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TRANSCRIPT
COVID and Insolvency Reforms – Trends and
Expectations
- Sikha Bansal
Partner, Vinod Kothari & Company
COVID-19 is already creating a havoc in all spheres, and its long-term adversarial implications on the
economy (and the world economy) is not lightly apprehended. The situation becomes all the more
peculiar for businesses which, at the time the disaster hit, were already struggling to get through financial
stress.
Debt recovery and enforcement actions are nightmares for any person – corporate or non-corporate.
Though insolvency proceedings undertake a balanced approach, yet the implications might not be too
debtor-friendly (especially, in Indian context). Therefore, in such difficult times, it becomes important to
save businesses, which can later save the economy.
Economies across the globe have called for a stand-still – ‘as is where is’ – that is, the countries have
barred enforcement/insolvency actions against defaults during this period. In this article, we examine the
reforms/measures undertaken by various countries (BRICS/US/Australia/some European nations) to draw
cues as to how we can adapt to such a situation.
The intended outcome of this article is to list out views and recommendations in the light of such global
reforms.
Besides, readers might be interested in other regulatory issues (and response of the authorities to such
issues). We have collated our analysis of such regulatory reliefs1.
1. Possible effects of COVID-19 on insolvency proceedings2
Before we discuss what kind of relaxations might be important for us, in the Indian context, we need to
identify various ‘problem areas’ – that is, those stages in the insolvency laws which might be adversely
affected by the ongoing crisis.
The issues can be listed, depending upon at what stage the proceedings are, as below –
1.1. Incipient proceedings before disaster period
1 See: http://vinodkothari.com/covid-19-incorporated-responses/ 2 Under the Insolvency and Bankruptcy Code, 2016 (‘Code’)
The debtors would have already defaulted. The creditors might have served the debtors with statutory
notices3 requiring the debtors to either pay or face insolvency; and the debtor would have again failed to
pay. Therefore, the creditor had all the essential requirements fulfilled to initiate insolvency proceeding,
but for the disaster, could not do so.
However, there might be cases where the debtor has defaulted, but the creditor so far has not served the
notice and is still intending to initiate insolvency proceedings against the debtor.
1.2. Ongoing proceedings
A proceeding can be said to be ongoing where –
(a) the application for initiation of insolvency has been filed, and the same is pending
admission/rejection by NCLT,
(b) the order for admission of corporate insolvency resolution process has been passed.
Cases as in (b) are the worst affected in several ways, including by practical difficulties arising in the
processes, e.g. –
Resolution proceedings are to be conducted within strict timelines, where each sub-process is
also required to be completed within minimal timelines – total time limit for corporate insolvency
resolution process is 180 days + 90 days (extension) = 270 days. In any cases, including the time
for litigation, etc., the time limit shall not go beyond 330 days. The disaster is cutting short the
time available in hand.
The corporate debtor is to be managed as a going concern during the corporate insolvency
resolution process period. The units which were otherwise operating fine, might have to suffer
halt in operations – that may substantially impact the going concern status of the entity, as well
as pose liquidity crisis in the hands of the resolution professional. Even well-to-do businesses
might need a considerable time to get up on feet and recover from the effects of this disaster,
and the same might be extremely difficult for entities in corporate insolvency resolution process.
The disaster has hit industries across. With an already stressed market for NPAs, and stressed
units, the chances of resolution applicants turning up with resources would be bleak, even after
the disaster ends.
The creditors can be said to be in a situation of ‘no-where to go’ – they cannot enforce their
security (as for moratorium), and they cannot have a resolution plan (at least, for the time being).
Liquidation processes, too, are time-bound – any extension in the timeline of 1 year would require
NCLT approval. The disaster has already taken away a substantial part of this timeframe.
3 The statutory notice is mandatory for operational creditors and not financial creditors; however, generally, the financial creditors also serve the debtors with a final notice. Further, note that the minimum default limit, with effect from 24.03.2020 has already been raised to Rs. 1 crore.
The sale processes in liquidation or even if there had been schemes of arrangement – all have
been severely affected. The processes are to re-run/resume again. Further, the potential buyer-
base of such assets can also reduce substantially.
There might be several cases pending before NCLT/NCLAT, or even SC.
Besides, the insolvency professional would be in dilemma as to how to go about the different functions
involved in the resolution/liquidation processes – for example, claim verification, invitation for sale,
identification of vulnerable transactions, etc.
