The reform of the Bankruptcy Law, promoted by the Government and validated in the General Courts, will enter into force within twenty days – with some exceptions – after its publication this Tuesday in the Official State Gazette (BOE).

The approved bankruptcy reform seeks to streamline and encourage the bankruptcy procedure and offer alternatives to the liquidation of companies, as well as a greater use of second chance instruments and harmonize requirements with the rest of the European Union, by transposing a community directive.

It should be noted that the bill pays special attention to micro-enterprises, which will have a procedure specifically adapted to their needs and characteristics, guaranteeing legal assistance. This new procedure will enter into force on January 1, 2023, as will the provision referring to deferrals and installments of tax debts by the Tax Agency.

In addition to transforming the contests into a single procedure, that of the restructuring plans, and introducing the pioneer figure of expert in restructuring, maximum terms of 12 months are set from the opening of the first phase and the closing of the fifth, when the current average duration is between four and five years, and a period of two months to resolve appeals before the Provincial Courts.

The special procedure for SMEs has restricted its threshold to companies that do not reach a turnover of 700,000 euros, a liability of 350,000 euros or have less than ten employees. Likewise, the nomination for a solicitor and lawyer has been recovered due to the doubts it raised regarding the right to defense and effective judicial protection, and the entry into force of this mechanism has been postponed.

Second Chance Improvements

Regarding the second opportunity, the exonerations provided for in the project of up to 1,000 euros against the Treasury and another 1,000 euros with Social Security rise to 10,000 euros for individuals. This level of exemption, according to estimates presented in the debate based on data from the General Council of the Judiciary, will allow a full exemption to more than 90% of debtors.

The linking of public credit to restructuring, continuation or business opening plans is also ended, limiting the execution on assets and rights necessary for the continuity of professional and business activity due to debts with the Treasury and Social Security. In this sense, the approval and homologation of the continuation plans will not require approval as long as the reductions with the Administration do not exceed 15%.

Lefebvre celebrates the 2022 Bankruptcy Congress on September 29 in which experts will analyze the main lines of bankruptcy reform required by EU Directive 1023/2019.

Likewise, the deferment and installment of credit with the Treasury may be requested in a voluntary period without the need for guarantees up to 30,000 euros. The exceptions have also been limited so that certain debtors can access the exemption of their unsatisfied liabilities after having been criminally convicted or sanctioned, even accessing public credit reductions.

Rescue of companies in bankruptcy

It also facilitates the rescue of companies immersed in a contest by their workers, constituted in a cooperative, participated or labor company, whose offer will be prioritized before another of the same scope.

Finally, the capitalization of their contributions is allowed, that is, they can use the corresponding unemployment benefit as capital.

Law 16/2022, of September 5, reforming the consolidated text of the Bankruptcy Law, approved by Royal Legislative Decree 1/2020, of May 5, for the transposition of Directive (EU) 2019/1023 of the European Parliament and of the Council, of June 20, 2019, on preventive restructuring frameworks, debt relief and disqualifications, and on measures to increase the efficiency of restructuring, insolvency and debt relief procedures, and by which the Directive is modified (EU) 2017/1132 of the European Parliament and of the Council, on certain aspects of company law (Directive on restructuring and insolvency).