Statute of the Insolvency Administration

Vanessa M. Rguez de los Reyes, Head of legal en Zolva Iberia.

The creation of the Statute of the Insolvency Administration is essential to regulate all aspects related to the exercise of this role in a clear manner, considering that the insolvency administrator plays a crucial role in the insolvency procedure.

Regarding the Statute of the Insolvency Administration

The reform of the Consolidated Text of the Insolvency Law (TRLC) includes particularly relevant novelties related, among others, to registration, appointment, prohibitions, acceptance, exercise, and remuneration of the position, rendering of accounts, information duties, without prejudice to the Regulation of the Insolvency Administration that develops it.

From a general perspective, it is crucial to regulate the access and practice requirements of the profession to ensure, as the regulation itself indicates, the assurance of being able to perform the functions of the position. Similarly, the regime of prohibitions is of particular importance to distribute the appointments objectively and fairly, seeking designation based on the classification and complexity of the assigned insolvency, limiting discretionary appointments solely to the most complex cases.

Likewise, the regulation of the duties of the Insolvency Administrator is of paramount importance, with a requirement of impartiality and independence. Furthermore, due diligence in favor of the interest of the insolvency and the creditors for the satisfaction of their credits, with a significant impact on the diligence and quality of the work of the Insolvency Administrator, in the fixed remuneration, as well as the duration of the insolvency, as contemplated in the reform of the TRLC.

The TRLC adds a new rule on the duration of the insolvency, with a reduction of up to 50% of fees for the expected time excess. With regard to this point, it is highly unlikely that this will be feasible due to the material impossibility of complying with the specified deadlines, which could lead to the non-application of these effects based on the existence of “objective circumstances justifying the delay.”

Not to diminish the importance of the other issues to be regulated, from the creditor’s perspective, the control and supervision of the Insolvency Administration are crucial. Although the amended wording of the TRLC contemplates the regulation of duties and accountability, I consider it insufficient; however, the increase in information duties to the creditors attending the Insolvency Administration is very positive, including direct communications and the sending of documentation by electronic means to the designated creditors, and failing that, through the attorney, as well as the removal of the right of creditors to obtain a copy of the insolvency report and complementary documents from the court, as the Insolvency Administrator is obliged to provide all of this to the creditors via email.

Likewise, it could not have been more accurate that the regulation foresees the duty of information upon the creditors’ request at any stage of the procedure, under penalty of a possible reduction of the established remuneration or even the removal from the position. This measure will prevent what unfortunately has been common in practice, namely the lack of response to the creditor’s request for information or documentation, or the provision of information in generic or imprecise terms.

Aligned with the fulfillment of the duties of the Insolvency Administration, the foreseen effect in the event of non-compliance with obligations, such as the submission of Quarterly Reports, could lead to the removal of the insolvency administrator and the existence of liability if such non-compliance caused harm to the creditors.

Conclusions

Without intending to delve deeply into the regulation introduced by Law 16/2022 amending the Consolidated Text of the Insolvency Law, I believe that a profound regulation of the Insolvency Administration is essential, reflecting the professionalization of this role, transparency, clear and defined incentivizing remuneration to expedite the insolvency procedure and penalize delays or non-compliance, control and supervision of the Insolvency Administration, as well as responsibility and temporal limitation in the exercise of the position, all with the aim of ensuring security and transparency in the insolvency arena.

About the author:

Vanessa M. Rguez de los Reyes, Head of Legal at Zolva Spain, will participate in the 11th edition of the NPL Iberian Forum organized by CMS Group Europe She will be part of the debate on the panel: The new Insolvency Law as a tool to streamline and invigorate NPL’s management.