The situation caused by the COVID-19 and the correlative declaration of the state of alarm has been a very hard blow for the business fabric of our country, causing situations of lack of liquidity impossible to foresee a few months or weeks before that, in an irremediable way, have led them to a situation of generalized non-payments of their current obligations.

The Insolvency Law has the necessary mechanisms to address such situations whatever the objective pursued, that is, to ensure the continuity of the activity or to proceed to the liquidation and orderly closing of the company and, always and in any case;saving the personal liability of the administrator of the company to, with this, guarantee the indemnity of his present and future personal assets against the debts of the business activity (presumption of guilt contained in art. 444 1º Texto Refundido de la Ley Concursal, hereinafter, TRLC).

The Insolvency Law provides for different mechanisms depending on the objective pursued and the situation of the debtor. Thus, it is possible to resort to the so-called “Communication of the opening of negotiations with the creditors”, generally known as preconcurso and previously regulated in article 5 bis of the Insolvency Law or, directly, to request the declaration of insolvency, it being essential that one or the other mechanism be implemented within a maximum period of two months from the time the debtor knew, or should have known, its state of insolvency (articles 584 and 5 of the Insolvency Law).

The filing of both the pre-bankruptcy and the bankruptcy itself has immediate positive effects for the debtor, the most notable of them being allowing the businessman to continue with his activity while the debt claims are suspended. In addition, from the declaration of the bankruptcy (art. 152 TRLC) and during the period for negotiating the out-of-court payment agreement (art. 665 TRLC) the accrual of interest will be suspended.

In addition, from the declaration of the bankruptcy no enforcement proceedings or administrative and tax assessments may be initiated against the bankrupt (art. 142 TRLC) and those already initiated will be automatically suspended (art. 143.1 TRLC), which means the automatic suspension of the seizures that could be processed and, even, the lifting of those that were already noted (art. 143 TRLC).

Therefore, although the legal obligation to file for insolvency proceedings is suspended until December 31, 2020, the prompt filing of such proceedings is essential to halt the deterioration of corporate assets thanks to the different measures and effects that their declaration causes.

Furthermore, given that all the positive effects for the debtor of filing for bankruptcy proceedings only take effect from the moment they are declared by the Court, the immediate filing of the application will allow the debtor to anticipate the more than foreseeable collapse of the Commercial Courts and, thus, benefit from the first moment of the advantages that the law offers for these cases.