1.3. Default during/after disaster period
An entity/an individual is amenable to committing
a default during the disaster period. There might be
several reasons for the same, including a systemic
dependence of entities for supplies and payments,
e.g. – financial stress, halt in operations with no
corresponding relief for expenses such as
employee expenses, overrun in expenses to
manage operations during such difficult times, or
even for technical reasons such as difficulties in
administration and processing payments.
One can envisage the following when it comes to
default during/after disaster period –
S. No. Possible scenario Remarks
(i) No default pre-disaster, but the entity
starts failing obligations in the disaster
period. However, the default is cured
after disaster period.
The same is not a problematic issue, as the default is
cured after disaster.
(ii) No default pre-disaster, but the entity
starts failing obligations in the disaster
period, and the same continues after
disaster period
Most probably, this is because of the effect of
disaster.
Here it would be important to define a cooling
period to –
To allow the effects of disaster to cool down,
and
To disallow entities from misusing
relaxations for an unreasonable period
An important consideration here would be the
sector and the industry in which the entity operates.
(iii) No default pre-disaster and during the
disaster. However, the entity starts
defaulting post disaster.
This might be an indication of percolation of disaster
effect. The financial position of the entity might have
been so effected such that initially, it might have
been possible for the entity to repay obligations, but
the same becomes difficult at a later stage.
Therefore, the legislature can consider granting a
‘cure-period’ to all entities, which is over and above
the ‘disaster period’.
(iv) Existence of default pre-disaster,
continuing default during disaster
period.
This cannot be a case where the disaster is a reason
of default. The inability of the entity might have
been magnified because of the disaster, but disaster
is not the cause of failure to pay.
Therefore, it is important to restrict such cases from
taking benefit of relaxations pertaining to disaster.
1.4. Other important considerations
There can be several other areas which might pose practical issues at a later date. Say, a company enters
into certain transactions during this disaster period, where it has to provide its goods/services at lower
rates, or may be, has to trade at unfavourable terms, even after knowing that the company is in incipient
stress. Can such transactions be later challenged by the insolvency professional as undervalued
transactions or wrongful trading, etc.?
Also, there would be resolution proceedings which had been concluded – the resolution plan would have
been sanctioned and the obligations of the resolution applicant under the resolution plan should have
been triggered; however, the present circumstances may limit the capability of the resolution applicant
to meet the obligations under the repayment plan.
2. Measures adopted in India
Pending announcement of a holistic mitigation remedy, the Indian Government and the judiciary have
undertaken several intermittent measures with respect to insolvency regime, besides addressing the issue
of NPAs, as briefly discussed below –
2.1. RBI moratorium on loan repayments/asset deterioration
The Reserve Bank of India announced a regulatory package on 27th March, 20204, and allowed banks and
other financial institutions to grant moratorium upto 3 months beginning from 1st March, 2020. We have
earlier dealt with micro-issues and queries relating to said measure in our FAQs5.
Recently, the RBI Governor announced measures relaxing ageing provisions as well, that there would be
an asset classification standstill on all accounts, which were standard as on 1st March, 2020, i.e. the 90-
day NPA norm shall not apply – see our quick note6.
These provisions will provide relief to borrowers as enforcement/insolvency actions against such debtors
can be avoided for defaults occurring solely because of the disaster7.
2.2. Suo-moto order by Supreme Court
The Hon’ble Supreme Court has taken suo-moto congnizance of the situation arising out of the challenge
faced by the country on account of Covid-19, vide order dated 23rd March, 20208. As per the order, a
period of limitation in all proceedings in various courts/tribunals across country, irrespective of the
limitation prescribed under the general law or special laws, whether condonable or not, shall stand
extended w.e.f. 15th March 2020 till further order/s to be passed by SC in present proceedings.
2.3. Relief by insolvency regulator
The insolvency regulator, viz., the Insolvency and Bankruptcy Board of India (IBBI) too, issued notification
dated 29th March, 20209 so as to envisage that the period of lockdown shall be excluded for the purpose
of computation of timelines under the regulations for corporate insolvency resolution process. For the
exemption, the activity should not have been completed due to lockdown. Vide press release10 of the
same date, it was clarified by IBBI that the relaxation under the said notification would be subject to
overall time limit provided under the Code.
Similar such notification, dated 17th April, 202011, has been issued with respect to liquidation process.
