Draft Bill for the Reform of the Insolvency Law

The Draft Bill for the Reform of the Insolvency Law, drafted by the Ministry of Justice, was published in July this year. The purpose of this Draft Bill is to adapt the insolvency law to the European Directive 2019/1023 on restructuring and insolvency.

Although it is a Preliminary Draft, that is, an initial text that may be subject to modifications until it becomes law, it is interesting to note the main changes that said text proposes in the current insolvency and pre-insolvency protocol.

(a) In addition to the existing figures of imminent insolvency and current insolvency, a new figure with its own characteristics is now introduced: the probability of insolvency. This would be a situation in which a company is at risk of insolvency and is offered public counsel in an attempt to avoid it.

(b) The pre-insolvency proceedings is eliminated, with a single restructuring plan proceedings being introduced, equivalent to refinancing and out-of-court payment agreements. This single restructuring plan proceedings has special features in the case of micro-companies, in an attempt to simplify the proceedings.

(c) A prepack is introduced, i.e. the sale plan of the pre-insolvency productive unit, which is confirmed in the insolvency proceedings.

(d) The possibilities of the creditors’ agreement are expanded, and it may now contain different contents for different creditors.

(e) The rules of the liquidation phase are modified in an attempt to speed it and make it more efficient.

(f) A new section is introduced for insolvency proceedings without assets, i.e. without assets worth seizing or with a market value lower than the foreseeable liquidation cost. In these cases, no insolvency administrator will be appointed, unless requested by 5% of the liabilities in the opposition phase.

Clearly, the amendment of the current process can be significant. However, it is important to carefully observe the changes that will be introduced in the coming months in the different phases of discussion and passing of the law.

Antoni Faixó
Dispute Resolution Area