The bankruptcy reform

• Law 16/2022 came into force partially at the end of September
• This new rule significantly changes the insolvency and pre-insolvency system

The Law 16/2022, of September 5, on the Reform of the Consolidated Text of the Bankruptcy Law entered into force at the end of September, with the exception of the third book that will enter into force on January 1, 2023, except for section 2 of article 689. Its purpose is the transposition of EU Directive 2019/1023 on preventive restructuring frameworks , exoneration of debts and disqualifications, and on measures to increase the efficiency of the procedures of restructuring, insolvency and exoneration of debts.

Learn about the most outstanding news of the bankruptcy reform.

Restructuring plans and cancellation of agreements

The restructuring plans are a pre-bankruptcy tool. With it, the aim is to avoid or overcome insolvency and it manages to act prior to a state of difficulty in relation to the usual pre-bankruptcy instruments.

Organizations take advantage of these restructuring plans in a situation of possible insolvency, prior to the imminent insolvency that was required in the previous pre-bankruptcy instruments and currently suppressed.

These restructuring plans are also valid and are applicable from the moment the probable insolvency situation occurs; that is, when it is objectively foreseeable that the debtor will not be able to meet its obligations that expire in the next two years.

This regulation maintains the flexibility of refinancing agreements. In addition, efficiency is also prioritized in the elements incorporated with safeguards for creditors.

In this scenario, the figure of the restructuring expert stands out. It is the expert similar to a mediator, who prepares a valuation report of the company.

Single insolvency procedure

The bankruptcy procedure has been reformed to make it more agile and, at the same time, facilitate the approval of an agreement for a viable company, or a quick liquidation in the event that it is not.

In this section microenterprises gain attention, which make up the vast majority of the country's business fabric. Now the law regulates a single insolvency procedure that manages bankruptcy situations (current or imminent insolvency) and pre-bankruptcy situations (probability of insolvency).

The procedure is compulsorily applied to all microenterprise debtors and has a great procedural simplification, with two requirements:

• Having employed an average of less than 10 workers during the year prior to the request for the special procedure, a requirement that will be understood to be fulfilled when the number of working hours carried out by the entire workforce is equal to or less than that which would have corresponded to less than ten full-time workers.
• Your total turnover must be less than 700,000 euros, or your liabilities, that is basically the outstanding debts, of a maximum of 350,000 euros.

Second opportunity

Another novelty is the regulation of the more efficient second chance procedure. To achieve this, the exonerable debts are expanded and the exoneration without prior liquidation of the debtor's assets is included with a payment plan. This allows the conservation of the habitual residence and business assets.