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The bankruptcy agreement

"We publish the summary of the 5th session of the Cycle of online sessions: Analysis of the most relevant issues of the Consolidated Text of the Bankruptcy Law (January-June 2021), on the bankruptcy agreement."

Following the trip through the TRLC, in this 5th Session we make a stop at the agreement that the Title VII of Book 1ª TRLC. The agreement can be understood as an agreement of the creditors and the debtor that has a series of peculiarities, among which the necessary judicial approval stands out. She was the “darling” of the LC and the TRLC maintains that preference. A simple examination of the distribution of the articles reflects this predilection, with almost a hundred precepts dedicated to it. However, despite being the main solution in the competition, practice has shown little success and that the agreed solution has a clearly residual character in the face of liquidation.

The TRLC continues to jointly regulate the procedural and substantive issues of the agreement and follows the same scheme as LC. Despite this, there are several new features and improvements that can be made to the new articles. Examples are, regarding the content of the agreement, the inclusion of some that were customary but were not expressly provided for in the LC or the systematic improvement of the regulation of others, such as the interest clause, proposed with provisions for the realization of assets or rights subject to credits with special privilege, assumption agreement or proposal with alternative content. The system for accepting the agreement by creditors has also been regulated in a clearer way. Likewise, these improvements are predicable of the regulation of the objective effectiveness of the agreement or the effects of its breach.

Along with this, in the current situation we have to take into account the special rules contained in Law 3/2020, of September 18, on procedural and organizational measures to deal with COVID-19 in the field of the Administration of Justice, which include the possibility of modifying the agreement (art. 3) or postponement of the duty to request the opening of the liquidation phase (art. 4), which coexist with the TRLC and temporarily alter its application.

Of these topics, all those that were examined by the two speakers are listed in detail below, whose interventions were mainly aimed at highlighting the novelties of the TRLC and the COVID legislation

Speakers:

  • Maria Aránzazu Ortiz, Magistrate of the Provincial Court of Mallorca and specialist in commercial matters
  • Jesus Quijano González, Permanent Member of the Commercial Law Section, General Codification Commission. Professor of Commercial Law, University of Valladolid. Academic Advisor of Allen&Overy. Member of the Academic Council of Fide

THE AGREEMENT PROPOSAL: CONTENT, SPECIAL TYPES OF AGREEMENT, PROHIBITIONS.

 

  1. Meaning of the agreement.

 

In ideal model of the bankruptcy procedure, and especially in its modern configuration, the agreement constitutes the preferred purpose of the bankruptcy: a agreement between the debtor and the creditors, of a special contractual nature In many aspects, reached within the bankruptcy procedure, although it could be previously achieved through some of the pre-bankruptcy mechanisms, in a situation of insolvency or pre-insolvency, with which it is intended to facilitate the conservation of the affected patrimonial mass and the continuity of professional or business activity of the debtor, as an alternative to the liquidation of the asset for payment to creditors, which, in this ideal model, would constitute the final solution when an agreement could not be reached, or the one reached could not be fulfilled.

 

La practical experience It confirms, however, that this ideal model, very defined in the original Bankruptcy Law of 2003, has not been effective: in the 2008-2015 stage, in which a deep business crisis developed, well known, around 90 On average,% of the declared bankruptcies ended with liquidation, and many with early liquidation due to insufficient assets.

 

 That is the context in which a evolution very relevant from the initial regimen of the agreement in the Bankruptcy Law, and through successive reforms, up to the current regime in the TRLC. In that first regime, the content of the agreement was more limited, the effects more restricted, and there was no possibility of modifying the approved agreement. The change in orientation in the reforms of 2011, 2014, 2015, has expanded content of the agreement, has extended its effects, following the model of extension of the refinancing agreements, and, at least temporarily for the moment, as was done previously, the possibility of modifying the agreement already approved and in compliance phase. 

 

  1. Characters of the proposed agreement.

 

In order for an agreement to be reached between the debtor and the creditors, a proposal must have been submitted by those who are legitimized for this (art. 315): the debtor himself (if he is a legal person, the administrative body may do so; it is not expressly stated, but by analogy with the bankruptcy request itself; it is possible that the administrative body submits it to the meeting general, although it is not required, and without prejudice to the fact that the general meeting must adopt essential resolutions for the fulfillment of the agreement, for example, a structural modification); the creditors, whose credits reach more than one fifth of the passive mass (total, computing all kinds of bankruptcy credits).

