Upcoming changes with the new reform of the Insolvency Law.

Among other changes, the upcoming reform of the Insolvency Law includes a novel special procedure for micro-enterprises that is simple, fast, flexible, and digitalized—in which the parties will communicate through free online forms and hearings will be held virtually—and which will significantly reduce costs for debtors. The insolvency procedure itself is also being reformed to streamline it and shorten its duration, with measures such as replacing the creditors' meeting with a written agreement and reducing the insolvency administrator's remuneration if their management is inefficient, which will occur if the procedure lasts more than 12 months due to reasons attributable to them. Another change is a thorough overhaul of the second-chance procedure, aimed at individuals (consumers) and the self-employed in insolvency proceedings.

The Government, through the Ministry of Justice and the Ministry of Economic Affairs and Digital Transformation, has put the Draft Bill for the Reform of the Insolvency Law into public consultation

The draft legislation includes the transposition of the European Directive on restructuring and insolvency and introduces other reforms in the insolvency field to provide agile and effective instruments that improve insolvency procedures and facilitate the maintenance of viable companies.

In broad terms, and according to the Ministry of Justice, these are some of the new features of this text:

• The text introduces the concept of business restructuring plans, a pre-bankruptcy instrument aimed at avoiding insolvency, or overcoming it, which encourages early action and, therefore, a greater probability of success.
• The debtor will be able to determine which creditors will be affected by the restructuring plan and the individual executions of the company's assets and rights will be suspended -up to a maximum of 12 months- to facilitate the negotiation of the plan, which will allow the company to continue developing its activity as normal.
• The reform includes a new, simple, fast, flexible, and digital special procedure for micro-enterprises —in which the parties will communicate through free online forms or hearings will be held virtually—and which will significantly reduce costs for debtors. This procedure will allow debtors to reach a continuation plan if the business is viable or, if not, will facilitate a quick liquidation of the company through an online platform.
• is also being reformed to streamline it and reduce its duration, with measures such as replacing the creditors' meeting with a written procedure in the agreement or reducing the remuneration of the insolvency administrator if the management is not efficient, which will occur if the procedure lasts more than 12 months for a reason attributable to him.
• Another new feature is the comprehensive overhaul of the second chance procedure, aimed at individuals (consumers) and the self-employed in bankruptcy proceedings. This provides a new impetus for those who wish to restart or continue their economic activity without the burden of debt from a previous venture. Thus, under certain conditions and adhering to a payment plan, debt relief is possible without the need for prior liquidation of business assets or the debtor's primary residence.
• The Organic Law of the Judiciary is amended: As a necessary complement to the efficiency measures contained in the draft bill, it is essential to reduce the jurisdiction of commercial courts and the specialized sections of the provincial courts. These measures require amending the Organic Law of the Judiciary, and therefore a second reform is presented, as an Organic Law, complementary to that of the Insolvency Law.

This reform includes, among its most notable measures, that the courts handling cases concerning general terms and conditions of contracts, consumer protection, and certain transport-related claims (airline delays, baggage, etc.) will be transferred from the commercial courts to the courts of first instance.

Finally, the courts of commercial law will return jurisdiction over the bankruptcy proceedings of non-business individuals.

You can contact this professional office for any questions or clarifications you may have.

Warm regards,

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MGI Àmbit

A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.

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