We analyze the main measures adopted in bankruptcy matter after the entry into force of Royal Decree-Law 16/2020 of April 28, on procedural and organizational measures to deal with COVID-19 in the area of the Administration of Justice.
Mainly these measures have been aimed at avoiding the collapse of the Commercial Courts, and at giving some respite and greater flexibility in terms to companies that may have economic problems as a consequence of COVID-19.
These measures have also been addressed to companies that are currently in bankruptcy or in the stage of agreement fulfillment. These are, in summary, the main measures:
a) FOR COMPETITIONS AND AGREEMENTS IN PROGRESS:
- In insolvency agreements in compliance period, the agreement or the out-of-court payment agreement may be modified, with the same majorities required up to now.
- Requests for a declaration of non-compliance with an agreement or extrajudicial payment agreements will not be accepted in the 6 months after the declaration of the state of alarm.
- The duty to request the opening of the liquidation phase is postponed for a period of one year from the declaration of the state of alarm, and a proposal to modify the agreement must be submitted.
- No opening orders will be issued for the liquidation phase within one year from the declaration of the state of alarm.
- In case of breach of the agreement approved or modified within two years from the declaration of the state of alarm, loans and credits granted to the bankrupt will be considered credits against the estate.
- Possibility of modifying the refinancing agreement or starting the process to reach a new one within a year from the declaration of the state of alarm.
- It is confirmed that the bankrupt companies can present an ERTE.
b) FOR FUTURE CONTESTS
- Postponement of the contest submission duty until December 31, 2020.
- Inadmissibility for processing of necessary bankruptcy applications presented since the declaration of the state of alarm, with preference for admission to the voluntary bankruptcy.
- To facilitate the financing of the company, ordinary loans will be considered those financing operations formalized with people related to the bankrupt within the 2 years following the declaration of the state of alarm.
- In the contests in which they have not yet been presented, and for the contests that are declared in the 2 years after the declaration of the state of alarm, the hearings will be eliminated (except criteria against the Judge) in the inventory challenge incidents and the list of creditors by elimination of view.
- To avoid the collapse and the increase in litigation, they will be processed preferentially within one year after the declaration of the state of alarm of:
- Incidents in labor matters
- Actions for disposal of production units or sale in wolf of the elements of the asset
- Proposal of agreement or modification of agreements in compliance period
- Incidents of reintegration of the active mass
- Applications for approval of a refinancing agreement or modification of the current one
- Adoption of precautionary measures and others that may contribute to the maintenance and conservation of assets
- Extrajudicial processing of auctions of goods and rights of the active mass, except the whole of the company or productive unit, which may be in judicial or extrajudicial headquarters.
- The Court must issue an immediate order, within a period of 15 days, of approval of the liquidation plan that had already been revealed in the Court's office, and may introduce modifications.
- During the year following the declaration of the state of alarm, an out-of-court payment agreement will be considered if two non-acceptance by the bankruptcy mediator occur.
- The losses for the financial year 2020 will not be taken into account for the purposes of determining whether a company is in the process of dissolution due to a reduction in net assets below half of the share capital.
Regardless of the temporary relief that some of these measures entail, the best recommendation that can be given in bankruptcy material is to carry out an early diagnosis of the economic and legal situation of the company, since its viability depends largely on the early decision-making as well as the adoption of the preventive measures that are necessary in attention to each particular case.
Unfortunately, one of the factors that most influences a bad result of a bankruptcy is to reach it in a critical situation, to resort to said mechanism when the economic situation is already irreversible.
