Company pre-pack sales
The current situation that many companies are going through has led to the introduction of new strategies to ensure business continuity. We would like to introduce you to one of these novelties: The pre-pack sale of companies.
What is the pre-pack sale of companies?
The pre-pack sale of a company is the sale of the production unit before the application for insolvency proceedings and can be a valuable solution that allows companies to remain in the market.
In 2011, the insolvency law was amended and a procedure for the award of a production unit was introduced when a binding offer to purchase was submitted together with the application for the declaration of voluntary insolvency.
How does the pre-pack sale work?
The procedure is currently found in Article 530 of the insolvency law, but in practice it has not been well received by judges and insolvency administrators. The reason for this disapproval is that the insolvent debtor himself is the one who is in charge of the prior management of the sale procedure and the choice of the offer that he finally submits to the Court.
This could lead to irregularities and lack of transparency. For this reason, it then had to process the entire procedure in order to guarantee the free competition of bidders.
Currently, the DIRECTIVE (EU) 2019/1023 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 June 2019 on frameworks for preventive restructuring, debt waivers and disqualifications, and on measures to increase the efficiency of restructuring, insolvency and debt waiver procedures, admits the integration of the figure of a corporate restructuring administrator, thus giving full effectiveness to this procedure and ensuring the necessary transparency.
What are the advantages of applying this procedure?
- First of all, the continuity of the productive units is the main advantage. Considering that the liquidation of a company can mean unemployment for the workers, the non-payment of debts and the reduction of economic activity.
- Costs are reduced not only for the parties involved, but also the wear and tear of justice.
- The deadlines for resolving the company’s situation are drastically reduced, which provides legal certainty.
First application in Spain by the Commercial Courts of Barcelona.
In spite of the European directive, the figure of the restructuring administrator to guide and collaborate with the pre-pack sale process is not legislated in Spain. However, in Barcelona, the judges competent to hear an insolvency proceeding have given rise to this on October 30, 2020. An administrator was appointed to manage the procedure prior to the bankruptcy application and once the bankruptcy application was filed with the bids, the administrator was given the functions of an insolvency administrator.
This judicial decision is a clear example of how in this crisis situation it is important to take innovative solutions that ensure the maintenance of the economic activity of the companies.
In Letslaw we want to advise you on all the questions you have regarding your business. We have a team of commercial operations lawyers ready to offer you an answer according to the needs of your company. Contact us!
Letslaw es una firma de abogados internacionales especializada en el derecho de los negocios.