New extrajudicial payment agreement in Spanish insolvency law
The Spanish so called “Entrepreneurs´ Law”, Ley 12/2013, introduces an important change to the scenario of extrajudicial agreements aimed at avoiding liquidation proceedings (bankruptcy). Effective from 18 October, a debtor has the option to request an extrajudicial payment agreement, as per articles 231 to 242 of the Spanish Insolvency Law, Ley 22/2003, which have been newly created as an alternative to the pre-insolvency procedure currently in place.
The main differences between the existing procedure ruled by article 5 bis of the Spanish Insolvency Law, Ley 22/2003, and the new alternative are as follows:
- The debtor only requests the procedure, but the party responsible for managing and completing the extrajudicial payment agreement procedure is not the debtor but a newly created agent called the “insolvency mediator” (mediador concursal).
- Once the procedure has started, no enforcement (seizure) procedures can be filed against the debtor, except for public law creditors or those with a property guarantee who have not joined the agreement.
- A maximum offset of 25% of the debt and a payment term of three years can be agreed with creditors.
- Should the negotiations not lead to an agreement, then the mediator is obliged by law to automatically file for liquidation.
- Once the mediator has accepted his/her appointment, he/she has to call a meeting of creditors and debtor at the debtor’s address. At least twenty days prior to such meeting s/he must send the creditors an extrajudicial payment agreement proposal, allowing the creditors ten days to propose changes.
- Ten days prior to the meeting, creditors must either accept the proposal or reject it. If they do not do so, they are obliged to attend the meeting, or else their claim’s classification will be lowered, and it will be considered a subordinate claim (crédito subordinado) if the debtor were to eventually enter into liquidation proceedings. In practice, this means that this claim would be last in line and, therefore, will have scarce or no chance at all of being collected.
Bierens Abogados is ready to assist its clients in any way necessary, including but not limited to representing the creditor during the procedure and acting as representative on the creditor’s behalf at the said-meeting with creditors.