Spain’s COVID-19 support measures extended: what it means for insolvencies

The Spanish Government has extended the various support measures aimed at helping Spain deal with the economic impact of COVID-19.

This blog post summarises the most relevant new insolvency measures of Royal Decree-Law 5/2021 (‘the RDL’), which was approved on 12 March 2021 and entered into force on 13 March 2021.

Debtor's duty to file for insolvency

The deadline to file for voluntary insolvency has been extended until 31 December 2021 (the previous deadline was 14 March 2021).

Consequently, until 31 December 2021 inclusive, a debtor who is insolvent is not required to file for insolvency, whether or not it has served notice to the court of:

• the opening of negotiations with its creditors to reach a refinancing agreement;
• an out-of-court payment agreement; or
• an accession to an anticipated proposal to a settlement agreement (propuesta anticipada de convenio).

The two-month term to file for insolvency will start to run as from 1 January 2022, ending on 1 March 2022.

The deadline to process involuntary insolvency filings has been extended until 31 December 2021 (the previous deadline was 14 March 2021). Consequently, until 31 December 2021 inclusive, the insolvency court shall not process creditors’ filings for involuntary insolvency proceedings submitted on or after 14 March 2020. Any debtor’s filing for voluntary insolvency made up to 31 December 2021 shall prevail over any filings made by any creditor.

No amendment has been made to the measure that applies when, by 31 December 2020, the debtor has served notice to the court of the opening of negotiations with its creditors to reach a refinancing agreement, an out-of-court payment agreement or an accession to an anticipated proposal to a settlement agreement. In this case, the debtor is not required to file for insolvency until six months after the notice was served; otherwise, the general regime shall apply.

Court-sanctioned refinancing agreements

The deadline to amend/replace a court-sanctioned refinancing agreement has been extended until 31 December 2021 (the previous deadline was 14 March 2021). Consequently, until 31 December 2021 inclusive, a company is entitled to amend the existing court-sanctioned refinancing agreement or to execute a new one, even if the one-year limitation period set out in Spain’s recast insolvency law has not elapsed. 

The insolvency court shall notify the debtor of any creditors’ requests made between 31 January 2021 and 30 September 2021 for a declaration of breach of a refinancing agreement and shall not process them until one month after 30 September 2021. Any creditors’ requests made between 31 January 2021 and 13 March 2021 for a declaration of breach of a refinancing agreement that have been processed by the court shall be suspended until one month after 30 September 2021.

No amendments have been made to the following measures:

• During the one-month period referred to above, the debtor may notify the court that it has initiated (or intends to initiate) negotiations with its creditors to amend or replace the existing court-sanctioned refinancing agreement, even if one year has not elapsed since the previous filing for court sanction (if any).
• If, within three months following the notice to the court, the debtor has not reached an agreement to amend or replace the existing refinancing agreement, the insolvency court shall process the creditors’ requests.

Settlement agreements

The deadline for a company to file a proposal for the amendment of the settlement agreement (convenio concursal) has been extended until 31 December 2021 inclusive (the previous deadline was 14 March 2021).

The insolvency court shall notify the debtor of any creditors’ requests filed between 31 January 2021 and 30 September 2021 for the declaration of breach of the settlement agreement and shall not process them until 31 December 2021. During those three months (from 30 September 2021 until 31 December 2021), the debtor may file a proposal to amend the settlement agreement, which will be processed ahead of any creditors’ request for a declaration of breach.

If the insolvency court has processed any creditors’ request filed between 31 January 2021 and 13 March 2021 for a declaration of breach of a settlement agreement, the insolvency court shall suspend the proceedings until 31 December 2021. Any proposal to amend the settlement agreement filed by the debtor before the end of that period shall be processed ahead of the creditors’ requests for a declaration of breach.

The suspension of the company's obligation to request the opening of the liquidation phase has been extended until 31 December 2021 (the previous deadline was 14 March 2021) provided that the company files a proposal for the amendment of the settlement agreement and it is admitted by the court before that date.

ICO guarantee lines

Under the RDL, any claim held by the Hacienda Pública in relation to the two Instituto de Crédito Oficial (ICO) guarantee lines (líneas de avales) set up by Royal Decree-Law 8/2020 of 17 March and Royal Decree-Law 25/2020 of 3 July to deal with the economic impact of COVID-19 will rank as an ordinary claim (instead of ranking as a privileged claim like other public claims) in case of insolvency of the debtor.

Freshfields' coronavirus alert hub

To support your decision-making during these challenging times, we have collected the best of our thinking on our coronavirus alert hub. Let us know what you think and if there are important questions we haven’t answered. We hope that, by bringing together our teams, we can help you navigate whatever lies ahead for your business.