Insolvency and Bankruptcy Law reform. Law 25563 as of Feb. 15, 2002.
- Argentina
- 02/22/2002
- Hourbeigt Ruiz Martinez & Padilla
On February 15, 2002 were published in the Official Gazette the Law 25.563 (the “Law”) that establishes, among other topics, (i) the declaration of the productive and credit emergency until December 10, 2003, 10 (ii) modifications to the Insolvency and Bankruptcy Law N°24.522, and (iii) the regulation of the private sector debts.
The purpose of the present brief is to highlight the main modifications introduced by the Law, which will have a deep impact in those indebted or crediting companies.
The main aspects of the Law are the following:
1. It extends to 180 days the established period of exclusivity for the Law N°24.522 in favor of the debtor so that it introduces proposals of preventive agreement to their creditors and to obtain their conformity. The previous period was of 30 days, with the possibility of being extended by the judge up to 60 days.
2. Eliminates the article 48 of the Law N°24.522 that established the mechanism of “Cramdown” for which the creditors could acquire the company in case the period of exclusivity was concluded without having arrived to a preventive agreement.
3. Modifies the article 55 of the Law N°24.522, establishing that although the judicial homologation of the creditors preventive agreement means the novation of all previous obligations, it doesn’t imply the extinction of the bondsman’s obligations and the solidary codebtor which will be limited within reach of the new obligation born from the preventive agreement.
4. The expiration of the period of exclusivity is continued, for a term not shorter than 180 days from the expiration date foreseen for this period or from the last extension granted by the judge in all the actions filled previously and governed by the Law N°24.522.
5. It is suspended up to January 10, 2003 the effects of any type of guarantees of financial obligations that at any rate allow the transfer of control of the competed societies or their subsidiaries.
6. It is suspended by a term of 180 days in the preventive action the judicial and extrajudicial executions.
7. One year the term is continued for the execution of the obligations assumed by the debtor in the cases of judicial or extrajudicial preventive actions homologated in the terms of the Law 24.522.
8. It is suspended by 180 days the tramitation of the insolvency and bankruptcy orders.
9. Orders the Central Bank to eliminate all restriction that at any rate impedes, block or urge the access to the credit of insolvenced physical and/or juridical entities. Also, the Central Bank will orchestrate a line of rediscounts dedicated to the financial entities that attend the companies that are in the stage of the period of exclusivity that has for effect to assure the access to the credit and enough guarantees to formulate a reasonable and viable proposal. The companies will be able to hire freely with the National State whenever they gather the conditions demanded.
10. Within a term of 90 days the financial entities must reprogram the credits that maintain with their debtors at November 30 2001 through an agreement fulfilled in the terms of the Law 25.561. The obligation of the financial entities to forsight the 100% of the credit was vetoed in the event of not reaching an agreement with the debtor in the established term, for what the article in question loses operability.
11. The guarantees granted by the Reciprocal Societies of Guarantee and/or guarantee funds will not been able to be executed whiles the emergency lasts (10/12/03).
12. Judicial or extrajudicial executions of any origin are suspended by a term of 180 days, with the exception of those that have labor, alimentary character, etc. and the obligations arisen after the promulgation of the Law.
13. Precautionary measures already filled on those goods considered indispensable for the continuity of the debtor’s normal commercial activities are suspended by a term of 180 days.
14. During the judicial and extrajudicial executions suspension term, the debtors’ acts of extraordinary disposition of their goods will be null, unless they have the creditors’ expressed agreement.
