One of the great novelties of the current bankruptcy reform is the chapter on business restructuring.

A complicated chapter, but decisive when it comes to refloating companies in a situation of insolvency, but with parameters that show possibilities of survival after the procedure.

The new restructuring procedure is one of the tools that the Ministries of Economic Affairs and Justice plan to implement in view of the avalanche of competitions that will be requested once the current moratorium ends.

Stay of executions
The communication of the beginning of the restructuring procedure is that the debtor can enjoy a temporary stoppage or suspension of singular, judicial or extrajudicial executions, on the assets necessary to continue with their business activity, in order to facilitate the negotiations of that plan restructuring.

This continuity should serve to preserve the value of the company and if the negotiations are successful, maximize the excess value associated with a pre-bankruptcy restructuring.

The Bankruptcy Reform Draft Law opts for a very broad definition of the concept of restructuring plans and includes the restructuring measures that affect both liabilities and assets.

The standard also includes the option of homologate a restructuring plan that provides for the sale of parts or even the entire company, the so-called liquidation plans, which can be an attractive option, in particular, for SMEs.

Guarantees required by law
The law links these guarantees to the concurrence of three fundamental elements: a correct configuration of the classes of creditors affected by the restructuring plan, who are going to make the decision; a favorable qualified majority within each of these classes and, finally, respect for a minimum economic value when there are dissident creditors or classes of creditors.

Indefinite professional figure
However, as with many other aspects of the articulated future, the figure of the restructuring expert is blurred, since, as the Council of Economists has pointed out, the Draft Draft is limited “to the mere generic requirement of having specialized knowledge, the sufficiency of which may be , in any case, evaluated by the contest judge “.

The Council of Economists points out, through its note on the urgent analysis of the draft text, that this lack of specificity is far removed from the highly qualified professionalized models that are used in other countries where the Directive has already been transposed, such as such as the United Kingdom (with its financial professionals with a special license for the exercise of this function -Monitors-) or Italy (where this function falls mainly on the highly qualified financial experts Dottori Commercialisti).

This situation leaves this professional figure in a similar lack of definition, as occurs with the figure of the bankruptcy administrator, whose regulations have been frozen for years and without publication visions, which mediates the training requirements and updating of knowledge of these professionals, among others. stuff.

A very heterogeneous matter
The Preamble to the regulation recognizes the difficulty of regulating restructuring, since “no two restructurings are the same and, therefore, the regulatory framework must be sufficiently agile, flexible and versatile to be able to adapt to the particularities of each case”.

New pre-bankruptcy instrument
Thus, these restructuring plans are introduced, which are a pre-bankruptcy instrument aimed at avoiding or overcoming insolvency, which seeks to act in a situation of difficulties prior to that of the current pre-bankruptcy instruments, which seeks to eliminate the stigma associated with bankruptcy.

This new procedure tries to contribute to the decongestion of the courts, threatened by an avalanche of competitions as a result of the pandemic.

The role of the judge in this phase
As in the right that is repealed, the intervention of a judicial authority is reduced to two different and independent moments: the communication of the opening of negotiations with the creditors and the confirmation or approval of the restructuring plan reached.

The law thus leaves it to the affected parties to privately negotiate and reach an agreement on the restructuring plan, and limits itself to setting a regulatory framework in order to facilitate this collective bargaining, guaranteeing minimum safeguards of the process and the outcome of the proceedings. negotiation, and

ensure a balance between protecting the interests of the majority and adequate protection of dissenting affected parties.

What companies will be welcomed?
The recipient of this pre-bankruptcy system will be any natural or legal person that carries out a business and professional activity and that is not included within the scope of the new special procedure for micro-SMEs.

In this way, a debtor who is likely to be insolvent cannot be the subject of a bankruptcy, but can use the mechanisms that make up the pre-bankruptcy law.

Companies will be able to avail themselves of restructuring plans in a situation of probability of insolvency, prior to the imminent insolvency required to be able to resort to the current instruments. Therefore, the current pre-bankruptcy instruments, which have not worked in practice since their entry into force, are abolished.

In the regulation of the restructuring plans, an attempt has been made to eliminate many procedural requirements from the refinancing agreements and elements that the legislator expects to achieve greater efficiency have been incorporated, such as the possibility of dragging out dissident classes, subject to compliance. of certain safeguards for creditors, which constitutes the core of the model.