2.4. Suo-moto order by NCLAT
The National Company Law Appellate Tribunal too, took suo moto cognizance of the unprecedented
situation and ordered on 30th March, 202012 that the period of lockdown shall be excluded for the purpose
4 https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11835&Mode=0 5 See FAQs: http://vinodkothari.com/2020/03/moratorium-on-loans-due-to-covid-19-disruption/ 6 http://vinodkothari.com/2020/04/the-great-lockdown-standstill-on-asset-classification/ 7 As a side-note, it may be noted that ineligibility of a resolution applicant to submit resolution plans under section 29A would depend on the length of time for which the account has remained an NPA. 8 Order: https://ibbi.gov.in/uploads/order/ba13679c3c9779782c75ad2dbd7c65ca.pdf 9 Amendment in CIRP Regulations by insertion of regulation 40C- https://ibbi.gov.in/uploads/whatsnew/be2e7697e91a349bc55033b58d249cef.pdf 10 See https://ibbi.gov.in//uploads/press/92797aa5f444ab7215707834d4821409.pdf 11 See: https://ibbi.gov.in/uploads/whatsnew/4697af9d01b6c12c0816f4be28ea6835.pdf 12 See https://ibbi.gov.in/uploads/order/0fd02d6fd104fcdd63936eb4cb23021b.pdf
of counting of the period of corporate insolvency resolution process, in all cases where corporate
insolvency resolution process has been initiated and pending. Further, any interim order/ stay order
passed by NCLAT under the Code shall continue till next date of hearing, which may be notified later.
As the authorities try to provide all possible relief amidst the ongoing crisis, what we need is probably a
holistic mitigation framework to deal with all possible problem areas – as we can see for other countries
as well.
3. Global responses to COVID effect on insolvency regimes
In the said pretext, countries across the globe have promulgated relaxations under their respective
insolvency laws, both personal and corporate. In general, the insolvency and winding up proceedings have
the same trigger event, which is default.
A cursory reading of the amendments/propositions with respect to insolvency laws across countries (see
at the end of this analysis), would indicate a certain level of commonness in the measures, e.g. –
moratorium on presumption/determination of default,
increase in the minimum limit of default,
increase in time limits for repayment by debtor on being served statutory demand notices,
extending timelines for reorganisation proceedings,
temporary relaxations in provisions relating to wrongful trading during insolvency,
An important observation from the measures is that the relaxations do not extend to entities which had
been in default before the event of disaster – that is, a disaster cannot be an excuse to cover a default
which did not happen because of the disaster. Therefore, a pre-existing default is not saved from the
COVID mitigation laws.
4. Possible measures/recommendations
In general, it is important to define/set limits on the period for which the relaxations would be applicable.
Some of the countries have called it ‘prescribed period’, while some have referred to it as simply
‘moratorium’. Some of the countries have prescribed retrospective inception of such moratorium (e.g.
from 1st March, 2020). Note that RBI too, in its notifications/announcements, has designated 1st March,
2020 as the inception of the period. We may refer it as disaster period. Such period may initially be for 90
days (that is, upto 31st May, 2020) and can be extended/shortened as may be notified by the Central
Government.
At the outset, the word ‘disaster’ may be defined with reference to section 2(d) of the Disaster
Management Act, 2005, which can include pandemics, such as this, as well.
On the point as to whether a blanket prohibition on initiation of insolvency proceedings (or say
enforcement action) during the Disaster Period should be there, there might be possible counter-
arguments –
(i) In favour – This would save the stressed entities from insolvency proceedings.
(ii) Against – It might be argued that, what matters is not the point of time at which the proceedings
initiate, but the point of time at which default occurred. Where default occurred prior to the
disaster, there must be no reason to prohibit the creditor to initiate insolvency proceedings. In
any case, given the circumstances, where the court-functioning is extremely limited, it might itself
be impractical to think of initiating such long-term proceedings. It may be noted that such
proceedings may not even be categorized as ‘urgent or unavoidable’ by the courts. Further,
certain measures can ensure that, where the cause of default is disaster, the debtors are
adequately protected (see recommendations below). Putting a blanket prohibition on creditors
might be putting fetters on legal rights of the creditors and may be practically not feasible.
However, the legislators may think of providing a ‘cure period’ to all entities, which would be
over and above the ‘disaster period’.
Now, the recommendations below seek to address specific problem areas –
S.
No.
Probable problem areas Possible recommendation
(i) The debtor defaults during the Disaster
Period.
Exclude from the definition of ‘default’, default
occurring during the Disaster Period. Alternatively,
proviso/explanation may be given under sections 4
and 78.