 

The proposed agreement has the following characters:

  • necessary: ​​without a proposal there can be no agreement; there is no other way to reach an agreement without a prior proposal.
  • voluntary, however: there is no obligation to propose an agreement, neither by the debtor, nor by the creditors, not even when there is a certain objective possibility that it will be approved and fulfilled.
  • -formal, written and signed (with legitimized signature): it is a question of the proposal showing a firm commitment.
  • timely: at the times provided by law, distinguishing whether it is anticipated or ordinary, and whether it is the debtor or the creditors.
  • irrevocable and unchangeable: in the terms of 346, without prejudice to the liquidation request, the specialty of the advance proposal that can be modified if it is maintained, and the current transitory possibility of modifying the already approved agreement.
  • accompanied by a payment plan and a viability plan, in the terms of articles 331 and 332.
  • Alternative and exclusive regarding settlement: 315, 2: if settlement was requested, it is not possible to present an agreement proposal; the content of the proposed agreement cannot be a global liquidation of the active mass to satisfy credits; If there is an agreement proposal already presented and then liquidation is requested, the proposal is not accepted for processing (342), and, if it is already accepted, it lapses, being without effect (346).

 

  1. Content of the proposal.

Given the variety and breadth of content that the proposal may have, a fundamental distinction should be made between ordinary content and special content, in addition to those that can be considered typological variants of the agreement due to their uniqueness:

   

  • A- Ordinary content:

This is the required content (317): the proposal must contain remove (Unlimited); waiting (up to 10 years) or a combination of both; any of the multiple options that are possible is enough; However, there is a legal assumption of an agreement without removal, which is the one that contains an interest clause (320). In any case, the amount of the deduction and the length of the wait influence several aspects: necessary majority; extension of effects; burdensome agreement or not for the purposes of qualification.

  

  • B- Special content:

It is the optional content, which gives rise to several options:

  • proposed agreement with commitments from creditors or third parties (316, 2): commitments for payments, guarantees, financing, etc., which are normally accompanied by a proposal for a unique treatment of these creditors.
  • additional propositions (317, 2): amplitude, except legal limits derived from the prohibitions of 318 and 319; possible singular treatment for all, some or some creditor, or for a class (also for any of the subgroups of privileged creditors, provided for in article 287?); not for public credits; the additional propositions can be one or more, alternative, complementary, linked, etc., but not conditioned; need for special majority of 378.
  • propositions with structural modifications (317, 3): of a bankrupt legal entity; merger, spin-off, global assignment of assets and liabilities; Transformation or transfer of domicile ?; In any position in the modification (absorbing-absorbed; spun-off-beneficiary ?; application of the LMESM regime, with specialties (right of opposition of creditors; responsibility of partners ex art. 80?); Distinction of bankrupt company and participating company not bankrupt: problems of universal succession, scope of subrogation in bankruptcy liabilities, etc.
  • other proposals with special content:
  • with clause interests, if there is no remove (320)
  • with limitation of powers debtor's assets (321)
  • with attribution of functions to the bankruptcy administration (322): intervention or supervision only, no other effects (cessation: 394, 395); other formulas (Committees of creditors).
  • with realization forecast of assets or rights attached to credits with special privilege (323): payment to the creditor; existence of remnant or insufficient payment.

 

  • C- Particular types of agreement:

These are two typological variants of the agreement due to their particular content:

a) agreement with assumption: (324)

Acquisition by natural or legal person, which must be determined in the proposal, of the entire set of assets and rights of the estate related to the professional or business activity of the bankrupt, or of specific production units (referral to the regime of these transfers: 215 to 224).

Double requirement: commitment to continuity in the activity for the minimum time set in the proposal; total or partial payment obligation of all or some of the bankruptcy credits (wide margin for the agreement; no credits against the estate; coordination problems with the special regime of subrogation and company succession, 222-224)

b) agreement with alternative content: (325-329)

Range of options: “any other alternatives”; for all or some credits, or classes of credits; and subclasses of article 287; not for public credits; proof of the term to exercise the power of choice, maximum one month, and alternative by default if not chosen.

