Companies with financial problems, under the bankruptcy laws or under the law of second chance, will have the option of suspending any of the special executions that have been processed -embargos, judicial executions, tax interventions …- to favor the negotiations of a "preventive restructuring plan", which currently lasts four months and could now be extended up to one year. In addition, entrepreneurs indebted or pressured by defaults will only need three years to access the procedure of full exoneration of debts, instead of the five that appear in the current legislation.
These are two of the most important points of the new insolvency directive approved by the Council of Europe, which amplifies the economic-business aspects of insolvency and improves the efficiency and speed of insolvency decisions, taking as a model the procedure of Chapter 11 of the Bankruptcy Law of the United States.
The General Council of Economists (CGE), through the Registry of Forensic Economists (Refor), emphasizes that this directive gives more weight to the second opportunity with the reduction of the debt forgiveness period, with what is intended to contribute to the use widespread of this procedure by entrepreneurs.
For Alberto Velasco, technical secretary of Refor, the transposition of this European directive will update the bankruptcy regulation in Spain with respect to the European one, since the draft of the consolidated text of the Bankruptcy Act had become obsolete even before its approval. "Now they are going to propose more in-depth reforms for their adaptation to our country, which will result in a law better adapted to our business needs."
The main measures of this new legislation are to give impetus to early warning of insolvency, through preventive restructuring frameworks: debtors can activate it in order to avoid insolvency and ensure its viability, thus protecting employment, activity business and the rights of creditors. Likewise, it will be possible to resort to a general administrator who facilitates the negotiations and helps to prepare a restructuring plan for the company.
Velasco emphasizes that the objective is "to facilitate the negotiations on the plans of renewal and the suspension of the singular executions". Reduce non-performing loans and NPLs – so-called "empty portfolio" loans, refinanced or delayed by mutual agreement – and eliminate obstacles that impede the flow of cross-border investment
-Which would facilitate the sources of financing, especially for SMEs- are other aspects regulated in this new law.
Although the European proposal has been well received, Refor economists criticize that some of its aspects have not been adequately developed and may generate doubts in its interpretation. The greatest concern arises from the fact that possible exceptions have been maintained for public credit which, in the case of Spain, maintains certain privileges that it would have to put on hold. "This aspect should be further specified, just as there is a missing chapter dedicated to SMEs. Spain has a special characteristic, since, unlike Europe, the majority of Spanish companies are micro-SMEs, which should have their own section adapted to their special needs, "says Velasco. In Spain, 98% of the business fabric is made up of this type of company.
For 2019, a general increase in the number of insolvencies is expected in some of the main European countries. According to the forecast of the credit company Euler Hermes, the United Kingdom will be the most affected country, with an increase of 9% because of Brexit. In France, Italy and Spain will grow by 2%, in Germany they will stagnate and in Portugal they will decrease up to 5%
With these forecasts, the president of the CGE, Valentí Pich, believes that the new text "can contribute to a more efficient treatment of bankruptcy proceedings, favoring the use of second-chance mechanisms, restructuring agreements and refinancing by of the entrepreneurs ».
On the other hand, the president of the Refor, Alfred Albiol, understands that this directive comes at a "very opportune" moment, taking into account the forecasts that point to an increase in insolvencies in most of the countries of the European Union. "This directive will establish important changes in the role of the professionals involved in these procedures. Everything points in the direction of an early intervention of the insolvency professionals to try to solve problems before it is too late ».
The Ministry of Economy has two years to transpose the European directive and incorporate it into national legislation. As last June 26 was published in the Official Gazette of the European Union, the Spanish Government has until June 27, 2021 to finish all the procedures, although any modification of the original text will have to be submitted before January 17, this year.
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