Restructuring & Insolvency Newsletter - December 2021 | News

Insolvency moratorium extended until June 30, 2022

The Official State Gazette (BOE) of November 24 last published the Royal Decree-Law 27/2021, dated November 23, on the extension of certain economic measures to support recovery. Such act, among other aspects, extends until 2022 the application of company-favorable schemes regarding insolvency, corporate, administrative and public aid.

As for insolvency, the most remarkable feature remains on the extension until June 30, 2022 of the suspension of the debtor’s duty to file for insolvency. From said date on, the legal period of two months available to the debtor to request the opening of its insolvency proceeding will begin to run. Furthermore, any insolvency proceeding application filed by creditors is also suspended until June 30, 2022. In the event that the debtor applies for insolvency proceedings until such date, such application will be admitted to processing with preference to any application filed by creditors (even if these were filed prior to the debtor’s application).

For more information on the content of the Royal Decree-Law click here.

Preliminary Insolvency Law Reform Bill published

On August 3, the government made the Preliminary Bill to reform the Recast Insolvency Law publicly available. It can be read (in Spanish) here.

This preliminary bill has been drawn up to transpose Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt. For further information on the content of the Directive, click here.

Although changes, amendments and modifications may be added to the approved preliminary bill during its passage through parliament, the most important components to be mentioned in a preliminary commentary are: (i) the particular attention paid to pre-insolvency solutions as an alternative to the insolvency proceeding; (ii) the implementation of a special proceeding for micro enterprises; or (iii) the improvements in relation to the treatment of the pre-pack and fresh-start.

The report on the Preliminary Bill made by the General Council of the Judiciary can be read (in Spanish) here.

Code of Good Practices for renegotiating financing guaranteed by ICO, CESCE and CERSA approved

The main aim of the Code of Good Practices, which was approved in a decision by the Secretary of State for Economy and Business Support on May 12, 2021, is to provide a voluntary framework that may be adhered to by financial institutions which have benefited from public guarantees since March 17, 2020.

Three measures are provided aimed at strengthening the solvency of companies that received guaranteed financing, subject to specific timing requirements: (i) a new extension of maturity dates; (ii) an option to convert the financing under the guaranteed transactions into participation loans, and retain the public guarantee; and (iii) a reduction to the principal sum of the guaranteed financing through transfers made by the government, as a last resort.

The Code also contains coordination and information measures among all adhered entities that had provided guaranteed financing to businesses and the self-employed.

For further information on the Code of Good Practices click here.

Time period to apply for Covid guarantees extended and rules on collecting enforced guarantees implemented

The Council of Ministers’ has agreed to extend the time period to apply for Covid guarantees granted to businesses and the self-employed until December 1, 2021, by Decision delivered on May 11, 2021, published in the decision on May 12, 2021, by the Secretary of State for Economy and Business Support.

Among other matters, it implements the collection rules applicable to these guarantees and provides a number of rules for management of the insolvency proceeding on the guaranteed debtor, such as subrogation of the Ministry for Economic Affairs and Digital Transformation in the financing transactions for the guarantees managed by ICO on behalf of it, the financial institution's duty to notify the claim to the insolvency practitioner and to send that notification to ICO and to the Government Lawyer's Office, as well as to analyze the proposals for an arrangement made within the insolvency proceeding. Additionally, the ranking and the priority for payment of the guaranteed claim are specified.

Following the initiative promoted by the Barcelona and Madrid courts, Balearic Island commercial judges agree on a pre-pack insolvency protocol to facilitate transfers of productive units

A meeting of Balearic Island commercial judges approved, at a session held on April 4, 2021, a pre-pack insolvency protocol, similar to the one approved by Barcelona commercial judges in January and following the approval of another one by Madrid commercial judges.

This new agreement determines that the suitable procedure for implementing the concept is the notice of debtor’s negotiations under article 583 of the Recast Insolvency Law, together with the application for appointment of an independent expert or restructuring practitioner who, unless there is good reason not to, will later be appointed insolvency practitioner if an insolvency order is issued.

During the pre-insolvency phase, the functions of the restructuring expert will include assisting and supervising the debtor in the search for investors for a future transfer of a productive unit and preparing a final report on the conducted bidding process. That report will have to accompany the petition for an insolvency order on the debtor, which needs to fulfill the procedure in article 530 of the Recast Insolvency Law, meaning that a binding purchase proposal must be attached to it.

Following the insolvency order, the proposal will be made available for ten days for comments by the creditors or any interested party. After the insolvency practitioner issues their report on the liquidation plan, the judge will render a decision authorizing or denying the requested transfer.

Check here the map with the update of the pre-pack situation in Spain.