On April 16, it was held in Fide la 3rd session of the Cycle of Sessions of Fide on Impact on Bankruptcy Law derived from the Covid-19 Crisis, dedicated to the most urgent Precautionary Measures in Times of COVID-19. We have Adrian Thery, Lawyer. Garrigues partner and with Nuria Fachal, Magistrate of the Commercial Court 1 of A Coruña. The session was moderated by Rafael Fernandez Morlanes, Prosecutor, attached to the Barcelona Provincial Prosecutor's Office. Member of the Academic Council.
We collect below some reflections prepared by Nuria Fachal that were discussed in the session.
Regime for the adoption of precautionary measures in the contest
The art. 8.4º LC includes within the jurisdiction of the bankruptcy judge all precautionary measures that affect the bankrupt's assets, except those adopted in the processes regarding capacity, filiation, marriage and minors who are excluded from its objective sphere of competence, in accordance with No. 1 of the same article, as well as the precautionary measures agreed by the arbitrators in the arbitration proceedings. The same precept adds below that these exceptions to exclusive and exclusive jurisdiction are "Without prejudice to the competence of the contest judge to agree to suspend them, or request their lifting, when he considers that they may be detrimental to the processing of the contest": This provision will enable the insolvency judge to order the suspension of precautionary measures already decreed by judicial or administrative authorities, although the final paragraph of art. 8.4º LC makes it clear that in no caso may order its lifting, but for that purpose it must formulate a request addressed to the body that had agreed the measure so that it proceeds to leave it without effect; Later on, reference will be made to the use that the commercial courts have made of these powers and what has been the instrumental channel used in those cases. casos in which the requirements have not been met by their recipients.
In accordance with the aforementioned art. 8.4º LC, only the precautionary measures adopted in processes regarding capacity, filiation, marriage and minors, and those adopted in arbitration proceedings in which the bankrupt is a party, remain outside the exclusive and exclusive jurisdiction of the bankruptcy judge.
The general provision of art. 8.4º LC lacks a further development in the Bankruptcy Law, so doubts are raised about how to assemble the singularities of the bankruptcy process with the specialties contained in the Civil Procedure Law for the adoption of precautionary measures. Nor is it duly clarified whether the debtor is entitled to request the adoption of precautionary measures to ensure the integrity and / or preservation of his own assets or what the procedure to follow in such a case should be.
The art. 17 LC refers to the possibility of precautionary measures being adopted prior to the declaration of insolvency, although it is only foreseen for the event of necessary insolvency and at the request of whoever is entitled to initiate the necessary insolvency. Once the request is made, the bankruptcy judge may adopt the precautionary measures that it deems necessary to ensure the integrity of the debtor's assets, ruling on them when admitting the bankruptcy request for processing. Next, the precept refers in terms of the procedural channel that must govern its adoption to the provisions of the Civil Procedure Law, so that the processing must comply with articles 730 and following.
In the Ritual Law, the ordinary processing of precautionary measures requires a prior hearing of the defendant by holding a hearing that must follow the channels of the oral trial. For those cases in which this is reasoned, it is possible to adopt unheard of part, when justified by the existence of reasons of special urgency or in caso that the defendant's hearing may frustrate the effectiveness of the precautionary measure.
Normally, the precautionary claim will be formulated under the modality of deferred contradiction and will be decreed without the previous hearing of the defendant: note that art. 17 LC indicates that the judge may adopt the precautionary measure by admitting the necessary bankruptcy request to be processed and may ask the applicant to provide a bond to respond for any damages that the precautionary measures could produce to the debtor if the bankruptcy is not declared .
In section 3 of art. 17 LC provides that "Declared the contest or rejected the request, the judge of the contest will rule on the effectiveness of the precautionary measures". Therefore, as the essential content of the Order that resolves the request for the necessary contest –cfr. art. 20 LC-, the corresponding pronouncement must be included, whether to raise or to maintain the precautionary measures that were agreed in the Order of admission to processing of the bankruptcy application.
It is questioned whether the debtor can, in the request for voluntary bankruptcy, request the adoption of precautionary measures aimed at safeguarding the integrity of his own assets. In this regard, it has been understood that art. 17 LC only allows those who are legally entitled to request these measures to request the necessary bankruptcy, so the bankruptcy judge cannot agree to precautionary measures prior to the declaration of bankruptcy if the debtor himself has promoted this declaration –cfr. Madrid AAP nº 38/2015, of February 13, [JUR 2015/247972] -.
