The Netherlands’ Pensioen Federatie has stated that a directive proposal from the European Commission (EC) to streamline insolvency legislation does not give sufficient priority to paying arrears of pension contributions.

In its feedback, the federation highlighted the treatment of unpaid pension premiums in pre-pack proceedings, in which employees are effectively creditors.

It noted that pension premiums are part of the obligations under the employment contract and liabilities should therefore be transferred in a pre-pack sale.

Pension funds collect contirbutions for the employees of companies and, when a company becomes insolvent, it is important employees' rights are protected, the federation stated.

"In a pre-pack procedure, it should not be the case that overdue pension contributions are waived," it added.

The federation said that amendments were needed to guarantee pension premium payments and warned that the proposals would result in a deterioration in employees’ rights compared with current Dutch legislation.

Despite the potential shortcomings, Pensioen Federatie said that it highly valued the EC’s proposal for a directive harmonising aspects of insolvency law, describing it as a vital building block towards the completion of the Capital Markets Union.

“We are convinced that Europe's pension funds play a vital role in enhancing the Capital Markets Union,” it added.

“Modernising member states' insolvency regimes increase faith in investors' ability to retrieve residual value of cross-border investments in firms that fail.

“Insolvency procedures are currently lengthy and the diversity of regimes means that investors can be hesitant to commit to higher risk foreign investments, as they struggle to assess the implications of insolvency.

“We therefore welcome the way in which the commission's proposal makes insolvency proceedings more efficient.”

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