The Spanish Government Plans to Simplify The New Bankruptcy Law

13 January 2009

The second vice-president of the Spanish government, Economy and Finance Minister Pedro Solbes, on the occasion of his appearance at the economic forum “Cinco Días” in Madrid, on December the 16th 2008, signalled that this January, at the Committee for the introduction of structural reforms (“Mesa de Reformas Estructurales”), the government is also going to discuss a reform of the Bankruptcy Law from the year 2003- Ley 22/2003, de 9 de julio, Concursal. More specific details have not been announced yet.

In the context of the progressing economy crises and its pression, with an unexpected number of petitions for bankruptcy, and after the first experiences with the new bankruptcy law, the vice-president admitted in his speech from the 16th of December 2008 that some aspects of the new applicable bankruptcy law should be improved.

On the one hand, it turned out that the applicable bankruptcy law is too complicated, especially for private persons and over indebted families, for whom has to be applied the same bankruptcy law, and thereby, on the other hand, that the proceedings are too expensive, so that only a few of them make use of them. The costs and the duration of the proceedings, which is obviously too long, are a problem for insolvent companies as well. The government intends therefore to simplify the proceedings and to substantiate those vague legal items of the bankruptcy law. The costs of the proceedings – here have to be mentioned lawyers, solicitors, procurator, courts’ fees – should be reduced by law and the deadline for the proceedings should be cut down.

According to the Spanish press, this year the commercial and the bankruptcy courts (Juzgados de lo Mercantil), which were established in every province by the reform of the bankruptcy law, were over helmed with bankruptcy petitions, in fact, new bankruptcy courts are constantly being established and the existing infrastructures are being expanded. As an improvement of the situation can not be expected in short term because of the progression of the crises, the companies and the courts should be pleased with a soon modification of the bankruptcy law, a simplification of the procedural steps and with a facilitation of the possibilities of recapitalisation of the insolvent companies. It remains to be seen which package of modification concretely will be released.

For further information, please contact Sönke Schlaich: sschlaich@mmmm.es