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With the aim of managing the potential ramifications of the measures that have so far been implemented in the context of the COVID-19 crisis, the Spanish Government has approved Royal Decree-law 16/2020, of 28 April, of procedural and organisational measures to tackle COVID-19 connected to the administration of justice.
A package of measures have been implemented in relation to insolvency with the aim of (i) ensuring that companies are able to continue carrying on their business; (ii) offering incentives to finance those companies to cover temporary liquidity needs; and (iii) avoiding a likely increase in litigiousness connected to insolvency proceedings by adopting a set of rules to expedite those processes on a preferential basis.
The following measures have been approved to ensure that companies are able to continue carrying on their business:
As for the measures to boost financing for companies to cover temporary liquidity needs, these are as follows:
Finally, in the case of measures to expedite and give preferential treatment to insolvency proceedings and certain actions that will apply until one year has elapsed after the state of emergency was announced:
In addition, in order to give companies time to restructure their debt, to generate liquidity and/or offset losses, whether by returning to business as normal or by having access to credit or public grants, the deferral of the obligation to file for insolvency has been pushed back to 31 December 2020, whether or not the debtor has notified that negotiations have been opened with creditors to refinance its debt, to reach an out-of-court payment agreement or accessions to a preliminary proposal of arrangement.
It has also been established that judges shall not between the announcement of the state of emergency and 31 December 2020 admit for consideration mandatory insolvency petitions; insolvency petitions filed by the debtor will be given preference, even if filed at a later date.
Equally, as for pre-insolvency notices, if prior to 30 September 2020 the debtor serves notice that negotiations have been opened with creditors to reach a refinancing agreement, an out-of-court payments agreement or accessions to a preliminary proposal of creditors’ arrangement, the general provisions established by the Spanish Insolvency Law 22/2003, of 9 July, will apply.
In turn, during the year following the announcement of the state of emergency it shall be understood that a debtor has attempted to reach an out-of-court payment arrangement unsuccessfully if evidence is provided that the insolvency mediator has rejected their appointment twice for the purposes of opening subsequent insolvency proceedings (concurso consecutivo), and the court is informed thereof.
Finally, it has been established that the results of the current financial year will not count in the context of the legal ground for winding up a company due to losses or the mandatory reduction of its share capital; however, that is without prejudice to a company’s obligation to file for insolvency in accordance with the Royal Decree-law.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2024
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