Clarify that the exclusion is not applicable where
there was a default existing prior to Disaster Period.
This can be a blanket exclusion – meaning, that the
adjudicating authority need not get into the ‘cause’
of default if the default occurred during the Disaster
Period.
(ii) Minimum default limit is low. The minimum default limit has recently been raised
to Rs. 1 Crore for corporate debtors, which seems
adequate. However, the limit for personal guarantors
remains at Rs. 1000/-, which is a disparity.
(iii) Creditor may have served demand
notice to the debtor, which must be
responded within 10 days.
The period of 10 days shall be extended by the
Disaster Period.
(iv) Corporate insolvency resolution
process is initiated, and the time limit
The same has been addressed in the NCLAT order,
however, a legislative amendment may be needed.
for completion of 270 days (max. 330
days).
Exclude the Disaster Period from the CIRP Period for
the sole purpose of extending the time availability.
The same shall not, in any manner, affect the
maintainability of costs incurred by the resolution
professional during the period, neither any other
provision depending on the definition of corporate
insolvency resolution process period.
(v) Obligations of resolution
applicant/guarantor under resolution
plan
This would be prominently contractual, and terms
would be decided by the resolution plan itself, as
sanctioned by NCLT. If there are force majeure
clauses, the same should suffice.
(vi) The entity might have to trade on
unfavourable terms during the Disaster
Period.
Some of the countries (including UK) have
relaxed/sought to relax provisions relating to
wrongful trading in the penultimate period preceding
insolvency, so as to grant immunity to the
management.
However, providing a blanket exemption might not
be desirable as ‘wrongful’ in itself is a subjective term
and determination of whether an act was wrongful or
not has to take into consideration facts and
circumstances as prevalent at the time of the act. It is
felt that such cases may be examined on case to case
basis at appropriate juncture, without a presumptive
relexation.
Besides, it might be important to amend enforcement laws, such as Securitisation, Reconstruction of
Financial Assets, and Enforcement of Security Interest Act, 2002 so as to prohibit creditors from initiating
enforcement actions with respect to defaults occurring in the disaster period. This will also provide relief
to guarantors of corporate debtors.
5. Annex: COVID and Global Insolvency Reforms
A cross-country study of how various countries have made an attempt to deal with various issues arising
out of the present situation will enable one to have an idea of best possible measures.
The details below have been collated from various sources including government announcements, press
releases, and several news pieces, articles available in the public domain13.
5.1. Singapore
Singapore has passed COVID – 19 (Temporary Measures) Act 202014. The said talks about ‘prescribed
period’ which the Minister may prescribe (see, section 3) and it should not exceed 6 months and it can be
extended or shortened more than once.
Part 2 provides temporary relief for inability to perform contracts. Part 3 of the Singapore Act deals with
modifications to bankruptcy and insolvency laws of the country, viz. the Bankruptcy Act; and the
Insolvency, Restructuring and Dissolution Act 201815.
The reliefs with respect to companies include the following –
The cut-off amount for initiating winding up application on inability to pay debts has been raised
from $15000 to $ 100000 during the prescribed period;
The time limit within which the company should pay has been extended from 3 weeks to 6 months
The provisions (section 239) relating to wrongful trading has been relaxed such that a company is
not to be treated as incurring debts or other liabilities without reasonable prospect of meeting
them in full if the debt or other liability is incurred during the prescribed period (including other
factors, such as ordinary course of business and before the appointment of a judicial
manager/liquidator)
Presumption of inability to pay debts (for the purpose of creditor’s application) has to be made
on lapse of 6 months from serving the statutory demand notice (at present, the same is 21 days)
Where the debt/aggregate of debt does not exceed $250000, in which case, the Court, instead of
making a bankruptcy order, adjourns the application for 6 months to assess whether the debtor
is eligible for debt repayment scheme.
5.2. Australia
On 23rd March 2020, the Australian Government passed the Coronavirus Economic Response Package
Omnibus Bill 202016. The amendments apply for a 6 month period. Schedule 12 of the said law deals with
temporary relief for financially distressed individuals and businesses.
Statutory demands issued from 25th March 2020 must now be for more than A$20,000 (earlier, A$2,000),
and they must allow a minimum of 6 months for the debt the subject of the statutory demand to be paid
or compromised, or for an application to set it aside to be filed and served (earlier, 21 days).
