Royal Decree 1333/2012 of 21st September, published in the Spanish Official State Gazette (Boletín Oficial del Estado – BOE) on 6th October 2012 regulates the obligation established by the Insolvency Act for insolvency administrators to have liability insurance or an equivalent guarantee.
Insolvency administrators who are Public Administrations or Public-Law Entities are exempt from this obligation if the individual chosen by the aforementioned to carry out the position is a civil servant.
The possession and validity of the insurance or equivalent guarantee constitutes a pre-requisite for the acceptance of the position of insolvency administrator.
1) What risks should the guarantee cover?
a) Possible damages caused to the insolvency assets by actions and omissions in the performance of the duties of the insolvency administrator.
b) Possible damages from the actions or omissions of the insolvency administrator, which directly damage debtor, creditor or third party interests.
c) Where insolvency administrator liability is declared, the expenses born by the person who carried out the action.
2) Accreditation.
The insolvency administrator must acknowledge before the court that he has contracted an insurance policy or that he possesses an alternative guarantee before accepting the post. If the insurance is not sufficient, the post shall be accepted and the insurance policy adapted within the following 15 days, which should be duly communicated to the court.
3) Financial coverage.
The minimum amount to be covered is 300,000 Euro. However:
a) When the insured is an insolvency administrator in at least three ordinary insolvency proceedings, the minimum amount shall be 800,000 Euro.
b) When dealing with insolvency proceedings of special importance in accordance with article 27 bis of the Insolvency Act, the minimum amount shall be 1,500,000 Euro.
c) When dealing with an issuing entity of securities or derivative instruments or a credit entity or insurance company, the minimum amount shall be 3,000,000 Euro.
4) Alternative guarantee to civil liability insurance.
The insolvency administrator may substitute the insurance for a joint and several guarantee with an equivalent content constituted by a credit entity, which should be maintained in force until 4 years have elapsed as from the moment that the administrator resigns his post.
5) Duration of the contract.
The contract should anticipate one or more extensions for periods of one year each. Should the insurer or the bank providing the guarantee not consent to extend the contract, the insolvency administrator shall have to produce another insurance policy or equivalent before the non-extended contract expires.
6) Provisional specification.
The coverage of the insurer shall include claims filed against the insolvency administrator during the practice of his duties or during the 4 years following the moment that he resigns his post, always providing that the claims are based upon damages caused to the insolvency assets during the time of acting as an insolvency administrator.
7) Claim.
Civil liability actions against the insolvency administrator have a limitation period of one year. Claims shall be carried out via court proceedings before a judge who may know or may have known about the insolvency proceedings in question.
For further information, please contact:
Eduardo VILÁ: vila@vila.es/en
