive summary of the Graham Report, with the opening question: “So why have pre-packs managed to gather such a bad name?” See also the enticing title, which even puts the bad before the good: ‘No Evil is Without Good’: A Comparative Analysis of Pre-pack Sales in the UK and the Netherlands, Int. Insolv. Rev. (2018), by A. Kastrinou and S. Vullings. See also G. Gispen, ‘The Pre-Pack is defective and no good for the joint creditors’ (original, ‘De ‘pre-pack’ is ondeugdelijk en niet goed voor de gezamenlijke schuldeisers’, in XL 40 Mr. Mart (M.J.M.) Franken, p. 84), and F. De Leo, [Pre-packs, transl.]: it is not all roses, you know, https://corporatefinancelab.org/2017/05/02/het-stil-faillissement-it-is-not-all-roses-you-know/.
[5] See Preamble 22 and art. 24 Proposal.
[6] See also G. Gispen, ‘De ‘pre-pack’ is ondeugdelijk en niet goed voor de gezamenlijke schuldeisers’, in XL 40 Mr. Mart (M.J.M.) Franken, p. 84. And see also Van Andel (translated), “A bankruptcy procedure is not something which just happens to a party. Often bankruptcy is a deliberate choice: are we going to pay for a restructuring of the creditors and the employees, or should we put the company into bankruptcy and acquire the business and continue in a new legal entity?” W.J. van Andel, ‘Stop de pre-pack’, TvI 2014/37.
[7] See also nr. 22 Preamble to Proposal.
[8] See first public report Estro, 5 July 2014.In the Estro case, the old shareholder indirectly sought to acquire the company for an amount around € 4 million, an amount just above the liquidation value if the assets would be sold out of a normal non pre-packaged insolvency proceeding. Only after tense discussions with the envisioned trustee, the circle of potential bidders was enlarged and the offer, still by a related party, was increased to a price above € 10 million.
[9] Pre-packs become especially problematic in case a Member State allows for shareholders loans with security rights. The shareholder can then embark on a credit bid strategy. A credit bid outside related parties means that a secured creditor can make a bid with its claim instead of cash. Credits bid in general have as their dark side that they can scare away other interested parties, which is referred to as the ‘chilling effect’ of credit bids. In case of related parties, the problem is again exacerbated and becomes different in nature. Here the shareholder has arranged for itself a position where it can bid up to an amount of its claim and ensure continued use of and say over assets notwithstanding insolvency of the company. See for an example of aggressive credit bidding by a shareholder, the Dutch case McGregor. See combined Public Report McGregor Group, 1 September 2016, available via https://cms.law/nl/NLD/Publication/Bankruptcies/McGregor-Group. See for an in depth analysis (in Dutch) A.L. Jonkers, ‘McGregor, de houdgreep van de aandeelhouders en de rechtvaardiging van beperkte aansprakelijkheid’, TvI 2017/15.
[10] In 2016, the ‘Report Study on a new approach to business failure and insolvency’ (by G. McCormack a.o.) still provided the following: “In Europe, the practice of pre-packs has been largely confined to the UK, France, the Netherlands and, to a certain extent, Greece, Ireland and Slovenia.”
[11] See more elaborate in Dutch, Ph. W. Schreurs, ‘Terugblikken op en vooruitkijken naar de gelieerde doorstart’, Insolventie in Context, Liber Amicorum Vriesendorp, 2025, based upon an examination of the rules in several European countries and the EU, which examination was closed in May 2024. Parts of this paragraph are derived from this more extensive analysis.
[12] Art. 642[-3] Code du Commerce provides in original: Ni le débiteur, (…), ni les dirigeants de droit ou de fait de la personne morale en liquidation judiciaire, (…) ni les personnes ayant ou ayant eu la qualité de contrôleur au cours de la procédure ne sont admis, directement ou par personne interposée, à présenter une offre. De même, il est fait interdiction à ces personnes d’acquérir, dans les cinq années suivant la cession (…) Translation: Neither the debtor, (…), nor the legal or de facto directors of the legal entity in liquidation, (…) nor the persons having or having had the status of controller during the procedure are admitted, directly or through an intermediary, to submit an offer. Similarly, these persons are prohibited from acquiring, within five years following the transfer (…)
There are some exceptions for agricultural companies.