13 Primary Source: INSOL International Coronavirus (COVID-19) Tracker of insolvency reforms globally (as at 3 April 2020), see: https://www.insol-europe.org/technical-content/covid19 14 https://www.moh.gov.sg/docs/librariesprovider5/pressroom/press-releases/annex-for-notification-8-apr-2020.pdf 15 https://sso.agc.gov.sg/Acts-Supp/40-2018/Published/20181107?DocDate=20181107 16 https://www.legislation.gov.au/Details/C2020A00022
The duty to prevent insolvent trading, and the associated personal liability for directors, will now not apply
to debts incurred in the ordinary course of the company's business. This will apply to debts incurred on or
after 25th March 2020 for 6 months.
5.3. United States
The United States has promulgated a bill to be called ‘Coronavirus Aid, Relief, and Economic Security Act”
or the ‘CARES Act’17. The US Bill, among other things, speaks about loan forgiveness to small businesses
covered under the Small Business Act.
Further, the Governor of the State of New York signed an Executive Order [No. 202.9] on 21st March 202018
which provides that ‘it shall be deemed an unsafe and unsound business practice if, in response to the
COVID-19 pandemic, any bank which is subject to the jurisdiction of the Department shall not grant a
forbearance to any person or business who has a financial hardship as a result of the COVID-19 pandemic
for a period of ninety days’.
5.4. BRICS nations
Brazil
Brazil has introduced a bill (PL No. 1,397/2020) to modify the current bankruptcy law, Law No.
11,101/2005.
The reforms include19 the following –
The minimum amount for the declaration of bankruptcy for the purposes of Article 94, I, of LRF,
is now considered BRL 100,000.00, verified on the date of the respective request
Prohibition for the creditors to exercise their rights against the co-obligors, guarantors and third-
party obligors;
Prohibition to declare liquidation of company for failure to comply with the judicial reorganization
plan;
The obligations provided for in the judicial or extrajudicial reorganization plans already approved,
regardless of the resolution of the creditors meeting, will not be due from the debtor for a period
of 120 days, in which the declaration of liquidation is prohibited;
The debtors who already have a judicial or extrajudicial reorganization plan ratified by the court
will be allowed to present a new plan and may subject credits subsequent to the judicial or
extrajudicial recovery request already approved, with the right to a new stay period, subject to
another approval by creditors under the terms of the specific procedure
Russia
17 See: https://www.congress.gov/bill/116th-congress/senate-bill/3548/text 18 See: https://www.governor.ny.gov/news/no-2029-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency 19 Source: Various articles/press notes
Russia has passed Federal Law No. 98-FZ dated 1 April 202020. As per the law, the Government has
imposed moratorium on 3rd April, 202021.
The moratorium will be for 6 months from 3rd April, 2020.
The moratorium is sector-specific (airlines, airports, education, tourism, etc.) and also applies to
systemically important and strategic enterprises (oil and gas, metal industry, etc.), as determined
by the Government.
The creditor petitions filed in the court during moratorium will be returned.
The Russian Government has also decided on soft loan programmes for small companies22.
South Africa
The Companies and Intellectual Property Commission has issued a practice notice dated 24.03.202023.
Under the Companies Act, 2008 of the country, the Commission has power to issue notices where it has
reasonable grounds to believe that the company is trading or carrying on business recklessly, with gross
negligence or for a fraudulent purpose. In light of the pandemic and the declaration of a national state of
disaster under the disaster management law, the said Commission will not invoke such powers in the case
of a company which is temporarily insolvent and still carrying on business or trading. This is applicable
only where the Commission has reason to believe that the insolvency is due to business conditions, which
were caused by the pandemic.
5.5. European Nations
United Kingdom
UK has announced measures for protection of businesses during the pandemic – press release dated
28.03.202024. As can be inferred from the press release, the rules are proposed to enable UK companies
undergoing a rescue or restructure process to continue trading, giving them breathing space that could
help them avoid insolvency. This will also include enabling companies to continue buying much-needed
supplies, such as energy, raw materials or broadband, while attempting a rescue.
Under the plans, the UK’s Insolvency Framework will add new restructuring tools including:
(i) a moratorium for companies giving them breathing space for from creditors enforcing their debts
for a period of time whilst they seek a rescue or restructure;
(ii) protection of their supplies to enable them to continue trading during the moratorium; and;
(iii) a new restructuring plan, binding creditors to that plan
20 Source: Various articles/press notes 21 http://government.ru/docs/39372/ 22 http://government.ru/news/39237/ 23 http://www.cipc.co.za/files/1015/8504/6745/Practice_Note_1_of_2020.pdf 24 https://www.gov.uk/government/news/regulations-temporarily-suspended-to-fast-track-supplies-of-ppe-to-nhs-staff-and-protect-companies-hit-by-covid-19
The proposals will include key safeguards for creditors and suppliers to ensure they are paid while a
solution is sought.
