Bankruptcies in Spain: an unsatisfactory reform for guaranteeing their future

The Royal Decree-Law 11/2014, which modifies the Bankruptcy Law for the nth time, originates, according to the legislating body itself in the Statement of Legal Reasons, from the need to guarantee the full coherence of the overall bankruptcy law with the novelties that were introduced in March with respect to the refinancing agreements that affected the pre-bankruptcy phase. Under this premise and hurriedly, various modifications were introduced, by means of the decree-... The Royal Decree-Law 11/2014, which modifies the Bankruptcy Law for the nth time, originates, according to the legislating body itself in the Statement of Legal Reasons, from the need to guarantee the full coherence of the overall bankruptcy law with the novelties that were introduced in March with respect to the refinancing agreements that affected the pre-bankruptcy phase. Under this premise and hurriedly, various modifications were introduced, by means of the decree-law, in the Law 22/2003 of 9 July, Bankruptcy Law, which not only affect the bankruptcy agreement but also the liquidation and that, as we will analyse below, leave profound dissatisfaction. In our opinion, the modifications of the Bankruptcy Law introduced by the Royal Decree-Law only make difficult the approval of the proposed agreements, given that they require much more reinforced majorities and exclude the public creditors from alternative proposals, which means that if up to now few agreements were approved, now even fewer will be. On the other hand, with respect to the liquidation, despite the fact that the lawmakers stated that the spirit of the modifications introduced is to promote the continuity of the business activity, it is certain that it puts the sale of the productive units in serious danger. Not only the limitation imposed on the businessman in order to be able to continue with the activity through the purchase of the business but also, above all, the risk of succession of the company introduced by the Royal Decree-Law will make many bidders prefer to buy the assets separately. In this way they will avoid the risks of a business succession instead of acquiring the company as a whole, which without doubt would impact very negatively on the maintenance of employment. With this new regulation, a period of uncertainty is opened. It will have to be seen what interpretation the judges of the Commercial Court give to it and what consequences its application will have in practice. And all of this, without forgetting the paradoxthat at this time a reform of the Bankruptcy Law is in process in the Senate, which could interfere with what was adopted in this Royal Decree.