The COVID 19 pandemic has dealt a major blow to the financial situation of many companies. In this context, measures have been taken in order to favour companies with debt problems, such as the extension of the bankruptcy moratorium. From Letslaw, we would like to give you more information about these measures.
Extension of the moratorium on the duty to file for bankruptcy proceedings
The Insolvency Act provides that the Administrator of a company that is in a situation of current imminent insolvency is obliged to submit to the Judge within two months an application for admission to the voluntary insolvency proceedings. The importance of this duty to apply for insolvency proceedings lies in the possible liability that the administrators could have if it is proven that they were not diligent in this application, causing damage to creditors.
As many companies are facing difficulties in meeting their debts, the strictness of this rule would have devastating effects on the economy. Therefore, through Royal Decree Law 5/2021 on measures to support business solvency, the deadline for filing for voluntary insolvency proceedings is suspended until 31 December 2021.
This means, in principle, that as of 31 December 2021, the two-month period within which the administrators must file the application for voluntary insolvency proceedings will begin to run. The processing of applications for insolvency proceedings, i.e. those requested by creditors, will also be suspended.
Additional economic and procedural measures approved
In the same regulation that includes this extension, three lines of economic support for companies were approved:
- Direct support fund for SMEs and the self-employed for the payment of debt contracted since March 2020, both related to suppliers and the payment of fixed expenses or financial and non-financial debts.
- This fund will be set up to restructure the loans guaranteed to date by the Official Credit Institute (ICO).
- Recapitalization fund for medium-sized companies.
In addition, the regulation establishes:
- The deadline for the execution of projects in the tourism sector financed by the General Secretariat for Industry and SMEs and loans granted to companies in the tourism sector is extended.
- The delay in payment of tax debts is extended by four months without interest for late payment.
- Public limited companies that have not been able to modify their bylaws may continue to hold the general meeting or shareholders’ meeting by telematic means during financial year 2021, but they must guarantee the identity of the member who exercises their right to vote and ensure the possibility of participating in the meeting in different ways.
How will this affect companies?
These measures have been requested and expected by the business sector for months. It is important for companies to access this type of support bearing in mind that the economic recovery is taking longer than expected. Taking advantage of the credit lines, the postponement of the duty to request bankruptcy and the payment of tax debts is essential to be able to overcome this crisis that the economy as a whole is going through
At Letslaw we can advise you on your company’s possible financial problems. We have lawyers who are experts in commercial law who will offer you a strategy in accordance with your company’s needs, providing you with a valuable insight into the current situation. Contact us!