The government will also temporarily suspend the wrongful trading provisions retrospectively from
01.03.2020 for three months to give company directors greater confidence to use their best endeavours
to continue to trade during this pandemic emergency, without the threat of personal liability should the
company ultimately fall into insolvency. Existing laws for fraudulent trading and the threat of director
disqualification will continue to act as an effective deterrent against director misconduct. Therefore, the
directors, on the basis of a COVID-19 Declaration, would be able to avail the moratorium. During such
period, the company would not be deemed to be unable to pay debts for the purpose of a creditor winding
up petition.
A slew of other measures as announced by UK for businesses are here:
https://www.gov.uk/government/publications/coronavirus-covid-19-guidance-for-uk-
businesses/coronavirus-covid-19-guidance-for-uk-businesses-trading-internationally
Germany
The German Parliament has passed the COVID-19 Insolvency Suspension Act (COVInsAG), which came into
force on 27th March, 2020 with retroactive effect from 1st March 2020. Further, the Mitigation of
Consequences of the Covid-19 Pandemic in the areas of Civil, Insolvency and Criminal Procedure Law.
The reforms, amongst other things, cover the following –
the obligation on a company to file for insolvency in case of over-indebtedness/illiquidity will be
generally suspended until 30th September, 2020 (with an option to extend till 31st March, 2021) –
the relaxation is not available where the insolvency did not result from the pandemic or if there
are no reasonable prospects that the company's illiquidity can be eliminated until 30th September
2020;
where a company was not illiquid on 31 December 2019, it will be presumed that the insolvency
was caused by the pandemic and that there are reasonable prospects for eliminating illiquidity;
a creditor’s application will only be admissible if the debtor was insolvent before 1 March 2020;
personal liability for payments during insolvency shall not arise where the obligation for filing
insolvency is suspended and the payments are required in ordinary course of business to
maintain/resume business operations or implement a restructuring plan.
France
On 23rd March, 2020, the French Parliament adopted an emergency law establishing a “health state of
emergency,” declared for a period of two months from 24th March, 2020 to 24th May, 2020 (Emergency
Law No. 2020-290 of March 23, 2020 to deal with the Covid-19 epidemic)25.The reforms are applicable
until the expiry of 3 months after the date of cessation of the state of health emergency –
the situation of the debtor has to be assessed as on 12th March 2020 – therefore, if a debtor was
not in state of cessation of payments, but such a state has arisen during the period of health crisis,
it cannot be assigned to judicial reorganization;
duration of ongoing conciliation proceedings automatically extended until such period of 3
months;
the duration of the safeguard and reorganization plans shall be extended;
the president of the insolvency court may extend the time limits imposed on the court appointed
administrator;
the periods relating to the observation period, the plan, the maintenance of activity and the
duration of the simplified judicial liquidation are automatically extended until the expiry of such
3 month period.
Luxembourg
The Luxembourg Government issued the Grand-Ducal Regulation of 25 March 202026. The time limits
prescribed in proceedings before the judicial, administrative, military and constitutional courts are
suspended. Consequently, the 1-month period following the date of suspension of payments (i.e. the date
at which the company was unable to meet its obligations) to submit a bankruptcy petition is also
suspended.
Spain
The Spanish Government has enacted Royal Decree-Law 8/202027 and other pieces of law in response to
the pandemic.
Relaxation has been provided to directors of their obligation to commence insolvency proceedings within
two months of the company becoming insolvent. The measure will last until the state of emergency that
was declared on 14th March 2020 remains in place. If a third party commences insolvency proceedings
against the company while the state of emergency is still in place, the proceedings will be stayed until two
months after the state of emergency has ended.
25 https://www.concurrences.com/en/bulletin/news-issues/preview/the-french-parliament-adopts-an-emergency-law-establishing-a-health-state-of. See also https://www.clearygottlieb.com/news-and-insights/publication-listing/covid19-temporary-french-bankruptcy-law-adjustments 26 See: http://www.legilux.lu/eli/etat/leg/rgd/2020/03/25/a185/jo 27 https://www.boe.es/boe/dias/2020/03/18/pdfs/BOE-A-2020-3824.pdf