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Ten keys to understanding the new bankruptcy scenario

"Here I collect some of the guidelines on which we usually discuss the people who work day by day in these matters"

We need a guide in this matter, but one that is understandable, that removes fears and provides peace of mind and, especially, interest in approaching the knowledge of some issues that will surely help entrepreneurs in this difficult time. Here I collect some of the guidelines on which we usually discuss the people who work day by day in these matters.

  1. On what date does the bankruptcy moratorium end?

December 31, 2021 is the date on which the term known as the “bankruptcy moratorium” ends, which has allowed any debtor in an insolvency situation since March 14, 2020, not to have been forced to request the bankruptcy. In the same way, throughout this long period of time, no Commercial Court has admitted to processing applications submitted by creditors to force the bankruptcy of its debtor, which is called necessary bankruptcy.

  1. Will all debtors, natural or legal persons, insolvent, be obliged to request the bankruptcy as of January 1, 2022?

Those Ones debtors who cannot regularly meet their payment obligations and they go through serious treasury difficulties, suffer seizures, etc., they will be obliged to resort to any of the mechanisms offered by bankruptcy legislation. Prior to the request for bankruptcy, the debtor could initiate negotiations with creditors and inform the Court of this in order to achieve a period of three months in which to negotiate an agreement with their creditors and thus avoid bankruptcy, something that is known as a "pre-contest". If an agreement is not reached in that period, the debtor must request the contest within the following month.

  1. Does the corporate administrator assume any personal responsibility for not requesting the contest on that date?

If it arrives on January 1, 2022, the debtor in a situation of insolvency does not request the insolvency or initiate negotiations with creditors In the framework of a pre-bankruptcy, it will assume the risk that a creditor requests the necessary bankruptcy, which will cause, if it is admitted by the Commercial Court, that the powers of administration are suspended and may be declared civilly guilty, disqualified, and You can even assume the payment of all debts that have not been able to meet with the assets (bankruptcy deficit).

  1. What can happen to those debtors who were in a situation of insolvency before March 14, 2020?

None of the legislative provisions published since March 14, 2020 distinguishes between prepandemic or post-pandemic insolvent debtors, so a priori, they should all receive the same treatment. However, it is not ruled out that in any bankruptcy proceeding that was declared as of January 1, 2022, the creditors or the bankruptcy administration investigate the solvency of the debtor at the time prior to the declaration of the state of alarm in order to found a guilty qualification by understanding that the moratorium of more than twenty months that The legislator has granted to the debtors, it was only for those affected by the pandemic and not for those others who were already suffering the effects of an economic crisis that was looming at the beginning of 2020.

  1. What Law currently exists to process tenders?

Since September 1, 2020, the Consolidated Text of the Bankruptcy Law has been in force, which has introduced important new features to ensure greater agility of the process and favor the protection of debtors' assets.

  1. Is there any legal reform in progress that I should know about?

There is a Draft Bill for the reform of the Bankruptcy Law, whose public hearing process has recently concluded. The most optimistic forecasts consider that during the first half of 2022 the parliamentary processing of said reform will have been completed.

  1. What are the main novelties of the aforementioned Draft Project?

The Draft Bill aims to strengthen pre-bankruptcy law, seeking to provide debtors with more legal tools to solve the business crisis at a time prior to insolvency. That is why it is intended to introduce (i) the restructuring plans, is included in the Insolvency Directive that will be transposed with the reform, to give companies a longer term - up to twelve months - to solve financial difficulties and also do so at an early time, (ii) the participation of independent experts in the sales processes of productive units or (iii) the introduction of a new insolvency procedure unique for autonomous and "Microenterprises" defined as those with less than ten employees or a turnover of less than two million euros. In this procedure it is intended to limit the role of the Court as much as possible and even to eliminate the intervention of the bankruptcy administration.

In any case, the reform is in an incipient phase and important modifications cannot be ruled out before the final text sees the light.

  1. Is there any news regarding second chances?

The Preliminary Project contemplates an important reform of the second chance procedure. Measures are introduced such as the possibility of exonerating debts without the need for a prior procedure for the liquidation of the debtor's assets, thus allowing the process to be more agile. However, the privilege of the public debt survives which, according to the text known so far, will not cease to be enforceable for the debtor, which may cause this reform not to obtain the desired success.

  1. In a crisis situation, Is there a legal mechanism to optimize the value of the assets so that they do not deteriorate quickly due to the processing of the bankruptcy?

With the legal modification in force since September 1, 2020, the legislator has wanted to give a boost to the sales of productive units. The new wording in force today provides greater legal certainty for potential asset purchasers especially with regard to the allocation of labor liabilities, which will be solely and exclusively that corresponding to the productive unit that is transferred, whose perimeter will have to be previously delimited by the bankruptcy administration.

  1. What improvements are intended to be introduced to give even more legal certainty to this process?

The Preliminary Draft of the bankruptcy reform introduces new modifications in the process of sale of production units, of which it is worth highlighting the appointment of an expert to collect offers for the acquisition of the production unit. It is a novel figure that responds to the need to have a transparent sales process with sufficient information for all those involved in it. This novelty, as well as others that are incorporated in the Draft Project, respond to the growing interest of investors in this figure, which has also found great support and involvement from the Commercial Courts where these asset sales are processed and centralized.

Ramon Fernandez-Aceytune

Managing Partner of the Litigation, Insolvency and Arbitration Area of ​​Ramón y Cajal Abogados

Article originally published in the Blog Fide in the withfideinitial

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