[13] Art. 224 lid 1 Ley Concursal states that debts in a normal asset sale will not transfer to the purchaser. In case of a sale with a related party however,art. 224 lid 2 jo 283 Ley Concursal states: No será de aplicación lo dispuesto en el apartado anterior cuando los adquirentes de las unidades productivas sean personas especialmente relacionadas con el concursado. Translation: The provisions of the previous section shall not apply when the purchasers of the productive units are persons who are specifically related to the bankrupt debtor.
[14] Art. 283 Ley Concursal.
[15] See art. 162 InsO: Die Veräußerung des Unternehmens oder eines Betriebs ist nur mit Zustimmung der Gläubigerversammlung zulässig, wenn der Erwerber oder eine Person, die an seinem Kapital zu mindestens einem Fünftel beteiligt ist, (…) zu den Personen gehört, die dem Schuldner nahestehen (§ 138). Translation: The sale of a company or a business is only permitted with the consent of the creditors’ meeting if the purchaser or a person who holds at least one-fifth of its capital (…) is one of the persons closely associated with the debtor (Section 138).
[16] De ‘Przygotowana likwidacja’ (prepared liquidation) has been introduced in january 2016 in art. 56a-f of the Polish Insolvencycode.
[17] See W. Kapica & D. Radwański, ‘Insolvency prepack transactions in Poland’, 2021.
[18] See J. Vananroye, A. van Hoe and G. Lindemans, Curb Your Opportunism: Limits to Group Structures and Asset Partitioning in Insolvency in Belgium, NACIIL Annual Report 2018, available at https://nvrii.nl/wp-content/uploads/2021/07/preadviezen-2018.pdf. In order to counterbalance strategic advantage of insiders, Article XX.87, § 2 contains the following rule: Ingeval een offerte uitgaat van personen die controle op de onderneming uitoefenen of hebben uitgeoefend gedurende zes maanden voorafgaand aan de opening van de procedure, en die rechtstreeks of onrechtstreeks de controle hebben over rechten die noodzakelijk zijn voor de voortzetting van haar activiteiten, kan die offerte slechts in aanmerking worden genomen op voorwaarde dat die rechten onder dezelfde voorwaarden toegankelijk zijn voor de andere bieders. Translation: In case a bid is made by persons who control the undertaking (or controlled it during six months prior to the initiation of the judicial reorganization) and who either directly or indirectly control any rights which are necessary to continue the activities, the offer can only be taken into account if such rights are made accessible to other bidders under the same terms and conditions. (translation taken from J. Vananroye, A. van Hoe and G. Lindemans).
[19] Loi du 7 août 2023 relative à la préservation des entreprises et portant modernisation du droit de la faillite , art. 58, 2: “Au cas où une offre émane de personnes qui exercent ou ont exercé le contrôle de l’entreprise et exercent en même temps directement ou indirectement, le contrôle sur des droits nécessaires à la poursuite de ses activités, cette offre ne peut être prise en considération qu’à la condition que ces droits soient accessibles dans les mêmes conditions aux autres offrants.” Translation: Law of 7 August 2023 on the preservation of businesses and modernising bankruptcy law, art. 58, 2: “In the event that an offer comes from persons who exercise or have exercised control of the business and at the same time exercise, directly or indirectly, control over rights necessary for the continuation of its activities, this offer may only be taken into consideration on the condition that these rights are accessible under the same conditions to other offerors. See Th. Mastrullo, Transposing the Directive (EU) 2019/1023: The new Luxembourg preventive restructuring law, European Insolvency and Restructuring Journal 2024/4.
[20] See for the Netherlands J.R. Hurenkamp, ‘Failliet of fast forward? Een analyse van de pre-pack in de praktijk’, TvI 2015/20. In the Nederlands in the period 2012-2014 in 15 out of 39 pre-packs, the sale was to a related party.
[21] This was the case in England. See T. Graham, Graham Review into Pre-pack Administration June 2014, page 37.
[22] Of course there are many more rules and the Proposal itself should be consulted to get a full understanding of the envisioned working and interplay of the different rules.
[23] Of course there is the basic governance rule that the transfer of an undertaking is prepared with the assistance of an independent monitor under the supervision of the court (art. 22 Proposal) and that Member States shall ensure that the sale process is competitive, transparent, fair, and meets market standards (art. 22a Proposal).
[24] In Preamble 25 the Proposal suggests implementing so called stalking horse provisions. The stalking horse procedure, however, only provides a remedy to problems related to the closed bidding environment. It should be recognized that in case of related party pre-packs, there should be additional safeguards also because of the advantage a related party has as to inside information. Therefore, a better rule would be to provide for a matching principle in case of related party transactions. Under a matching principle, a related party would make a binding offer and external parties should be allowed to acquire the company for that bid during a certain period of time. Only this way there can be some comfort that the related party would actually be paying for the business what it is worth.
