Extension on insolvency moratorium.

One year ago now, on 17 March 2020, Royal Decree-Law 8/2020 was issued to suspend the obligation to file for insolvency proceedings for the duration of the state of alarm and the non-acceptance of applications for insolvency proceedings (when a creditor requests the declaration of insolvency of a debtor) during this period. This rule was extended by a series of new decrees, most recently Royal Decree-Law 5/2021 of 12 March 2021, which has extended it again in this case until December.

This means that companies and business owners are not obliged to file for insolvency proceedings until that date even if they are insolvent, and also that their creditors cannot file involuntary insolvency proceedings. However, companies and business owners can file voluntary insolvency proceedings if they wish to do so, and they will then be processed in the ordinary way.

It is also worth noting that the regulation provides that during this period no applications for non-compliance with agreements approved in insolvency proceedings will be processed. In these cases, the judge will have to request the insolvent party to try to renegotiate the agreement but will not rule on non-compliance itself.

The purpose of these measures is to give companies and business owners the opportunity to obtain more time to obtain financing to overcome potential one-off or temporary insolvencies, and to avoid material obstruction at the courts due to the accumulation of insolvencies. However, their effectiveness over such a long term is uncertain and may create confusion for economic operators.

Antoni Faixó
Dispute Resolution Area