New EU Directive with a focus on pre-pack proceedings and directors' liability in the event of insolvency

Introduction

On 30 March 2026, the European Parliament and the Council adopted Directive (EU) 2026/799 harmonising certain aspects of insolvency law. The purpose of the Directive is to contribute to the proper functioning of the internal market and the Capital Markets Union. The Directive must be implemented in national law by 22 January 2029.

The Directive contains new rules regarding (a) avoidance actions (clawback), (b) tracing of assets belonging to insolvency estates, (c) pre-pack proceedings, (d) directors’ duty to submit a request for the opening of insolvency proceedings, and (e) creditors’ committees.

From a Swedish perspective, the provisions regarding (1) pre-pack proceedings and (2) directors' liability in the event of insolvency constitute fundamental changes to Swedish insolvency law, which are discussed below. 

Pre-pack proceedings

Pre-pack proceedings involve the preparation and negotiation of a sale of all or part of the debtor's business before bankruptcy proceedings are formally commenced. The purpose of such proceedings is to facilitate the swift transfer of a viable business, or parts of it, following the opening of insolvency proceedings, thereby preserving value ​​that might otherwise be lost in a conventional bankruptcy sale process. Although Sweden currently lacks a specific regulatory framework for pre-pack proceedings, such transactions occasionally occur in practice. 

The Directive requires Member States to ensure that pre-pack proceedings are available to debtors that are likely to become insolvent under national law. Such proceedings are typically considered to benefit creditors as a whole, while preserving value ​​and helping to safeguard jobs.

Under the Directive, pre-pack proceedings consist of two phases: a preparation phase and a liquidation phase.

During the preparation phase, a monitor – in practice an insolvency practitioner – is appointed by the court upon an application by the debtor. The monitor must document and report on the sale process in writing, recommend the best bidder as the pre-pack acquirer of the debtor’s business, and ensure that the best bid does not constitute a breach of the best-interests-of-creditors test. The sale process must be competitive, transparent, fair, and meet market standards. In addition, the preparation phase should be confidential, at least with respect to the identification of potential purchasers, in order to minimise market disruptions and preserve the value of the business. During this phase, the debtor may also benefit from protection against individual enforcement actions, such as attachment of assets, provided that certain conditions are met.

The liquidation phase commences upon the opening of insolvency proceedings in accordance with national law. During this phase, the court shall be able to authorise the sale of all or part of the debtor’s business where at least one of the following conditions is met: 1) the acquirer has been proposed by the monitor, who confirms that the sale process was properly conducted during the preparation phase, 2) the acquirer has been selected through a public auction, or 3) the sale to the acquirer has been approved by the creditors. When implementing the Directive, Sweden will need to determine which of these options should apply.

In the event of a pre-pack sale, the acquirer should, as a general rule, be able to take over the business free from debts and liabilities, unless the acquirer expressly consents to assume them. Furthermore, certain contracts of the debtor should be capable of being assigned to the acquirer without the consent of the counterparties, provided that the contracts are necessary for the continued operation of the business. However, this rule does not apply where the acquirer is a competitor of the debtor’s counterparty or counterparties. Permitting the assignment of the debtor's contracts without requiring the consent of the counterparties represents a fundamental change in Swedish law and should give rise to consequential amendments to both the Bankruptcy Act and the Company Restructuring Act. 

Duties of directors

Currently, Swedish law does not contain any explicit obligation for company directors to file for bankruptcy when a company becomes insolvent. Instead, directors' duties in situations of financial distress are found in several different legal frameworks, including the Companies Act, the Tax Procedures Act and the Criminal Code. Non-compliance with these duties may, in certain circumstances, give rise to personal liability. These rules are primarily intended to encourage directors to take appropriate action when a company encounters financial difficulties and to protect the interests of creditors.

The Directive requires the Member States to ensure that the directors of a company that has become insolvent are under a duty to apply for the opening of insolvency proceedings within three months of the date on which they became aware, or could reasonably be expected to have become aware, of the company's insolvency. In the event of non-compliance, directors may be held liable for losses suffered by creditors, a concept that is new to Swedish law. The purpose of these rules is to prevent the destruction of recoverable value resulting from the delayed commencement of insolvency proceedings and to create more uniform expectations regarding the conduct of company directors across the EU. 

The Directive adopts a relatively broad approach to directors' duties and grants Member States significant discretion in implementing the rules. For example, the terms ‘insolvency’ and ‘directors’ are to be construed in accordance with national law. Moreover, Member States may introduce additional exceptions. For instance, directors may be relieved of this duty if the company’s insolvency is made public through notification in a public register. The duty may also be suspended if the directors take measures designed to prevent damage to creditors, provided that such measures afford creditors a level of protection equivalent to that resulting from the commencement of insolvency proceedings. 

Final remarks

The Directive represents a clear step towards further harmonisation of insolvency law across the EU.

The introduction of rules governing pre-pack proceedings may increase recoveries for creditors, and the implementation of such a framework in Sweden is long-awaited. An explicit duty for directors to file for bankruptcy in the event of insolvency may enhance the protection of creditors and contribute to a more unified legal framework governing directors' duties in situations of financial distress. 

An important issue to be addressed in Sweden is whether, when assessing directors' liability for damages in the context of insolvency, an application for court-supervised restructuring proceedings should be treated as equivalent to an application for bankruptcy. Given the Swedish definition of 'insolvency', there are reasons for the legislature, when implementing the Directive, to ensure that an application for restructuring is recognised as having the same liability-interrupting effect as an application for bankruptcy. A contrary approach risks creating an undesirable system that incentivises bankruptcy proceedings. 

The Directive is to be implemented in national law by 22 January 2029. Taken together, the provisions on pre-pack proceedings and directors' duty to file for bankruptcy in the event of insolvency constitute fundamental changes to Swedish insolvency law.

DLA Piper is closely monitoring the developments. For more information on the implementation of the Directive, please contact Anders Svensson Clark, Jonas Premfors, Erik Selander or 
Sandra Andersson.