The Official State Gazette (BOE) of 29 April published Royal Decree-Act 16/2020, of 28 April, laying down the procedural and organisational measures intended to address the slowdown caused by the COVID-19 crisis in matters of Justice Administration. 

Chapter II includes measures in the area of bankruptcy: 

1. Preferential procedures in matters of bankruptcies

For 1 year as from the declaration of the state of alarm (14th march), the following will be processed with preferential consideration: 

a) Bankruptcy incidents in labour-related matters.

b) Actions aimed at the transfer or disposal of production business units or the lump-sum sale of assets.

c) Proposals for agreements with creditors or modifications of those that were in period of compliance, as well as incidents challenging the judicial approval of the agreement.

d) Bankruptcy proceedings relating to the reincorporation of the workforce.

e) Acceptance to admit the application for approval of a refinancing agreement or modification to one in effect.

f) The adoption of protective measures and, in general, any other measures which, in the opinion of the bankruptcy judge, may contribute to maintaining and conserving assets and rights. 

2. Extension of the term to apply a voluntary bankruptcy situation

Until 31/12/2020, a debtor who is in a state of insolvency shall not be obliged to request a declaration of bankruptcy, whether or not notification pursuant to 5 (2) Bankruptcy Act has been served. 

Until 31/12/2020, judges shall not admit for processing any request for necessary bankruptcy that has been submitted as of the declaration of the state of alarm.  

If, before 31 December, 2020 the debtor has submitted a request for voluntary bankruptcy, it shall be admitted for processing preferentially, even if it were dated later than the request for involuntary bankruptcy. 

3. Suspension of grounds for dissolution due to losses

For the sole purpose of determining the existence of the grounds for dissolution provided by article 363.1 e) of the Corporations Act (equity or net worth below 50% of share capital due to losses), the losses in the year 2020 shall not be taken into consideration in calculating net worth. 

4. Challenging the inventory and list of creditors

In insolvency proceedings where the Bankruptcy Administration has not presented the provisional report, and in those which are declared within 2 years of the declaration of the state of alarm, the only admissible means of evidence in the incidents to challenge the inventory and the list of creditors shall be documentary and expert evidence, without the need for a hearing, unless the judge decides otherwise. 

5. Divestment of insolvency proceedings: Extrajudicial auctions

In bankruptcies declared within the year following the declaration of the state of alert and in those being processed on that date, the auction of assets and rights of the insolvency proceedings must be extrajudicial, even if the liquidation plan provides otherwise. An exception is made for the divestment of production units, which may be carried out by judicial or extrajudicial auction or any other method authorised by the judge. 

6. Approval of the liquidation plan

At the end of the state of alarm, when 15 days have passed as of the liquidation plan being presented in the court office, the judge must immediately issue an order approving the liquidation plan.

During the year following the declaration of the state of alert, the bankrupt party may present a proposal to modify the agreement during period of compliance.

7. Out-of-court settlement regarding payments

During the year following the declaration of the state of alarm, the out-of-court settlement regarding payments shall be considered to have been attempted by the debtor unsuccessfully, if it were demonstrated that there have been two failures by the bankruptcy mediator to accept appointment, for the purpose of initiating consecutive bankruptcy, notifying the Court of such circumstance. 

8. Bankruptcy agreements

8.1. Modification 

During the year following the declaration of the state of alert, the bankrupt party may present a proposal to modify the agreement during period of compliance. 

8.2 Non-compliance 

Within 6 months as from the declaration of the state of alert, bankrupt parties shall be notified of any requests for a declaration of non-compliance with the agreement that may be submitted by the creditors, allowing them to submit their proposal for modification. 

8.3. Postponement of the obligation to request opening the liquidation stage 

Within the term of 1 year as from the declaration of the state of alarm, debtors shall not be obliged to request liquidation, when they know that it is impossible to comply with payments pledged after approval of the insolvency agreement, provided the debtor presents a proposal for the agreement’s modification.  

The judge shall not issue an order initiating the liquidation stage even if the creditor demonstrates the existence of one of the circumstances that may substantiate it. 

8.4 Consideration of claims against the insolvency estate 

In the event of failure to comply with the agreement approved or modified within two years as from the declaration of the state of alert, claims against the insolvency estate shall be considered to be claims arising from cash revenue from loans, credit or other similar transactions that have been granted to the bankrupt party or arise from personal guarantees or liens in favour of the bankrupt party by any person, including persons especially related to the bankrupt party. 

9. Refinancing agreements

Within the term of 1 year as from the declaration of the state of alert, the debtor who had a refinancing agreement approved, may initiate negotiations with creditors to modify the agreement in effect or agree upon a new one. 

Within the 6 months following the date on which the state of alert were suspended, the judge shall pass on to the debtor any requests made by creditors to declare non-compliance with the refinancing agreement, in order to allow the debtor to modify it during the following month. 

10. Financing and payments by persons especially related to the debtor (better classification)

In arrangements with creditors declared within two years as from the declaration of the state of alert, ordinary claims shall include those arising from cash revenues from loans, credit or other similar transactions, which as of the declaration of the state of alert had been granted to the debtor by persons especially related to him or her. 

In arrangements with creditors declared within two years of the declaration of the state of alert, ordinary claims shall include those assumed by persons especially related to the debtor as a result of payments of ordinary or privileged claims made on the debtor’s account, as from the declaration of the state of alert. 

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