The measure, passed in march of 2020 in order to mitigate the impact of COVID-19, suspends the legal obligation of the companies to apply for the contest of creditors when they are in a situation of insolvency, negative equity, etc.
After more than two years of chain extensions end definitely the June 30, unless otherwise agreed upon an extension of the last hour
The companies that are in because of the competition must submit an application in the period of 2 months in order to avoid the responsibility of the administrator
In the midst of the explosion of the pandemic of COVID-19, as of march 2020, the Spanish Government passed numerous measures of an emergency with the aim of alleviating the economic impact caused by the pandemic. One of them was the suspension of the duty to request the declaration of bankruptcy on the part of the companies insolvent and the rejection for consideration of the applications of competition necessary that they present the creditors.
This measure, which was expected to last only a few months ago, has finished stretching over two years through successive extensions, set to expire June 30, 2022, likely permanently.
What are the legal effects it will have on the end of the measure?
With the end of the moratorium back to the enforceability of the obligation of the companies insolvent apply for the contest of creditors, so that in case of breach of the duty to submit bankruptcy petition the directors may incur personal liability.
In addition, with the end of the moratorium, the creditors will have a free way to apply for the competition necessary in relation to those companies that, despite being in a situation of insolvency, have not obtained the competition voluntarily, which has consequences far more harmful to the society in debt.
Collapse judicial
If not it returns to extend this moratorium, a very high number of companies will be forced to push for competition of creditors to not have yet sufficient resources to rebalance their balance sheets.
It is true that the economic impact of the pandemic has been lowered considerably with the recovery of the normal activity, but now the war in Ukraine has generated a strong inflation, especially in energy prices, which has ralentitzat significantly to the economic recovery of the Spanish business fabric.
All this will, predictably, there will be a flood of applications of insolvency in the next two months, which can collapse the Court's Business, which will take you paired the lengthening sine die of the insolvency proceedings.
Growth of non-performing loans
During the period of validity of the suspension of the obligation to demand the competition of creditors, many companies have been taking advantage of the various support approved by the COVID-19 although, many have not been able to address the situation and improve their economic situation to avoid the contest.
This will result in a large number of Spanish companies do not have assets sufficient to deal with their debts and produced many defaults, which will go up considerably the rate of default.
Reform of the Insolvency Act
Months ago it was announced that the intention of the Spanish Government was to pass a reform of the Insolvency Act before June 30, 2022 to avoid having to extend again the moratorium on bankruptcy, as it has been doing for more than 2 years, and halt the flood of requests for a contest of creditors, and the possible collapse of the Courts commercial.
Currently, the reform is still in parliament and in the absence of a week by the end of the moratorium, there is no news, nor on the approval of this reform, or on a possible extension of the measure. Therefore, it seems inevitable that the June 30, triggering the avalanche of competitions, by producing a collapse of the courts and a significant increase of non-performing loans.
For this reason, it may be interesting that companies in a situation of insolvency begin to study the possibility of resorting to some of the mechanisms preconcursals required to by law, that boren via agreements out-of-court pay-per-view or refinancing, or, directly from the contest. Do not submit a tender or preconcurs in a period of two months from 30 June may involve personal responsibility of the administrator.
