In the coming months, the approval and entry into force of the reform of the Bankruptcy Law by Parliament. In principle, this modification It is conceived as a solution when dealing with the large number of insolvencies that arise, especially after the announced end of the insolvency moratorium. Given this change in the current law, the experts at Abencys, a firm specializing in insolvency and restructuring, warn that “Insolvency is stubborn in terms of generating liquidity and we are seeing this with companies that have supposedly refinanced and restructured their debt several times and are still in difficulty.”
The main key to understanding this reform lies in the change of the legislation of the insolvency processes. The objective is to streamline them, trying to have options for early detection of difficulties and reducing the intervention of the court and the auxiliary bodies of the judge.
According to the experts from Abencys, despite the fact that this modification was devised by the European Union as a measure to facilitate the restructuring process of companies, its transposition in Spain may have a result contrary to the intended one. For Luis Martín, partner of the firm, this new regulation, more than a help, supposes a danger for the companies in bankruptcy. “With the new Bankruptcy Law, advance solutions and quick contests prevail, in small companies that are intended to be managed by the social administrators themselves. Although this reform is a way to streamline processes and avoid judicial collapse, it will in turn lead to less efficient management of the same, thus harming the recovery of asset values to meet bankruptcy debts.”, explains Luis Martin.
For this reason, looking ahead to the coming months, from Abencys an increase in company liquidations is expected within the Spanish market, closing the year with record figures. According to Luis Martin, “If this reform is approved as it is drafted, it will bring with it a large number of company closures that will not end in an agreement or in an orderly liquidation managed by bankruptcy administrators.”
The administrator: key figure for the good resolution of the contest
Given this situation, the Abencys office reaffirms the importance of participation in the bankruptcy administrator’s process as a key factor when it comes to a good resolution of a bankruptcy.
In this line, Luis Martín points out that, “the role of the bankruptcy administrator prioritize value recovery for creditors without losing sight and giving an opinion on the viability, if this role is left aside, it is possible that this objective will not be met, thus causing an increase in companies that are not able to overcome the contest, being forced to liquidate with less recovery for creditors.
