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reform of the Insolvency Act

The Council of Ministers, dated March 18, approved the submission to Parliament of the Bill to amend the Bankruptcy Act.

The reform aims to:

• streamlining, simplification and cheapening of the process bankruptcy;
• deepening of the alternatives to competition through institutes
• preconcursales and rectification of some aspects of the present regulation that have led to practical problems and questions of interpretation.

Among the highlights of the proposed reforms include:

Establishing alternatives to contest

The project pays particular attention to solutions as alternative mechanisms preconcursales to facilitate escape the need to go to competition, and offers a solution to the situation insolvency of the debtor, which will decongest the commercial courts.

The objectives pursued are to: Facilitate

• both proposed convention early as the completion of debt refinancing agreements between the debtor and some of its major creditors, giving them security and guarantee in any proceedings in bankruptcy . Boosting
• refinancing settlement agreements would, on the basis of business continuity, maximizing the value of the common debtor's assets, increasing the chances that even the creditors involved in the agreement can better meet their claims.

To do this, first, clarifying the unique legitimacy of the receivers to challenge refinancing agreements, and on the other, makes a new regulation on agreements of this kind may be approved in court. This allows judicial approval to extend the effects of the agreement to other creditors, although they had shown against or did not participate in the agreement. To this must be of agreements to ensure continuity of business, as certified by an independent expert.

addition, creditors seeking the approval of the agreement shall be entities credit holders at least 75% of debt owned by financial institutions. If you attend these majorities and do not pose a disproportionate sacrifice for the other creditor banks, the judge always homologated in order to facilitate the sustainability of society. With this reform lending to power companies in need at this time. In line with these instruments is introduced preconcursales first regulation called fresh money injected creditors to troubled companies as part of a refinancing agreement.

The new rule states that the 50% of that new money coming to company through the refinancing agreement, and that means new revenue cash for it, is considered to be c revenue against the mass (priority of payment), which is the best guarantee for financial institutions to extend new credits to revive the company, and one element in assessing the credit.

abbreviated or simplified procedure

order to reduce time and costs of the bankruptcy process, it is expected that the judge may apply the simplified procedure if it considers that the competition is of low complexity, considering that a series of objective and without prejudice to any individual assessment in each case can be made, in other cases as when the debtor presents a proposal for agreement of transfer of the undertaking or cessation of workers without charge.

insolvency administration

is a progress in the professionalization of the receivers, both through the requirements of responsibility, and the training of them. The reform is considered management as a key part of legal assistance that can help reduce congestion of commercial courts and book their holders the functions by the Constitution.

Therefore, the new law:

• Administrators have the ability to correct the mistakes of the list of creditors, reducing to a large extent, the demands of bankruptcy incidents, the main cause of delay in the proceedings.
• appointment is power in any contest, whether ordinary or short, auxiliary delegates and
• Introducing the possibility of bankruptcy administration is performed by a legal person, a figure which could be called society insolvency administrators .

reforms in labor

The Bankruptcy Reform Act also aims to improve the position of workers in contests and incorporate recent changes to the labor reform approved by the Law of 17 September 2010 urgent measures to reform the labor market.

ensuring respect for the rights of workers affected by the situation of a company in crisis, adapting the Insolvency Act for the declaration of insolvency in this sense have the least impact and reiterated the fundamental principle that labor issues submitted to the bankruptcy process should take into account the principles underlying the social arm of the law. Thus, we solve the interpretative questions raised in order for the participation of representatives of workers, the social fund and the procedures relating to labor and resources.

Related Entries:

• The annual accounts of the company in bankruptcy with the bankruptcy reform (2011) .

Image: Economist