[25] See also Preamble nr. 24a with some room to that extent: “Where it becomes evident in the course of the preparation phase that the objectives of the pre-pack cannot be achieved, Member States should be able to allow for the termination of the pre-prack proceedings. Such situations can occur where the debtor fails to cooperate with the monitor or to conduct the preparation phase with due diligence, or where there is no reasonable prospect of selling the business as a going concern. The latter could be the case, for example, where the books and records of the debtor are incomplete or deficient to a degree that makes it impossible to ascertain its business and financial situation.”
[26] See M.H.F. van Vught, ‘De Nederlandse pre-pack: timeout, please!’, FIP 2014/47. In original: “Dat de concurrente crediteuren, zoals de MvT stelt, na faillissement ex art. 69 Fw de rechter-commissaris kunnen vragen de curator te bevelen de pre-pack niet uit voeren, is theoretisch gezien juist, maar de facto zinledig. De pre-pack heeft immers tot doel zo snel mogelijk na faillissement de doorstart te bewerkstelligen en zal op de dag van faillietverklaring worden geëffectueerd. Het faillissement is dan nog niet eens gepubliceerd, kennisgeving aan de bekende crediteuren nog niet verzonden. Het verzoek ex art. 69 komt daardoor als mosterd na de maaltijd. Het is maar de vraag of potentiële voordeel voor de concurrente crediteuren voor hen opweegt tegen het feitelijke verlies van hun positie in het na de pre-pack volgend faillissement.”
[27] See previously for the Dutch national setting, Ph. W. Schreurs, ‘Terugblikken op en vooruitkijken naar de gelieerde doorstart’, Insolventie in Context, Liber Amicorum Vriesendorp, 2025. See also Van Andel, ‘Stop de Pre-pack’, TvI 2014/37. Translation: “Therefore, in my view a pre-pack should not be allowed in those cases where it is the entrepreneur himself or a closely related party that seeks to continue the business, as was the case in Estro.”
[28] Previously, one of us, has already openly questioned whether it is humanly possible for a related party to comply with its information and cooperation obligations towards the monitor or envisioned trustee, if such party wants to acquire the business itself. See Ph.W. Schreurs,’De gelieerde doorstart na het Heiploeg-arrest’, TvI 2020/28.
[29] See art. 33a-2 Proposal. “Member States shall ensure that, where security interests encumber the business subject to the pre-pack mechanism, creditors who are the beneficiaries of those security interests may offset their claims against the purchase price only to an amount not exceeding the market value of the business.” More as a side note, we like to remark that we fail to see how this rule suggesting a limitation as to the scope of credit bidding can ever be relevant.
[30] The only argument offered in favour of related party pre-packs is to be found in Preamble nr. 28: “The best offer should not be disqualified from the preparation phase solely on the basis that it comes from a closely related party to a debtor.”
[31] See Directive (EU) 2019/1023 of 20 June 2019 on Preventive Restructuring Frameworks.
[32] See most notably art 11 Preventive Restructuring on the mandatory inclusion of a priority rule in case of cross-class cram-downs.
[33] Preamble Proposal, nr. 60: “Since the objectives of this Directive cannot be sufficiently achieved by the Member States because differences between national insolvency frameworks would continue to raise obstacles to the free movement of capital and the freedom of establishment, but can rather be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.”
[34] See Amendment European Parliament, 1 July 2025 (A10-0126/2025) as to article 32 Proposal: “Member States shall provide that where it is proved that the disclosure duty referred to in the first subparagraph, point (a), was breached, the court revokes the benefits referred to in Article 28.”
[35] See Directive 2001/23/EC of 12 March 2001 on Employees’ Rights in the Event of Transfers of Undertakings, Businesses or parts of Undertakings or Businesses.
[36] See CJEU, 22 June 2017, Case C-126/16 (Estro/Smallsteps) and CJEU, 28 April 2022, Case C-237/20 (Heiploeg), nr. 26. In the Smallsteps procedure the pre-pack was conducted with a related party and was not aimed at liquidation. In Heiploeg the pre-pack was conducted with only outside parties and was aimed at liquidation. See for the analysis in full R.J. de Weijs and J.P.H. Zwemmer, https://corporatefinancelab.org/2025/09/02/european-harmonisation-of-pre-packs-initiating-a-european-race-to-the-bottom-at-the-expense-of-employees/.
