The revised text of the Bankruptcy Law does not repeal the bankruptcy measures approved on the occasion of the COVID-19 crisis

• We collect below the main novelties presented by the Consolidated Text of the Bankruptcy Law (TRLConc), published in the BOE on May 7, 2020 and which will come into force next September, with respect to the current Bankruptcy Law.

The prohibition of dismissals during the six months after June 30 (that is, during the second semester of this year) by companies that on that date finalize their Temporary Employment Regulation File (ERTE) processed by force majeure as a result of COVID-19 and that involve contract suspensions or reductions in working hours «the commitment to maintain employment will not be applicable in those companies in which there is a risk of bankruptcy in the terms of article 5.2 of the Bankruptcy Law ». This precept establishes that “unless there is evidence to the contrary, it will be presumed that the debtor has known his state of insolvency when any of the events that may serve as the basis for a necessary bankruptcy request have occurred …”

This is established in the agreement signed by the Government, employers and unions on the extension of the ERDE until June 30, leaving therefore its termination unrelated to the lifting of the state of alarm. It is therefore to be assumed that from this date, there will be a wave of creditors’ pre-bankruptcies, so it is more interesting to know the Consolidated Text of the Bankruptcy Law (TRLConc), approved by Royal Legislative Decree 1/2020 of 5 May and published in the BOE on May 7, 2020.

However, the second final provision of the TRLConc establishes that this legislative text will not enter into force until next September 1, that is, one month after the ERTEs decline and many companies begin to present the pre-bankruptcy during the period of The company has three months to renegotiate a financing agreement with its creditors before submitting the request for the final declaration of insolvency to the court.

It must also be borne in mind that the TRLConc does not imply the repeal of the urgent insolvency measures that have been approved on the occasion of the COVID-19 crisis, as established by Royal Decree-Law 16/2020, of April 28 , on measures procedural and organizational to deal with COVID-19 in the field of the Administration of Justice, so that both regulations will temporarily coexist.

Apart from the influence that the new TRLConc may have on the possibility of firing companies today subject to an ERTE related to the health crisis, the new consolidated text of the Bankruptcy Law presents new features compared to Law 22/2003, of 9 July, Bankruptcy , highlighting the following:

– In the declaration of bankruptcy, the current criterion that allows the consolidation of inventories and lists of creditors in bankruptcies declared jointly or accumulated when there is confusion of assets is modified for the sole purposes of preparing the report of the bankruptcy administration and is replaced by the power of the judge to exceptionally agree on the consolidation of masses of said contests.

– The competence of the bankruptcy judge is expanded to hear liability actions against administrators or liquidators, when these are directed against the natural person representing the administrator of a legal entity and the one that has the powers attributed to higher management when there is no permanent delegation of powers. It also introduces the power of the commercial judge for the joint declaration or accumulation of contests of a non-entrepreneur natural person, a natural entrepreneur or a legal person.

– Regarding the effects of the bankruptcy declaration, it is established that the payment made to the bankrupt will release the debtor (without the need for validation by the bankruptcy administration) if, at the time of making the provision, the debtor was unaware of the bankruptcy declaration, presuming such knowledge since the publication of the declaration of insolvency in the BOE. On the other hand, the sanction of nullity is incorporated to the actions that contravene the suspension of actions and enforcement procedures against the assets of the active mass.

– The concept of productive unit is included , which is defined as the set of means organized for the exercise of an essential or accessory economic activity. In the sale of a productive unit, the competence to declare the existence of a company succession and determine its effects on outstanding credits corresponds exclusively to the bankruptcy judge.

– In the bankruptcy administration report, the cases in which it is possible to modify the definitive list of creditors are expanded, and may be modified in those cases in which appeals filed against resolutions of the bankruptcy judge in incidents of contesting the list are deemed creditors.

– When approving the agreement , it is established that the judge will not be able to modify its content except to correct material or calculation errors, or to correctly interpret any of its clauses. In addition, the sentence must include the full text of the approved agreement. In addition, the content of the agreement will bind the debtor and ordinary creditors whose credits were prior to the bankruptcy, although they had not adhered to the agreement proposal or voted in favor of it, as established in the ruling of the First Chamber of the Supreme Court of 4 November 2016.

– In the preparation of the liquidation plan, not only the interest of the bankruptcy, but also the most adequate satisfaction of the creditors will be taken into account. In addition, the bankruptcy administration may request the judge at any time to modify the approved liquidation plan if it deems it convenient for the interest of the bankruptcy and the quickest satisfaction of the creditors.

– Only the bankruptcy administration and the Public Prosecutor’s Office have the power to propose the classification of the bankruptcy, so that creditors and other interested parties may only allege in writing what they consider relevant so that they can establish the classification as guilty. In the judgment of qualification resulting in a plurality of convicted persons, the judge may establish solidarity or not between them, according to the doctrine of the judgment of the First Chamber of the Supreme Court of March 6, 2019.

– In its accountability report , the insolvency administration will also express the remuneration that had been set for each phase of the contest and the amounts finally received by it, its workers, delegated assistants, expert appraisers and specialized entities, and will detail the hours dedicated to the contest for all these people.

– The refinancing agreements must respond to a viability plan that allows the professional or business continuity of the debtor in the short and medium term and, in order to calculate the majority of the financial liability, the creditors with real guarantee are identified with the creditors with special privilege. It is established, on the other hand, that the competence for the approval of a group or subgroup refinancing agreement corresponds to the judge that is competent for the declaration of insolvency of the parent company, or, if it has not signed the agreement, that of the group company with the highest financial liability that participates in the agreement.