Government approves measures to foster viability of companies

 

The government will make it easier for companies in financial difficulties to carry on with their activities if the business is still viable. The Council of Ministers approved a Royal Decree-Law on urgent insolvency measures, which seeks to facilitate agreements that allow companies entering into insolvency proceedings to remain trading.

The Vice-President of the Government, Soraya Sáenz de Santamaría, stated that the measure seeks to guarantee the survival of companies that are in financial difficulties but which are still viable. The Minister for Economic Affairs and Competition, Luis de Guindos, clarified that 95% of all companies that enter into insolvency proceedings go into liquidation and this percentage is far higher than in our peer countries. In this respect, the minister added that an "active company is something of value and it is much easier to avoid a company going into liquidation than create a new one".

 

The minister explained that the new legislation complements the measures already implemented in the pre-insolvency phase and acts at a level of insolvency proceedings by facilitating agreements between the various creditors: public, financial, labour and commercial. From then on, a procedure is applied for decision-making that enables debt to be reduced and to convert debt into capital according to the decisions taken by the creditors.

 

Furthermore, the measures helps ensure that privileged creditors, in other words those with a mortgage guarantee, do not obstruct decisions taken on the global debt of these companies.

 

The Royal Decree-Law facilitates the sale of a company in its entirety, thereby avoiding different classes of assets from being sold off individually, which often leads to the company going into liquidation. Luis de Guindos stated that the transfer of the company will be facilitated, as will the subrogation of the different types of new purchaser vis-à-vis the previous types, and a series of actions will be established which, in his opinion "will help ensure that companies in the final phase of insolvency proceedings are able to carry on their economic activities", which is preferable for the country's economic activity as a whole, for workers and for creditors, who will have a higher collection percentage guaranteed than they would obtain in the event of the liquidation of the company.

 

This text gives effect to a ruling handed down by the Court of Justice of the European Union such that a mortgage debtor can file an appeal against the decision that repeals his objection to the enforcement thereof in the event that it is founded on the existence of a contractual clause which is deemed to be abusive.

 

Furthermore, it provides for the creation of a telematic portal at the Official State Gazette (Spanish acronym: BOE) with information on companies in liquidation so that potential buyers can obtain updated information. A supervision committee will also be set up to analyse how levels of indebtedness are evolving and to propose measures to the government to improve debt reduction.