In our opinion, the Bankruptcy Law does not attribute to the debtor active legitimacy to formulate a petition of a precautionary nature so that it is decreed prior to the declaration of bankruptcy. However, the possibility of enacting measures aimed at ensuring the integrity of the debtor's assets, such as one of the pronouncements of the Writ of Declaration of Insolvency and at the request of the debtor himself, should be admitted. The diction of art. 21.1.4º LC endorses this interpretation, since this precept specifies the content of the insolvency declaration order and provides that it must include, in its caso, the pronouncements on the precautionary measures that the insolvency judge considers necessary to ensure the integrity, conservation or administration of the debtor's assets, although temporarily limited until the date of acceptance of the charge by the insolvency administration.
The vagueness of the terms in which art. 21.1.4º LC allows to affirm that in the car of declaration of voluntary bankruptcy the judge will be able to understand justified the measures concerned at the request of the party by the debtor himself, and not only those requested by the legitimized person to urge the necessary bankruptcy in accordance with article 17 LC: note that with respect to those that were urged by the latter, the contest judge had to rule in the order of admission to processing of the application –art. 17 LC-, unless the request had been submitted by a creditor and had been based on an embargo or an unsuccessful investigation of assets, or had led to an administrative or judicial declaration of insolvency, since in this case the judge will issue the insolvency declaration order on the first business day following –art. 15.1 LC-.
Specialties of article 43 of Royal Decree-Law No. 8/2020, of 17
In accordance with article 43 of Royal Decree-Law No. 8/2020, of March 17, of extraordinary urgent measures to face the economic and social impact of COVID-19, while the state of alarm is in force, the debtor who is in In a state of insolvency, they will not have the duty to request the declaration of insolvency.
It should be understood, as can be deduced from the wording of article 43 of Royal Decree-Law No. 8/2020, that the debtor is given the power not to file the application for insolvency while the state of alarm continues: what is suspended is the duty to request the declaration of insolvency in caso of current insolvency, as configured in article 5 LC.
The rule is completed with a provision that imposes the blocking of any necessary bankruptcy requests that may be made during the two months following the end of the state of alarm, since during that period the necessary bankruptcy requests that are would have presented during the state of alarm or those that occur during the aforementioned two months. If a request for a voluntary contest has been submitted, it will be accepted for processing, preferably, even if it was of a later date.
The Second Additional Provision of Royal Decree No. 463/2020, of March 14, which declares the state of alarm for the management of the health crisis situation caused by COVID-19, has the heading "Suspension of procedural deadlines" and in section 1 it establishes the following:
“Terms are suspended and the terms provided in the procedural laws for all jurisdictional orders are suspended and interrupted. The computation of the terms will be resumed at the moment in which this Royal Decree loses its validity or, in its caso, the extensions thereof”.
Therefore, as long as the state of alarm over the health crisis caused by COVID-19 continues, the deadlines provided in the procedural laws are suspended and interrupted.
However, in accordance with article 43 of Royal Decree-Law No. 8/2020 and the concordant regulations approved to deal with the health crisis caused by COVID-19, the possibility that the debtor may initiate the voluntary bankruptcy must be admitted if is in a situation of current or imminent insolvency during the time period for which the state of alarm is prolonged. The Commercial Court to which the request for voluntary bankruptcy is transferred - cfr. Article 86 ter, section 1, LOPJ- will have to proceed to issue a declaration of insolvency, given the true risk of causing irreparable damages in cases of delay in the declaration of insolvency.
In accordance with section 4 of the 2nd Additional Provision of Royal Decree No. 463/2020, it provides that "The judge or court may agree to the practice of any legal actions that are necessary to avoid irreparable damage to the rights and legitimate interests of the parties in the process". The effects caused by the declaration of bankruptcy advise not to incur excessive delays in the issuance of the Declaration of voluntary bankruptcy, not only during the period of time for which the state of alarm is prolonged.
Suspension of administrative deadlines during the state of alarm
The provision for suspension of administrative deadlines is contained in the Third Additional Provision of Royal Decree No. 463/2020, although it does not apply to tax procedures, as clarified in section 6:
"The suspension of the terms and the interruption of the administrative deadlines referred to in section 1 will not apply to tax deadlines, subject to special regulations, nor will it affect, in particular, the deadlines for filing returns and tax self-assessments ”.
