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Payment agreement for companies

Business Law
Payment agreement for companies
The health crisis due to covid19 has caused many companies to be insolvent, so some must file for bankruptcy, however, as Forcam Abogados describes, the results of a bankruptcy declaration do not always show a happy and satisfying ending for companies.

In legal doctrine, mediation is an alternative method to the process, the purpose of which is to serve as an extra figure for the resolution of conflicts, thus avoiding procedural delays and in turn avoiding the wear and tear of the judicial apparatus.
What is the settlement of payments?
When we place both figures in the same scenario, -the bankruptcy and mediation-, we find that the extrajudicial payment agreement is nothing more than the recognition that the debtor makes, to the judge, that a middle point of agreement is being perfected with your creditor, for such purposes in law 14/2003 the legislator provides as follows:
"The debtor may inform the competent court for the declaration of his bankruptcy that he has begun negotiations to reach a refinancing agreement or -to obtain adhesions to an anticipated agreement proposal under the terms provided in this Law-"
The extrajudicial payment agreement, which is important to have a specialized office in extrajudicial payment agreements, as is the case of the commercial law department of Forcam Abogados, its purpose is to strengthen the economic apparatus and business activity, it is for this reason that the legislator sanctioned Law 14/2013, of September 27, to support entrepreneurs and their internationalization, in which the legislator raises the possibility of giving special treatment to entrepreneurs, so even in the same law it modifies bankruptcy law, introducing what is called "extrajudicial payment agreement", which goes hand in hand with the figure of mediation in procedural law.

What is the out-of-court payment agreement?

Applicants must attend previously, either before the commercial registrar or a notary public to proceed with the “appointment of the bankruptcy mediator. The official in charge of making the appointment must issue an official letter to the competent judge of the declaration of the bankruptcy that has opened the negotiations leading to the resolution of the conflict”. 

For this purpose, the lawyer of the Administration of Justice, without further delay, will proceed to record the communication presented by the debtor or, in the cases of negotiation of an extrajudicial payment agreement, by the notary or by the commercial registrar.

For the purpose of awaiting the results of the mediation, the conducting court will grant the debtor a period of three months, in which they undertake to notify the court of the result of their negotiations; After this period, three assumptions could arise:

1.- The scope or not of a refinancing agreement,

2.- That an out-of-court payment agreement is effectively produced;

3.- The necessary adhesions for the admission for processing of an advance agreement proposal, and in which case you must request the declaration of bankruptcy within the following business month, unless the bankruptcy mediator has already requested it or it will not be in a state insolvency.

The request can be made as long as your liability does not exceed five million euros, and you prove it by providing the corresponding balance.

The law contemplates the possibility that “legal persons, whether or not they are capital companies, as well as self-employed, professionals and all those who are within the assumptions of the law called entrepreneurs, may also benefit from this procedure.”

“The agreement must be favorably informed by an independent expert, appointed by the commercial registrar of the debtor's domicile. If the refinancing agreement affects several companies in the same group, the report may be unique and prepared by a single expert, appointed by the registrar of the domicile of the parent company, if it is affected by the agreement or, failing that, by the domicile. of any of the group companies."

The expert's report must contain:

  • a technical judgment on the sufficiency of the information provided by the debtor,
  • on the reasonableness and feasibility of the plan under the conditions defined in the first paragraph and
  • on the proportionality of the guarantees according to normal market conditions at the time of signing the agreement. 

The rule is very clear by not allowing to take advantage of these acts to:

  • The entrepreneur who has been convicted in a final judgment for a crime against property, the socioeconomic order;
  • The one obliged to register in the Mercantile Registry that has not done so, prior to requesting the agreement.
  • It may not be requested either by those who, in the last three years, have reached an out-of-court agreement with their creditors, or have obtained judicial approval of a refinancing agreement or have been declared bankrupt.

Contact us, and our lawyers specializing in business law will study your specific case. 

At Forcam Abogados we have offices in Barcelona, Madrid and Reus.