New Law modifying bankruptcy proceedings in Spain
The Congress has passed the draft of a new law regarding the modifications of the current bankruptcy proceedings law in Spain. The current law has been already modified by the Royal Decree 3/2009 dated March 27th, 2009 which established some urgent measures regarding tax and financial aspects of the bankruptcy proceedings. The lawmaker has tried to speed up such proceedings and reduce their costs.
The purpose of this new draft is to become bankruptcy proceedings in tools which can be easily used by the corporations, not only for winding up, but also as a way to try to save the corporation.
Other alternatives to the bankruptcy proceedings
The new draft provides other measures to try to save the corporation instead of starting a bankruptcy proceeding. This will help to reduce the amount of work that the civil courts have now in Spain.
Among others, these are some of the proposed measures:
- To promote the achievement of agreements for the refinancing with some of the creditors of the corporation, making those agreements valid in case of a future bankruptcy proceeding.
- To promote those out-of-court agreements for refinancing the corporation. These agreements would be profitable for the signing creditor and other creditors off the agreement as well.
To that end, the lawmaker points out the exclusive legitimation of the bankruptcy trustees or agents to impeach those agreements for refinancing. Moreover, the judge could validate these agreements as well. This judicial validation would affect all creditors, even if some creditors were not in favor or did not participate in the agreement, provided that these agreements are meant to save the company according to an outside and independent expert.
Creditors signing the agreement must represent at least 75% of the debt. If the agreement does not seriously damage the right of the minority creditors, the judge will validate the agreement to promote the feasibility of the corporation. This reform promotes credits to the corporations suffering the financial crisis.
Besides those pre-bankruptcy measures, the new draft introduces for the first time the regulation of the so-called “fresh money“, i.e., money paid by the accreditors to the corporation within the agreement of refinancing. A 50% of this “fresh money” would be qualified as crédito contra la masa (privilege credit), which means that it would be paid before other ordinary and privileged credits. This constitutes a higher guarantee for the creditor refinancing the corporation.
Development of the simplified proceeding
In order to reduce the procedural costs and time, the judge will be able to apply the simplified proceeding when he/she determines that the proceeding is not that complicated, based on objective data without detriment of his/her own personal evaluation. The same will apply when the debtor files an anticipated plan proposal regarding the transfer of the corporation or its liquidation in the event that there is no employee working for the corporation.
Trustees
The draft defends the professionalization of the trustees in charge of the bankruptcy proceedings. From now on, trustees will be allowed to correct errors in the creditors list, not being necessary anymore to file a complaint before the court to correct the list. This has been a major issue with regard to the length of the bankruptcy proceedings.
Giving more responsibilities to the trustees will reduce the amount of work of the civil courts in Spain. In any type of bankruptcy proceeding, it would be possible to appoint delegated assistants as well. Moreover, the trustee could be also a legal entity and not only a natural person.
Labor related reforms
The draft maintains the exclusivity of the civil courts to try any related issue to the bankruptcy proceeding, including the employment complaints and the reforms provided by the Royal Decree of 2009.
In addition, the draft includes all modifications provided by the lately labor reform and guarantees the rights of employees affected by the bankruptcy situation of the corporation
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