Out of the Court Payment Agreement (V): How does the application for an Out of the Court Payment Agreement sit alongside the notice under article 5 bis of the insolvency law (the preinsolvency notice)?
The notice to the court with jurisdiction for the insolvency order on a debtor who has opted to negotiate an Out of Court Payment Agreement is not made by the debtor himself (which is usually the case with the preinsolvency notice for negotiating a refinancing agreement or an advance proposal for an arrangement), but instead will be made, as applicable, by either the commercial registrar, notary, or Chamber of Commerce, who will be required to perform this task, after the insolvency mediator has accepted his position. This may add distortions to the notice procedure under article 5 bis, because it falls outside the debtor’s control, and it is not even stipulated that the debtor may appear before the court in this procedure, although nothing should prevent this and it would even be advisable for the debtor to do so.
It would be highly recommendable in all cases for the debtor to identify, in his application for appointment of an insolvency mediator and commencement of the Out of Court Payment Agreement proceeding, any enforcement action that is being taken against the debtor’s property and which enforcement action the debtor wishes to be interrupted for the purposes of article 235.2.a) of the Insolvency Law, so that the examiner in the proceeding may include that specific petition in his notice of negotiations to the judge with jurisdiction. The more coordination there is between the application for an Out of Court Payment Agreement and the notice to the court with jurisdiction of the negotiations the better.
What may happen in some cases, however, is that the notice to the court under article 5 bis of the Insolvency Law may be delayed for a reason not attributable to the debtor, with the resulting damage that may arise, for example, from the failure to interrupt any enforcement action against the debtor’s property. If this is foreseeable, there is nothing to stop the debtor applying for urgent injunctive remedies to seek a moratorium on the enforcement action on the basis of the application for commencement of the Out of Court Payment Agreement proceeding and until the notice of negotiations by the examiner for that proceeding has taken place, after an insolvency mediator has been appointed, the mediator has accepted his position, etc. This solution has been endorsed by the courts in cases such as the decision by Barcelona Commercial Court no 3 of January 24, 2014 (La Ley 18931/2014).
It must be added that secrecy may not be ordered for the notice to the court of the negotiations to reach an Out of Court Payment Agreement (whereas the debtor can apply for secrecy in relation to refinancing agreements or advance proposals for an arrangement). The mandatory nature of article 233.3 of the Insolvency Law leaves no room for doubt because the examiner for the proceeding, simultaneously with giving notice of the commencement of the negotiations to the judge with jurisdiction, will order its publication on the Insolvency Public Register, without exception. Bear in mind that an Out of Court Payment Agreement will always have more publicity, because the commencement of the proceeding and acceptance of the position by the insolvency mediator must be recorded in a provisional noting of a claim against property on the sheet at the property registries or the civil registry, as applicable, or at any other relevant public registries. This makes sense from the standpoint that the Out of Court Payment Agreement may be binding on all of the debtor’s creditors, except for holders of public law claims.
Garrigues Restructuring and Insolvency department