Why the restructuring expert is a key figure in the new bankruptcy law
The Bankruptcy Reform Bill has just entered the public hearing process, and one of the main novelties it introduces is the figure of the restructuring expert. The new bankruptcy law will give more importance to the previous phases of the process, in which the restructuring expert is called upon to play a key role in the survival of companies plunged into bankruptcy. Their role will be fundamental when the current moratorium applied to combat the effects of the COVID-19 pandemic ends.
However, the bill does not clearly define the figure of the restructuring expert. According to Manuel Urrutia, expert in insolvency proceedings and CEO of Confianz, “this generates legal uncertainty and leaves entrepreneurs facing the risk of finding themselves assisted by professionals who do not have adequate preparation at a critical moment for the survival of your business. business ” .
The end of the COVID-19 moratorium
The government has just submitted the bankruptcy reform bill to the public hearing, with which it intends to facilitate the restructuring of viable companies and improve insolvency procedures. The preliminary draft, approved by Royal Legislative Decree 1/2020, of 5 May, was prepared by the Ministry of Justice and the Ministry of Economic Affairs and Digital Transformation, and includes the transposition of the directive (EU ) 2019/1023 of the Council and Council Parliament, of 20 June 2019, on preventive restructuring frameworks, debt relief and lapses, and on measures to increase the efficiency of restructuring and insolvency proceedings and debt relief.
The main objective of the new bankruptcy law is to ensure that viable businesses and entrepreneurs in financial difficulty have access to an effective preventive restructuring procedure that allows them to continue in business. In other words, to prevent an overly complex and costly bankruptcy system from ultimately causing the downfall of viable businesses.
The new bankruptcy law must be ready to go into effect by January 1, 2021, when the current moratorium ends. Until then, an avalanche of bankruptcy applications is expected. Official forecasts put some 50,000 competitions on hold, which would increase last year’s figures by a factor of seven.
The functions of the restructuring expert
In certain cases, the directive imposes the compulsory appointment of the restructuring expert. Apart from them, their designation is not necessary, unless the debtor or the majority of creditors request it.
El texto sigue la lnea, del artculo 600 del Real Decreto Legislativo 1/2020, de 5 de mayo, that esta-blece el nombramiento de un experto independiente that emita un inform sobre el plan de via-bilidad y el valor en funcionamiento de la business:
Both the debtor and the creditors can ask the registrar of the trade register of the debtor’s domicile for the appointment of an independent expert to report on the viability plan. If the collective refinancing agreement concerns different companies of the same group, the report may be drawn up by a single expert, appointed by the registrar of the domicile of the parent company, if he is concerned by the agreement, failing this, by that of the domicile of one of the companies in this group. For the issuance of the report, the trade registration office will appoint as expert a professional it deems suitable. The regime of incompatibilities and prohibitions established by this law to be appointed auditor as well as the regime of incompatibilities established to be appointed auditor shall apply to the expert.
An insufficiently defined figure
However, the bill does not define in detail the figure of the restructuring expert (Insolvency Practitioner in the directive). It is limited to establishing a simple generic requirement of having specialized knowledge, the sufficiency of which can, in any case, be assessed by the competition judge.
Manuel Urrutia, expert in insolvency proceedings and CEO of Confianz, underlines that this lack of specificity is very far from the highly qualified professional models that are used in other countries where the European directive has already been transposed: they are called Monitors and they are finance professionals with special authorization to perform this function. In Italy, financial experts Dottori Commercialisti are in charge. The Spanish draft lacks a clear commitment to the professionalization of the experts who must help companies in their most delicate financial moments. Bankruptcy is a complex affair which requires a great deal of specialization and professionalization. The restructuring expert must demonstrate objectivity and technical knowledge ”.
The figure of the restructuring expert is in a similar situation to that of the insolvency administrator, whose settlements have been frozen for years. In any case, the text of the bankruptcy reform bill is an important step forward, especially taking into account the current delicate moment caused by the COVID-19 crisis.