Etiqueta: concurso de acreedores

As expected, the end of the bankruptcy moratorium, the consequences that many companies still carry from the COVID-19 crisis and the difficult political and economic situation worldwide have triggered the number of insolvency proceedings in recent months.

Between January and October, 5,879 Spanish companies started insolvency proceedings. This figure is 19% higher than in the same period in 2021 and 60.5% above pre-COVID levels. If we go back further, it is the highest figure in the last 8 years. You would have to go back to the first ten months of 2014, in the throes of the previous financial crisis, to find more insolvency proceedings in the first ten months of the year (5,941).

The new insolvency law, which came into force at the end of September, has begun with a high volume of activity. In October, 896 insolvency proceedings were declared, 53.1% more than in 2021 and a figure not seen since 2013.

By sector, the most affected in the first ten months of the year was commerce, with 1,398 procedures (+36.3%). It is followed by construction and real estate activities (1,138, +25.1%). And the third most affected sector is hotels and catering (691), although in its case the number of insolvency proceedings has fallen by almost 13% with respect to 2021.

Bankruptcy moratorium ends 

We are facing a perfect storm situation which explains the increasing number of companies filing for bankruptcy.

On the one hand, the moratorium on insolvency proceedings ended on 1 July. Companies in insolvency once again had only two months to file for bankruptcy. Since March 2020, they had enjoyed a temporary waiver that was put in place to protect companies affected by the economic crisis caused by COVID-19. This reduced the number of insolvency proceedings declared to levels prior to September 2004, when the now defunct Insolvency Act came into force.

The ICO credit gap ends

On the other hand, two crises, almost intertwined, are hitting the business fabric hard. High energy and production costs have put many companies on the ropes. And rising interest rates are making it very difficult to refinance debt.

Finally, the end of the grace period for many ICO loans is causing many companies to have to repay these loans when they have not yet fully recovered.

For all these reasons, the trend in insolvency proceedings over the coming months looks set to continue to rise. According to Informa D&B forecasts, the year is likely to end with more than 7,000 insolvencies declared.

The good news: express insolvency proceedings are on the decline

After little more than a month in force, it is still too early to assess the results of the new insolvency law, whose priority objectives include facilitating restructuring processes and prioritising the rescue of viable companies. However, its effects can already be seen, for example, in the large reduction in the number of express insolvency proceedings.

This type of insolvency proceedings, which combine simultaneously the request for insolvency proceedings and the request for the company’s extinction, have been experiencing sustained growth over the last few years. However, in October they fell to 40%, 36.5 points less than in the previous month. In 2021, they accounted for 65% of the total and in the first nine months of this year they had not fallen below 65.5%.

One of the most notable new features of the new Insolvency Act is the introduction of a new auxiliary figure: the restructuring expert. In this article we review their functions and the appointment process.

Functions

The first thing to know is what are the functions of this new figure who is now involved in insolvency proceedings. The restructuring expert acts as a mediator who promotes negotiation between the parties. He also helps inexperienced debtors and facilitates judicial decisions when disputes arise between the parties. In addition, in the case of non-consensual plans, he prepares a report on the going value of the company.

How the restructuring expert is appointed

Articles 672, 673, 676 and 678 of the Insolvency Act provide that the restructuring expert in insolvency or preinsolvency proceedings is appointed by the judge. He may only do so in two cases:

• When requested by the debtor or a majority of the creditors.
• Autonomously, when it deems it necessary to safeguard the interests of creditors or when judicial approval is sought for a restructuring plan that has effects on third parties who have not voted in favour of it.

Tasks of the restructuring expert

Among his or her knowledge, skills and abilities, the restructuring expert must be able to detect the warning signs of early insolvency. In this regard, we cannot forget that the Insolvency Act transposes Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019, the fundamental objective of which is to offer bankruptcy prevention or early warning services.

In order to increase the efficiency of restructuring, insolvency and debt discharge procedures, the expert must be able to predict difficulties, restructure the organisation pre-emptively and adapt it to the market. To this end, some of his main concrete tasks are to analyse the company’s financial situation and financial statements and to draw up viability plans and growth strategies. He also implements financial solutions, restructuring and continuity measures. He evaluates compliance programmes and implements risk control systems.  Finally, it advises on early warning systems, such as foreclosure and insolvency proceedings.

Skills of the restructuring expert

In order to carry out all these tasks effectively, the restructuring material expert must have specialised legal, financial and business knowledge, such as:

1. The rules applicable to each specific case of insolvency proceedings.
2. Early warning and early intervention.
3. The duties of organisational.
4. Risk control.
5. Compliance programmes.
6. The execution of a financial analysis.
7. The implementation of a feasibility plan.
8. The valuation of organisations.
9. What is restructuring or refinancing and what does it consist of.
10. The implementation of possible financial solutions.
11. The implementation of growth strategies.

What is the profile of the restructuring expert?

According to Article 674 of the new Insolvency Law, the restructuring expert must be a «natural or legal person, Spanish or foreign, who has specialised legal, financial and business knowledge and experience in restructuring matters or who proves that he or she meets the requirements to be an insolvency administrator in accordance with this law».

In practice, this means that the restructuring expert becomes a profession. No qualification or compulsory registration is required to practise this profession. However, this new insolvency law will require qualified professionals and experts in insolvency proceedings.

At Confianz we have extensive experience in insolvency law. Do not hesitate to contact us if you have any questions on this subject.