The art. 33 RDL No. 8/2020 regulates the suspension of deadlines in the tax field and, for the purposes of interest here, the following should be highlighted:
§ In section 1 it is established that the deadlines to attend the requirements, seizure proceedings and requests for information with tax significance, to formulate allegations before acts of opening of said process or hearing, dictated in procedures for the application of taxes, penalties or declaration of nullity, return of undue income, rectification of material errors and
revocation, which have not concluded when the Royal Decree-Law enters into force, will be extended until April 30, 2020.
§ Additionally, within the administrative enforcement procedure, guarantees that fall on real estate will not be executed from the entry into force of this royal decree-law and until April 30, 2020.
§ Pursuant to section 2, the term established to meet the requirements, seizure procedures, requests for information or acts of opening the process of allegations or hearings that are communicated from the entry into force of this measure are extended until 20 May 2020, unless the one granted by the general rule is greater, in which caso this will apply.
In reality, despite the fact that art. 33 leads by rubric "Suspension of deadlines in the tax field", which, in reality, implies the use of an equivocal terminology, since cases of deferral of deadlines are regulated which, in the norm, are assimilated to a case of suspension. In short, compliance with tax obligations is deferred in the terms expressed in the regulation.
Through RDL No. 11/2020, of March 31, urgent complementary measures are adopted and, among them, a block referring to the tax field, among which is the application of the measures to suspend deadlines in the tax field of the art. 33 of RDL No. 8/2020 to the Autonomous Communities and Local Entities –v. gr. art 53-.
Articulation of precautionary protection in the contest in light of the regulations issued during the state of alarm.
The regulations referred to in the previous section allow us to conclude that, while the deferrals indicated in art. 33 RDL No. 8/2020, the administrative enforcement procedure that is in process will not continue with its processing. As we have indicated, arrivals on the dates indicated in art. 33 RDL No. 8/2020, unless the terms were made more flexible, it will be understood that the procedure is resumed in the state in which it was.
This is relevant in caso that the debtor chooses to request the declaration of voluntary insolvency during the validity of the state of alarm. The activation of the aforementioned deferrals will make it unnecessary to resort to any type of precautionary protection that the debtor could request when presenting the request for voluntary insolvency, whose purpose was the temporary stay of the executive actions that fall on goods and/or rights integrated in the active mass.
Once the state of alarm has ended, it may be necessary to resort to the precautionary protection that has been previously analyzed, in order to avoid the fragmentation and reduction of the active mass caused by the continuation of administrative enforcement procedures under the terms of the art. 55.1.2 LC. This will require a sufficiently solid justification on the part of the debtor, with an expression of the reasons that make it essential that the suspension of the executive actions that fall on assets and/or rights that are part of their assets. Throughout caso, it should be emphasized that the powers of self-protection recognized for public creditors require that the insolvency judge expressly rule on the non-necessary nature of the asset or right on which the administrative enforcement procedure falls. In this sense, the Special Conflicts Chamber has considered in STS of December 22, 2006, [RJ 2007/8690], that the powers of self-protection recognized to public creditors in art. 55, section 1, paragraph 2, LC specify that, once the bankruptcy has been declared, the Public Administration addresses the jurisdictional body [Juzgado de lo Mercantil] so that it decides whether the specific goods or rights on which it is intended to do cash the compulsion are or are not necessary for the continuation of the debtor's activity. Consequently, “If the judicial declaration is negative, the Administration recovers in its entirety the powers of execution. If, on the contrary, it is positive, it loses its competence, in the terms established in the aforementioned article 55 and with the effects provided in the third section for the hypothesis
of contravention ”.
On the other hand, we must examine whether during the validity of the state of alarm the creditor would be empowered to request the bankruptcy judge to adopt the necessary precautionary measures to ensure the integrity of the debtor's assets. Well, art. 43.1 of Royal Decree-Law No. 8/2020 establishes that, until two months have elapsed from the end of the state of alarm, the necessary bankruptcy applications that had been submitted during that state or that were present during those two months: consequently, if the creditor -legitimate to urge the necessary competition ex art. 3 LC- You cannot request the declaration of insolvency, nor can you make use of the power conferred by art. 17 LC to impose the indicated precautionary protection. This will happen until two months have elapsed from the end of the state of alarm, since during that time period the possibility of requesting the declaration of the necessary bankruptcy of the debtor is blocked.
This does not imply that the creditor cannot obtain effective protection of his credit right. Although the legal possibility of engaging the debtor's bankruptcy is temporarily limited, this does not prevent the creditor from taking legal action against him and, cumulatively or separately, bringing liability actions against the company administrators.
Author: Nuria Fachal, Specialist Magistrate in matters of the