The Government of Spain has extended the bankruptcy moratorium for the third time until 30th June 2022. Insolvency debtors will not have a legal obligation to file for bankruptcy until the middle of next year.
Insolvency or bankruptcy, take place when a company fail to pay their debts. Insolvency declaration leads to a bankruptcy proceeding. Corporate restructuring takes place when a company encounters a difficult situation and management decides to change the outer and inner structure and direction of the company.
Declaring insolvency proceedings in Spain entails its consideration as “main bankruptcy” and implies the inclusion of the debtor’s assets, regardless of whether or not they are in Spain, and that, with certain exceptions, Spanish law applies.
Although Royal Decree-Law 5/2021 exempts directors from the duty to file for insolvency proceedings, it does not exempt them from the responsibility to avoid the winding-up of the company.
Pre-bankruptcy mechanisms and labour, corporate or procedural measures can prevent and restrain the high number of insolvency filings expected following the insolvency moratorium in Spain.
Official data reveal a sharp increase in insolvency filings in 2021. Estimates suggest that after the extended moratorium on insolvency proceedings until 31 December, the number of insolvency proceedings will rise significantly.
Royal Decree Law 34/2020, published on 18 November 2020, establishes an extension of the insolvency moratorium (previously established until 31 December 2020) until 14 March 2021.
Pre-insolvency is a procedure defined in Article 5 of the Insolvency Law in Spain as a final extension for the company to redirect its financial/economic situation.
The crisis may drive companies into insolvency. In these cases, the management body must adopt the fairest solution for all creditors, with the purpose to resolve the critical situation of the company. Pre-insolvency may be an alternative.
This informative note deals with the procedural and organizational measures to deal with COVID-19 in the field of the Administration of Justice in Spain, as included in Law 3/2020, of 18 September. We analyze its chapters and summarize their most relevant points.
In the following informative note, we address the Royal Legislative Decree 1/2020, of 5 May, that approves the redrafted text of the Insolvency Law, and revises its structure and key characteristics.