Royal Decree-Law 34/2020: extension of bankruptcy measures

Written on 23 Nov 2020

Since the beginning of the health crisis caused by Covid-19, the Spanish Government has been taking measures aimed at solving the liquidity problems that companies, professionals and self-employed workers are facing. Royal Decree-Law 34/2020, of 17 November, focuses on aiding these economic agents with any insolvency issues they may encounter because of the long-lasting effects of the pandemic.

Royal Decree-Law 34/2020 ("RDL 34/2020") amends some measures that were implemented earlier, such as those set out in Law 3/2020, of 18 September, on procedural and structural measures to face Covid-19 in the judicial sector. These modifications are:

(i)      Both the suspension to file for bankruptcy and the court's obligation to accept any petitions of involuntary bankruptcy, which are submitted the creditors, are extended until 14 March 2021. Additionally, if it is the debtor who is filing for bankruptcy, they will have preference during the admission's process, even if their petition is at a later date than the voluntary bankruptcy.

(ii)      The measures to admit claims related to contractual infringements are also extended; therefore:

Any applications for declarations of contractual violations submitted by creditors by 31 October 2020 will be admitted three months later. During that period, the creditor may submit a proposal to modify the agreement, which, in any event, will be dealt with as a matter of priority.

If between 31 October 2020 and 18 November 2020, any such applications had been admitted, then they will be suspended for three months. If during this period the insolvent debtor submits a proposal to modify the agreement, the court will file the creditors' application and will give priority to the modification that the insolvent debtor has submitted.

Likewise, any claim related to contractual infringements that creditors lodge before 31 January 2020, will not be admitted until three months later. During this time, the insolvent debtor may submit a proposal to modify the agreement, which will be processed before the application for declarations of contractual infringement.

(iii)      Finally, the period for applying to the refinancing of infringed agreements is extended. To that end, and even if creditors can apply to the refinancing of the breached contracts, the applications will be conducted as follows:

Infringement applications submitted by 31 October 2020 will be transferred to the debtor but will be admitted a month later, that is, on 20 November 2020.

Any other infringement applications submitted between 31 October 2020 and 31 January 2021 will also be transferred to the debtor but will not be admitted until 28 February 2021.

All these measures are aimed at providing companies affected by the pandemic with some additional time, to either recover or negotiate with their creditors.