 

 Assumptions:

                     - credit conversion: in shares, participations, quotas or convertible bonds of the bankrupt company or of another company (a subsidiary, for example); in participating loans, up to 10 years, in subordinated loans, in loans with capitalizable interest; in any other financial instrument with characters other than the original credit; labor credits require individual consent of the holder for conversion; flexibility in requirements to convert into shares or participations, with or without a premium: compensation requirements are not required (liquid, overdue and enforceable credit) and a reinforced majority, neither the legal nor the statutory majority, is necessary for the increase in capital.

                    - assignment in payment: not for payment; extinguishing effect of credits; only of assets or rights of the active mass, not necessary for the continuity of the debtor's activity; determination of the fair value of the assets or rights to be assigned: equal to or less than the amount of the credits that are extinguished; if higher, integration of the difference in the mass by the assignee .; non-assignment in payment of public credits.

                    - transfer of shares or the effects of reintegration: to one or more creditors, or to classes of creditors.

 

  1. Prohibitions: 318 and 319.

   - alteration of the amount of the credits (according to the list of creditors); except you take away.

   - alteration of the classification (classes and subclasses of credits)

   - Liquidation of the assets to satisfy the credits: but global, not partial liquidation (disposals, assignments, etc. are allowed)

   - Conditional proposals: on the effectiveness of the agreement, except related tenders.

 

Author: Jesús Quijano González, Professor of Commercial Law. University of Valladolid. Allen&Overy consultant. Member of the Academic Council of Fide

 

 

THE APPROVAL OF THE AGREEMENT (EFFECTS, COMPLIANCE, NON-COMPLIANCE AND MODIFICATION)

 

Regarding the effectiveness and compliance of the agreement, the entry into force of the TRLC has been affected by the special legislation issued in the wake of the COVID 19 pandemic.

To provide a practical content to the session, the modification of the original agreement was discussed both in terms of its objective scope and with respect to the need to appoint a bankruptcy administration body, as well as the possibility of requesting the opening of the liquidation phase in the cases where insolvency is evident before March 2020.

We also analyze the content of the agreement in line with the last sentence of the first chamber (STS 29.12.2020) due to its reasoning on the instrument's viability plans, which is undoubtedly essential in the new economic scenario.

 

MODIFICATION OF THE ORIGINAL AGREEMENT

 Regarding the first point, art 3 of law 3/2020 governs (preceded by art 8 of RDL16 / 2020 which was repealed by law 3/2020 of September 18 in the part that affects us has been amended by RD 5/2021 of March 12).

The current art 3 provides: "1. Until December 31, 2021 inclusive, the bankrupt may present a proposal to modify the agreement that is in compliance. The application must be accompanied by a list of bankruptcy credits that were pending payment and those that, having been contracted during the period of compliance with the agreement, had not been satisfied, a viability plan and a payment plan.

 The modification proposal will be processed in accordance with the same rules established for the approval of the original agreement, although the procedure will be written regardless of the number of creditors. The majorities of the liability required for the acceptance of the modification proposal will be the same as those required for the acceptance of the original agreement proposal, whatever the content of the modification. In no case will the modification affect the credits accrued or contracted during the period of compliance with the original agreement or the privileged creditors to whom the effectiveness of the agreement has been extended or who have adhered to it once approved, unless they vote to Please or expressly adhere to the proposed modification.

