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Companies with economic difficulties

The pandemic situation led the BOE to legislate urgently, as it had never done before. Laws, Decree Laws, Emergency Decrees, etc… were published to control an unprecedented economic, social and health situation in the contemporary history of Spain.

The ICOS and ERTES triumphed as “saving” formulas in the short term, and specifically in the bankruptcy area, several Royal Decrees were issued that came to establish bankruptcy moratoriums.

The objective of these was to avoid the avalanche of bankruptcies of insolvent companies, whose insolvency could be definitive given the brake to zero of the country’s economy, concentrated in the spring of the 2020 financial year. The incessant legislative “bleeding” has affected related companies, especially in the restaurant, leisure, tourism sectors, etc… The deadlines for the return of the star formulas of this pandemic have been delayed, since an important secondary actor has been the constant moratorium on the obligation to file bankruptcy for companies with current or imminent insolvency. The truth is that this situation is coming to an end (we understand that it is definitive) on June 30, in parallel with the completion of ERTES extensions and ICOS deficiencies.

It seems that the current economy, characterized by “stagflation (stagnation of the economy + increase in inflation), if combined with the situation described above, will cause the “perfect storm” for the avalanche of insolvent companies.

Therefore, it is convenient to analyze what can happen to the company, which, being in a situation of current or imminent insolvency, does not present the voluntary bankruptcy before June 30.

There are several consequences; namely:

  • Possibility of necessary contest urged by a third party. Until now
    this option was shielded -until June 30-, but if you do not urge
    your voluntary contest before June 30, will be unprotected
    some against third parties.

The risk that the necessary insolvency proceeding will be, on the one hand, that the powers of the administrator are suspended, and on the other, that the risk that the insolvency may be classified as guilty (and have its consequences for the administrator and accomplices), given
account the manifest impossibility of any preparation of the contest with the necessary time, since a short period (20 days) will be available to be able to defend a situation of insolvency.

Furthermore, no one is unaware that it is not the same thing that the corporate administrator controls the voluntary creditors’ meeting, that they urge you to file a meeting and that, in the event of not being able to prove solvency, finding yourself in “the hands of the bankruptcy administrator” within a month or two from the presentation of the necessary bankruptcy.

It is important to present the contest on time, to avoid possible responsibilities in the qualification of the contest. Let’s think that one of the most recurrent reasons in the guilty qualification of a contest is the late presentation of it. And for this we have a very obvious and simple fact, a tax quarter. In other words, if we have to owe any amount to the TGSS or AEAT, we can normally avoid a faulty classification, if we do not go beyond 3 months from the non-payment of said tax obligations. Not being a strict norm of success (like everything in the contentious world), it is true that it is a very infallible norm.

Needless to say that the “closing of the shutter” is prohibited/persecuted, and to think that the debts remain within the premises or closed warehouse. Let us remember that the post-pandemic administration is “thin” and “hungry”, which is why economic responsibility is being derived from companies and administrators in amounts never seen before in Spain.

The article 43 of the LGT (Law 58/2003 of December 17), is very clear in this sense, and opens a range of possibilities of difficult escape.

Therefore, we openly recommend that, if a company is or plans to be in a short-term insolvency situation, and cannot meet its current obligations (also tax), that it file a voluntary bankruptcy.

And one last point, which is no less important for that, let us remember that from one “moment to another” the draft of the new Bankruptcy Law, which is being debated in Parliament, will be approved, and the modifications are very substantial, and less
favorable to the debtor.

In our office we have proven experience in bankruptcy matters and true
legal and tax specialists, will support you to get out unscathed from such a challenge.

Article writing
bankruptcy section