May 20, 2020

Spanish new Revised Consolidated Text of Insolvency Act (Royal Decree-Legislative 1/2020, of May 5th)

The deep economic crisis brought up by the outbreak of the Covid-19 health crisis, just few days after the extraordinary measures adopted through Royal Decree-Law 16/2020 of April 28, has urged Spanish legislator to speed up further legal reforms, and finally, has passed the Royal Legislative Decree 1/2020, of May 5, enacting the Revised text of Insolvency Act (published in the Spanish Official State Gazette of 07 May 2020), pursuant to the Parliament’s mandate of May 2015 to recast, harmonize, clarify and order insolvency legislation, confirmed in February 2019.

It comes into force, generally, on September 1st, 2020, although it sets a lengthy transitional regime on certain areas, many of which are subject to regulatory development. The new consolidated text has a total of 752 articles (previously 242) divided into three “books”:

Pre-bankruptcy law.
International insolvency rules.
With this, in one single consolidated text, the provisions of Bankruptcy Law 22/2003, of July 9, and the 28 legislative amendments since it came into force have been reordered and clarified: solving inconsistencies, interpretive problems and systematic alteration that had been generating legal uncertainty in such crucial matter.

It also aims to lay the foundations for the transposition of Directive (EU) 2019/1023, of the European Parliament and of the Council, of June 20, 2019, on preventive restructuring frameworks, on the discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency, and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency). This Directive provides alert mechanisms on insolvency risks, comprehensive rules for preventive debt restructuring, simplifies bankruptcy rules, improves efficiency and costs rationalization, and more possibilities for debt relief.

The unquestionable opportunity of this legal instrument, needed to relieve the effects of the Covid-19 health crisis, which has quickly turned to a profound economic crisis, recession worldwide. We hope that it is not too late and the necessary regulatory development it requires is provided as a matter of urgency that is required.

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