 

  1. The judge will notify the bankrupt of all the requests for declaration of the breach of the agreement that are presented by the creditors between October 31, 2020 and January 31, 2021, but will not admit them for processing until three months have elapsed from the last date indicated. During those three months, the bankrupt may submit a proposal to modify the agreement, which will be processed with priority to the request for a declaration of non-compliance.
  1. Likewise, the judge will notify the bankrupt of all the requests for declaration of the breach of the agreement that are presented by the creditors between January 31 and September 30, 2021, but will not admit them for processing until three months have elapsed from the date of the last date indicated. During those three months, the bankrupt may submit a proposal to modify the agreement, which will be processed with priority to the request for a declaration of non-compliance.
  1. In the event that between January 31, 2021 and the entry into force of this Royal Decree-Law, requests for a declaration of breach of the agreement have been submitted by creditors and these have been admitted for processing, the processing of the procedure will be suspended. , until a period of three months has elapsed from September 30, 2021. If during those three months the defendant presents a proposal to modify the agreement, the judge will file the non-compliance request procedure admitted for processing and process with priority the proposed modification of the agreement.
  1. The same rules will apply to extrajudicial payment agreements. "

 

 

 THE INSOLVENCY ADMINISTRATION

 

Regarding the reappointment of the bankruptcy administration in practice there are two positions. On the one hand, those who consider that this process slows down the necessary agility in the approval without justifying this new loan against the mass.

Faced with them, other commercial courts consider it essential for the task of updating bankruptcy credits whose classification is the responsibility of the bankruptcy administration. Thus, the order issued on November 10, 2020 by JM1 A CORUÑA (AJM C 77/2020-ECLI ES: JMC: 2020: 77A) resolved: "Indeed, nothing clarifies the 3rd Transitory Provision of Law 9/2015 in relation to the need to reinstate the bankruptcy administration in office, precisely so that the essential purification of the definitive list is carried out objectively and impartially creditors. It depends on its precise and correct updating that the concurrence of the majorities of liabilities required in this provision for the judicial approval of the proposed modification of the agreement can be guaranteed. the assessment contained in the final text of the bankruptcy administration report within five days following the transfer of the amendment proposal. And this is where the shortcomings of the legal regime emerge once again, which also does not solve article 3 of Law 3/2020 by temporarily reinstating the regime of modification of the agreement, with certain specialties and variations with respect to the regime provided for in DT 3 of Law 9/2015.

Legal silence obliges the bankruptcy judge to integrate the legal provisions for the sake of legal certainty and, fundamentally, to guarantee the protection of the interests of all creditors that may be affected by the approval of the modification of the agreement. The appellant's evaluations about the inadmissibility of imposing on the debtor the procedural burden of transferring the proposed modification of the agreement to all creditors; There is also agreement on the lack of clarity of the legal regime in setting the dies a quo for the formulation of incidents of opposition to the assessment contained in the final text of the bankruptcy administration report.

The deficient legislative technique cannot favor obscurantism caused by the limited judicial control caused by situations such as this: the debtor has not filed opposition to the assessment contained in the final text of the bankruptcy administration report on time. It is true that the proposing creditors could resort to this route within the five days following the transfer of the proposed modification of the agreement, but what happens is that there is no procedural procedure for transferring this proposal to each and every one of the creditors that could be affected by the modification. In this regard, it has been pointed out that the first difficulty posed by the counterclaim regime is relative to the transfer of the request, since the norm does not clarify whether it refers to the creditors in person or to all the creditors; And, although it must be understood that the transfer must be made to all creditors, it is recognized that such a possibility may not be feasible in practice, given the lack of a complete and updated list of creditors, which raises many doubts about the fact that Adequate knowledge of the proposed modification can be achieved, which is essential for the correct provision of consent (GUTIÉRREZ GILSANZ, «The preservation of the bankruptcy agreement«, RDCP nº 22/2015).

For this reason, the transfer of the proposal must be limited to those who are present in the procedure, without prejudice to the fact that complementary publicity measures may be adopted -for example, publication on the notice board of the court or publicity through the media. communication of national circulation-; The additional publicity methods are intended to give knowledge of the proposed modification of the agreement but are not comparable to a procedural process of personal notification to creditors. This procedure would be unfeasible in cases like the present one, in which the number of bankruptcy creditors included in the list was very high -more than a thousand-, so it would be enough for the notification to one of them to be frustrated to block the processing of the modification of the agreement. As we will see, the reinstatement of the bankruptcy administrator in office has come to alleviate a good part of the criticism that is made of the insufficiency of the legal regime.