[37] See more elaborate on the importance of the identity of the acquiror in relation to the application of the Transfer of Undertakings and Business Directive Ph.W. Schreurs, ‘De gelieerde doorstart na het Heiploeg-arrest’, TvI 2020/28, Ph. W. Schreurs, ‘Terugblikken op en vooruitkijken naar de gelieerde doorstart’, Insolventie in Context, Liber Amicorum Vriesendorp, 2025.
[38] The distinction between pre-packs with related parties and non-related parties also fits with a more general understanding of what an enterprise actually is. Under Dutch Corporate Income Tax, an enterprise is viewed as ‘a lasting organisational union of capital and labor’. If the old capital provider is no longer involved after going through insolvency, it should also be possible to let go of excess workers in that process. However, if old capital (shareholder) remains, so should employees.
[39] Article 20/2 Proposal now provides that ‘the liquidation phase shall be considered to be bankruptcy proceedings or any analogous insolvency proceedings instituted with a view to the liquidation of the assets of the transferor’.
[40] The Proposal does not seek to alter the Transfer of Undertakings and Business Directive itself. Therefore, Member States can continue to provide that also in case of a transfer of a business out of insolvency, employees do transfer along with the business as is currently the case in Germany. Although the Proposal forces Member States to allow for related party pre-packs and also seeks to reverse the CJEU case law in Estro and Heiploeg, it remains possible for Member States to not enact the insolvency exception.
[41] In Preamble 28e of the Proposal, Member States are given the option to introduce additional requirements obliging related-party acquirers to maintain existing employment contracts. Under the envisaged EU law, dismissals would therefore be allowed, unless Member States decide to provide additional protection themselves. The European pre-pack would therefore dismantle long-established protection at the European level and relegate the issue to Member States.
[42] See Amendment European Parliament, 1 July 2025 (A10-0126/2025) as to article 20/2 Proposal.
[43] See CJEU, 28 April 2022, Case C-237/20 (Heiploeg), nr: 67 (emphasis added by authors): “Article 5(1) of Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses must be interpreted as meaning that the condition which it lays down, according to which Articles 3 and 4 of that directive are not to apply to the transfer of an undertaking where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings ‘instituted with a view to the liquidation of the assets of the transferor’, is satisfied where the transfer of all or part of an undertaking is prepared, prior to the institution of insolvency proceedings with a view to the liquidation of the assets of the transferor and in the course of which that transfer is carried out, in the context of a pre-pack procedure which has as its primary aim to enable, in the insolvency proceedings, a liquidation of the undertaking as a going concern which satisfies to the greatest extent possible the claims of all the creditors and preserves employment as far as possible, provided that that pre-pack procedure is governed by statutory or regulatory provisions.”
[44] See identical R.J. de Weijs and J.P.H. Zwemmer, Amendment Protecting Workers against Shareholders, October 2025. The Amendment Protecting Workers against Shareholders is incorporated here in a more encompassing approach of protecting stakeholders against abuse and opportunistic use of pre-packs by related parties.
[45] See art. 4-12 Proposal.
[46] See R. Bork and P.M. Veder, Harmonisation of Transactions Avoidance Laws, Larcier Intersentia, 2022. The book rightfully claims to be the result of an intensive research project that digs deep into the matter of transaction avoidance, comprising national reports and input from 25 jurisdictions and analysing the relevant topics from a principle-based perspective.
[47] The so called WOVOF II draft was made public for consultation on May 27, 2024. The WOVOF can conceptually be placed as diametrically opposed to the EU Proposal. The WOVOF has as its basic rule in a new art. 7:666b Civil Code that necessarily all employees transfer with the enterprise in case of a pre-pack. The European Proposal on the other hand provides that there will never be any employee necessarily transferring. We disagree with both approaches and believe that employees should necessarily transfer in case of related party pre-packs but not outside thereof.
[48] We do not agree with the passionate plea by A. Thery to provide for related party pre-pracks. See A. Thery, ‘The pre-pack regulation in the EU Commission proposal for a second insolvency directive’, European Insolvency and Restructuring Journal (available via https://eirjournal.com/article/view/18096/20135). We, however, do agree with him that art. 32 Proposal is the most important article in the entire Proposal (Thery, loc. cit, nr 69), the content of which we think will be decisive for the shape and working of European Insolvency Law.
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