The limit of the contest required
As long as the company is economically viable, its restructuring is justified to avoid the risks of destruction of value associated with the bankruptcy procedure, which will not imply that the right of every creditor to request the insolvent debtor is going to be restricted. For this reason, the only time limit to the restructuring of companies in a current insolvency situation is the one that has already been admitted for processing a necessary bankruptcy application.

Three months extendable
The norm regulates the possibility of extending the effects of the communication for periods of three months up to a maximum term of 12 for very complex negotiations, which involve many and heterogeneous creditors and shareholders.

Communication effects
The most important novelty concerns the cases in which it is the debtor who voluntarily requests the bankruptcy, so that the application may be suspended when there are probabilities of reaching a restructuring plan in a short period of time to prevent the debtor from frustrating the adoption of the a restructuring plan with negotiations well advanced.

An informal vote
The negotiation and voting of the plan is informal and outside of any regulated process or the intervention of any judicial authority, without prejudice to the possible appointment of an expert in restructuring, when imperatively appropriate or at the request of the parties. The judge only intervenes at the end of the process, to approve the plan already approved by the classes and majorities required by law.

Dissenting creditors
Recourse to the special regime will be necessary when it is intended to extend its effects to dissident creditors within a class, to entire classes of dissident creditors or even to partners, that is, when the general rules of civil or commercial law are excepted. .

In the same vein, recourse to this special regime must be used when it comes to protecting the plan and the guarantees, acts or businesses provided for in it of the general rules on bankruptcy rescission actions or, where appropriate, granting certain privileges to the financing granted or committed in the context of a restructuring plan, in the event of subsequent bankruptcy.

Definition of affected credits
Affected credits are those that, in accordance with the plan, will undergo a modification of their terms or conditions, regardless of whether their real value is also altered. The law leaves the interested parties to decide, depending on the needs of each case and the negotiation process, whether they want to affect the entire liability or only a part, and the amount or identity of this.

The judicial control over how the credits have been grouped to form the different classes presupposes a control over how that perimeter of affectation has been delimited and guarantees that it responds to objective and sufficiently justified criteria. The only exception to the principle of universality of the liability susceptible to affectation are public credits, labor credits, food credits and extra-contractual ones.

Weighting of the vote cast
The law contains rules on how credits must be computed for the purposes of weighing the vote cast. Many of them come from current legislation, but an important novelty has been added to solve a common problem in practice, such as the valuation of contingent credits.

As in the case of communication, the law establishes the general principle of validity of contracts with reciprocal obligations pending fulfillment, with the novelty that the law declares the clauses of change of control that a capitalization of credits may cause ineffective.

The law introduces another novelty taken from the bankruptcy procedure and from other systems in our environment: the possibility of terminating contracts in the interest of restructuring, including, with some additional specialty, senior management contracts.

This novelty is, therefore, one of the few special rules that are established in the text in relation to the restructuring of the asset.

Voting by class
For the approval of the restructuring plan, the affected loans must vote separated by classes according to their nature, which is not new, but as the Directive extends the scope of liabilities that may be affected, the formation of classes is more complex.

The law provides several criteria to determine how these classes should be formed.

After the general clause taken from the Directive, and which refers to the existence of a common interest of the creditors that are members of each class, the law indicates that the main parameter to form the classes must be the bankruptcy credit ranges: credits with ranges Different insolvencies must be separated into different classes.

In addition, credits of the same rank are allowed to be separated by classes taking into account data such as their financial or non-financial nature; the asset on which its guarantee rests in the case of guaranteed credits; how they will be affected by the plan, when credits of the same nature are to receive instruments of a different nature; and in particular that their owners are small or medium-sized companies that may be particularly affected by the restructuring.

Silence in contractual agreements
The law is silent in relation to contractual subordination agreements, leaving the internal voting mechanisms themselves to be the ones that, where appropriate, play and are outsourced. Although the formation of the classes will be controlled later, in the homologation phase, as a novelty, the interested parties are granted the option of requesting a prior judicial confirmation before the competent judicial authority.

This option may be useful for cases in which, during the negotiation phase of the plan, there is a disparity of criteria between the affected subjects on the classes formed and it is preferable to clear up doubts without having to wait until the end of the entire process .

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