The authorized doctrine alludes to the problem of the identification and classification of the existing liability, relevant to verify if the percentage of liability legally required to have standing for the modification request is met. The issue regarding the transfer of the proposal is problematic, since there is no procedure that guarantees that all creditor can express their consent or not in this regard. Ultimately, it must be possible to monitor the computation that makes it possible to determine whether the modification has been accepted by the majority of creditors and which creditors are bound by the approved modification. In order to adequately resolve these problems, it is proposed that the judge proceed to reinstate the bankruptcy administration office or appoint a new one, applying by analogy the provisions of the repealed art. 145. 1 II LC for the event in which the settlement is opened after the effectiveness of an agreement (GUTIÉRREZ GILSANZ, «The preservation of the bankruptcy agreement«, RDCP nº 22/2015).

In effect, the shortcomings indicated in the preceding paragraphs can be made up by repositioning the bankruptcy administration in the post, which will be entrusted with a very specific task, consisting of updating the definitive list of creditors on the date of presentation of the proposed modification of the agreement. The debtor herself refers in the appeal to the debate initiated regarding the reinstatement of this professional, which has been admitted in some court decisions -cf. SJM nº 2 of Cuenca of February 8, 2017 and SJM of Toledo of April 5, 2017-; Undoubtedly, the intervention of the bankruptcy administration as the body in charge of updating the definitive list of creditors gives objectivity to the procedure for modifying the agreement and guarantees that the legal majorities required for its judicial approval will be fulfilled.

In addition, through this professional intervention, The dies a quo is also objectified for the calculation of the period of five days foreseen to formulate the opposition to the assessment contained in the final text of the bankruptcy administration report. Once this updated list has been prepared and presented to the Court, the disclosure in the Judicial Secretariat for the knowledge of all interested parties begins the computation of the aforementioned legal term. " the highlight is ours.

               

 

THE OPENING OF THE SETTLEMENT PHASE

 

The so-called bankruptcy moratorium has been extended, but what about the agreement proposals that were presented before the state of alarm?

Unfortunately, the emergency legislator has not foreseen that the feasibility plans and payment plans presented before the health emergency may have been affected by it and in the face of an exception regulation -which has also been reformed 3 times in a year- not applicable the application to cases not included in it.

Thus, the possibility of modifying the original agreement does not apply to those who have been rejected at the creditors' meetings held in 2020 with a proposed agreement presented in 2019.

Regarding the request to open the liquidation phase at the request of the creditors who had verified the existence of insolvency before March 2020, thus, in order issued by the Provincial Court of the Balearic Islands on February 24, 2021, it thus solves the issue : "As we already resolved in the order dated October 23, 2020 (roll 440/2020), it is true that in the precepts that regulate the postponement of the duty to request the liquidation nothing is established but the purpose for which The postponement of this obligation responds (Article 3 of the Civil Code).

The order upheld the request and declared the breach of the agreement, again, because as a result of incident No. 3 confirmed by this court, it would have already been declared at the request of the AEAT.

This leads us to two conclusions: the first, that there were a plurality of creditors and the second that the revealing facts invoked do not need the requirements listed by the bankrupt because they are those provided for in article 2.4.4.LC/2.4.5 . TRLC.

In the present case, the bankrupt failed to comply with obligations subsequent to the approval of the agreement at a time prior to the declaration of the state of alarm, thus causing the request of the creditor body.

The situation that led to the opening of the liquidation phase was not motivated by the health crisis, but is prior to it, so that the legal measures as claimed by the appellant cannot be applied.

The explanatory memorandum of law 3/2020 (as also did that of RD 16/2020) provides: “To the measures already adopted in said Royal Decree-law, others are added in this Law, with a triple purpose. In the first place, to maintain the economic continuity of the companies, professionals and freelancers who, prior to the entry into force of the state of alarm, had been regularly complying with the obligations derived from an agreement, an out-of-court payment agreement or an approved refinancing agreement. Regarding these debtors, the duty to request the opening of the liquidation phase is postponed when, during the term of the agreement, the debtor becomes aware of the impossibility of complying with the promised payments and the obligations contracted after the approval thereof; Likewise, the modification of the agreement or the extrajudicial payment agreement or the approved refinancing agreement is facilitated. Regarding the latter, the presentation of a new application is also allowed without the need for a year to elapse from the presentation of the previous one ”.

