The end of the insolvency moratorium in force until June 30 restored the obligation of social administrators to apply for bankruptcy within two months of learning of their insolvency. This implies that all companies, the self-employed and business debtors who cannot regularly meet their payments must solve their situation... or suspend payments urgently so as not to incur the personal responsibility of having to face the debts in the case of a possible subsequent bankruptcy. As of September 1, the judicial shield that was in force since March 2020 – shortly after the outbreak of the pandemic – until now disappears.
Many affected have already made decisions. The return to normality in bankruptcy matters that began in July and will be completed on September 1 has triggered the activity of commercial courts during the summer. Bankruptcies, yes, continue to be seen mostly as an instrument to close and liquidate, not as a restructuring tool. The vast majority of the contests that are presented are from companies with hardly any assets – which, in general, are quickly declared and filed – and from people who take advantage of the Second Chance law.
Since the end of the moratorium, that has been the dominant practice. The great contests, with debts of tens, hundreds or even billions of euros that marked the previous crisis, are now testimonial. For example, in the 12 commercial courts of Barcelona, which cover the insolvencies of the entire province, 515 insolvencies were filed between July 1 and August 2, the last day for the distribution of files by the deanery, as August is a non-working month judicially (except for very urgent cases).
The figure is 70% higher than the around 300 contests last June. In Madrid, the increase is also significant. In the 18 commercial courts of the Community of Madrid, nearly 500 contests were filed in July, a figure that almost triples the 180 applications registered in June, before the end of the moratorium.
But, despite the spectacular numbers, bank delinquencies remain low and a dead calm reigns in the courts. “Consecutive insolvency proceedings [those of natural persons] remained stable, and the large increase is due to insolvency of companies, most of them without active mass”, explains Xavier Rafí, lawyer for the administration of justice of the commercial court 9 of Barcelona . In this square, yes, the competitions of companies tripled in July compared to the previous month.
What will happen from now? "Foreseeably, the true effect of the end of the moratorium will be noticed from next September 1," says Ignacio Fernández de Senspleda, head of the commercial court 10 of Barcelona. Not only because of the end of the moratorium, but because of a foreseeable deterioration in the situation. Although employment in Spain has held up well, the already reported slowdown in the economy and high inflation are beginning to hit companies in two ways. In the first place, deteriorating its margins due to its cost increases. And, along with the above, with a contraction in consumption –due to the sharp drop in household disposable income–, which is already noticeable.
It is a matter of time before companies with treasury tensions that have not been able to capitalize and whose businesses have not recovered end up precipitating. “There are many very affected companies, and we see an upturn in pre-bankruptcy proceedings to try to refinance debts while waiting to see if there are modifications in the loans guaranteed by the ICO or more public aid,” explains Juan Antonio Borràs, RocaJunyent bankruptcy and restructuring partner. .
The entry into force of the new bankruptcy law, pending approval in the Congress of Deputies, should facilitate new itineraries to overcome solvency crises. Above all, with regard to refinancing, which will now have regulated mechanisms, such as the prepack for the sale of productive units. Some lawyers and judges think that the delay in the entry into force of the new law until at least the end of September has slowed down the explosion of contests that was expected due to the end of the moratorium. We will see.
There are predictions for all tastes. José Vela, a lawyer from the commercial court 7 of Madrid, believes that "the tsunami that was feared is nowhere to be seen and, although in July we received more contests than in the entire second quarter of 2022, I hope that the number of procedures will be maintain or decrease in the following months”.
Everything will depend, as always, on the evolution of the economy. Now there are more contests with ERE, almost all relatively small. But everything is controlled. Serious problems will come in the event that the current slowdown turns into a recession.
