Changes in the contests and ICO guarantees to avoid a tsunami of bankruptcies

“The measures to support those affected by the coronavirus are being effective, but they must be adapted at all times in a changing environment to respond to possible solvency problems that may cause viable companies to close due to the fall in economic activity derived from the pandemic, “said the Minister of Economic Affairs. Last spring, with a slowdown in activity due to actions to contain the pandemic, the Government followed in the footsteps of other Europeans and established policies to alleviate the liquidity problems of companies (loans with public endorsement, tax moratoriums …). They were policies designed with terms tailored to a crisis that was presumed short and followed by a rapid and intense recovery. The outbreak of the coronavirus, against which it is being fought again with mobility limitations that mutilate the functioning of various economic sectors, has aggravated the situation of many companies whose solvency and continuity is already highly compromised. The Government has now reacted by modifying the conditions of the liquidity measures and trying to put a dam in the face of insolvency situations.

ICO loans.

Two decisions are made to alleviate the companies in difficulties that had to face the beginning of the amortization of the capital from next March. As of that month, the grace period expired (period during which only the part corresponding to interest is paid). This period is extended by a further twelve months. At the same time, the expiration dates, which in most cases are four or five years, can be increased by up to three. Companies or freelancers who have not been in default or are immersed in bankruptcy proceedings may access these new conditions. Likewise, the possibility of accessing ICO loans extends until June 30, 2021. In Asturias, more than eleven thousand companies have availed themselves of these credits with public endorsement, with which they have obtained emergency financing amounting to 2,000 millions of euros.

Bankruptcy moratorium.

The decree approved yesterday maintains in suspense essential norms of the ordinary legislation on bankruptcy. First, the decision, now in force until December 31, is extended until March 14, according to which the obligation of companies in a legal situation of insolvency to request voluntary bankruptcy within two months is suspended. The obligation of the judges to admit for processing the necessary bankruptcy requests that the creditors may present is also suspended until the same date. “These measures will make it possible to avoid the bankruptcy of companies that, under normal conditions, would be viable, giving them additional time for their recovery or for negotiating with their creditors,” explained the Ministry of Economic Affairs. It is not a peaceful issue: a current of experts maintains that a general suspension of competitions favors unviable companies (“zombies”) to continue operating, with potential risks of bankruptcies for suppliers and customers.


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