We understand that the special legislation is applicable to companies that before the pandemic had been complying with their obligations, a fact that does not occur in this case.

That is why the appeal must be dismissed.”(The highlight is ours).

 

CONTENT OF THE AGREEMENT

 

Regarding the scope of analysis that the judge has a quo Regarding the viability plan as the content of the agreement, the judgment rendered on December 29, 2020 (Red: STS 4462/2020 -  ECLI:IS: TS: 2020: 4462): "3. The third paragraph of art. 128.1 LC, when prescribing the reasons for the opposition, refers in the first place to "the infringement of the norms that this Law establishes on the content of the agreement". The content of the agreement was regulated in art. 100 LC, which in section 5 provided for the following:

 

                 «When, in order to comply with the agreement, it is foreseen to have the resources generated by the continuation, total or partial, in the exercise of the professional or business activity, the proposal must be accompanied, in addition, by a feasibility plan in which specify the necessary resources, the means and conditions for obtaining them and, where appropriate, the commitments to provide them by third parties ”.

               

                 It is not disputed that the Deportes y Residencia Geriátrica SL agreement was affected by this provision, and therefore had to be accompanied by a viability plan. And as we declare in judgment 147/2015, of March 26:

               

                 «The viability plan that art. 100.5 LC requires, in certain cases, to accompany any agreement, it is a special document so that the bankruptcy administration can evaluate the content of the agreement proposal in all those cases in which the resources generated by the economic activity can be counted on that the bankrupt develops in the future. At the same time, it serves as information to creditors, so that they can assess the expectations of compliance with the agreement. It is a document that projects, in an estimated way, the resources necessary for the continuation of the debtor's economic activity, the means from which it starts, as well as those others necessary to complement them, in order to obtain results that allow, according to the cash flows, comply with the terms stipulated in the agreement «.

               

The appeal ruling has understood that the viability plan had not been presented, or rather that what was provided with the agreement proposal was not properly a viability plan. As we have seen, it is not so much a matter of appreciating that compliance with the agreement is not feasible, as of appreciating that a viability plan has not been presented that would explain how the necessary resources were going to be generated to comply with the payment plan.. The trial court reaches this conclusion after evaluating the documentary and expert evidence (...)

               

  1. The court makes an assessment by which it understands that the document provided with the proposed agreement is not properly a viability plan and therefore the requirement of its contribution provided for in art. 100.5 LC. This assessment, for these purposes, can be considered a legal assessment, as it refers to whether a legal requirement has been met. That is, whether or not what was provided with the agreement proposal met the necessary requirements to be considered a feasibility plan (not whether or not the proposed plan was viable, which is different). But the appeal does not contest this. His argument is centered on the fact that the Hearing could not carry out that assessment, but had to consider the requirement of the viability plan with the document presented as fulfilled, without going to assess it. We have already seen that it is one thing to assess the viability of the plan and another to assess whether the contribution is properly a viability plan. This second, the court could do it, and it was this assessment that, in his case, the appellant could have challenged, without having done so."(the highlight is ours)

 

This judgment of the Supreme Court must be put in relation to the one that ruled in 2015 that it is not appropriate to declare an agreement in breach because the viability plan is not fulfilled because the commitment of the bankrupt to its creditors is with the agreement (the payment plan) : STS, Civil section 1 of March 26, 2015 (ROJ: STS 1290/2015 - ECLI: ES: TS: 2015: 1290): " THIRD.

 

  1. The viability plan that art. 100.5 LC requires, in certain cases, to accompany any agreement, it is a special document so that the bankruptcy administration can evaluate the content of the agreement proposal in all those cases in which the resources generated by the economic activity can be counted on that the bankrupt develops in the future. At the same time, it serves as information to creditors, so that they can assess the expectations of compliance with the agreement. It is a document that projects, in an estimated way, the resources necessary for the continuation of the debtor's economic activity, the means from which it starts, as well as those others necessary to complement them, in order to obtain results that allow, according to the cash flows, meet the terms stipulated in the agreement.

 

Note that the viability plan is only mandatory when it is planned to have the resources generated by the continuation, whether they are own or third parties. In the latter case, section 5 of art. 100 LC refers to the necessary resources, the means and conditions for obtaining them, as well as "the commitments to provide them by third parties." This requires, in turn, to indicate the economic conditions of the provision of resources by third parties, and that, in the case of credits, the parties are entrusted to determine in the agreement the form of their satisfaction (second paragraph of section 5 of art. 100 LC).

 

The bankruptcy law also refers to the viability plan in art. 104.2, in the event of an advance proposal of an agreement by the debtor when, in order to comply with it, a viability plan is presented that expressly contemplates a withdrawal or a wait greater than the limits provided in section 1 of art. 100 LC, which, in any case, must evaluate the bankruptcy administration (art. 107.2 LC). Also in the event of an agreement proposal submitted by creditors representing a fifth of the total liability of the debtor resulting from the list of creditors (art. 113.1 LC), if it is admitted for processing, it will be transferred to the bankruptcy administration for to issue an evaluation document on its content, in relation to the payment plan and "where appropriate, with the viability plan that accompanies it."

 

For this reason, the viability plan must accompany, in certain cases, the agreement, but it is not necessary other than in the cases expressly contemplated in the law.

 

  1. From the foregoing, it should be readily ascertained that what is put to the vote for approval or rejection at the creditors' meeting is the proposed agreement, which will be accompanied by a payment plan and, where appropriate, a feasibility plan.. But the agreement and only the agreement is the one that will indicate the conditions of compensation and satisfaction to the creditors. It is the only instrument that must be voted on, either by written procedure (art. 115 bis LC), or at the creditors' meeting (arts. 121 and 124 LC); the one that is submitted to judicial approval (art. 127 LC); The one that can be challenged, by means of opposition by the legitimate persons (art. 1128 LC), without any reference to the viability plan appearing as an infringement of norms or as a cause of challenge; and the judge, ex officio, can reject (art. 131.1 LC), but limiting himself to strictly formal questions, not because he could interpret the "non-viability" of the plan in his own way.

 

Consequently, the appellant's motive for cassation must be upheld, because the judgment appealed against has upheld the appeal filed by the plaintiff based on the breach by the bankrupt of the viability plan that accompanied the agreement. Neither, for the aforementioned reasons, could the breach of the viability plan constitute the "ratio decidendi" of the appealed judgment, nor was the Court of Appeal entitled to declare the agreement breached, since only before the bankruptcy judge can the complaint be filed by the itself (art. 140.1 LC). Only the firm resolution of breach of the agreement implies the termination of the agreement and the disappearance of the effects on the credits (art. 140.4 LC), in relation to the non-binding effects. "

 

To conclude, as it is a study forum after the enactment of the consolidated text, we cannot fail to mention one of its many technical improvements. Legislative delegation allows the TRLC to introduce modifications to harmonize the existing legislation.

 

Although the jurisprudence had highlighted that it was unnecessary to transcribe the content of the agreement in the judgment that approves it TS, Civil section 1 of October 31, 2018 (ROJ: STS 3678/2018 - ECLI: ES: TS: 2018: 3678): " 4.- What is irrelevant, contrary to what was stated in the judgment of first instance, is that the judgment that approved the agreement reproduced or stopped reproducing any clause of the agreement in the judgment that approved it. No precept of the Bankruptcy Law provides that in the sentence that approves the agreement, it must be transcribed, in part or in full.. It is enough that the agreement that is approved is properly identified, which in this case also appears in a notarial document. The approval of the agreement affects its entirety, without it being possible to argue that some clauses were not approved for the simple fact that they were not included in the agreement approving judgment or supposing that they went unnoticed by creditors. "the highlight is ours.

Art 389 TRLC now expressly provides for the obligation to fully transcribe the agreement. Modification that brings cause of the incidence that the content of the agreement has for several institutions (commercial registry, property registry) as well as for the creditors.

Knowing the full content of the approved agreement is essential and its publication in the judgment provides legal certainty to all those who will be potentially affected by it.

Author: M Arántzazu Ortiz González, Magistrate of the Provincial Court of Mallorca and specialist in commercial matters

 

Fide, March 24, 2021

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