INTRODUCTION
The reform of the Insolvency Act, by way of Law 38/2011, modified article 84.4 of the legal text of the latter, so that, according to one interpretation thereof, the opening up of administrative enforcements regarding credits against the bankruptcy assets would be possible. The Judgment of 12th December 2014 of the Supreme Court has provided an interpretation, which is different to the literal interpretation, as follows.
THE JUDGMENT
The current text of article 84.4 of the Insolvency Act (IA), in its literal interpretation, offers the administration the possibility of initiating enforcements on the property of the insolvent party, once liquidation has begun, and without the need to go through the commercial courts, thus making possible the non – judicial exercise of the enforcement of credits against the bankruptcy assets on the part of the administration.
The Supreme Court, on its part, understands that it is an error to literally interpret this provision. In any case, it should be interpreted in the context of the Insolvency Act in its entirety. Specifically, the High Court considers that this interpretation infringes the principle of “par conditio creditorum” (equal treatment of creditors) and therefore would be contrary to the spirit of the law.
The aforementioned judgment expresses that clearly once the liquidation phase is initiated, separate administrative restrictions or enforcements should not be initiated.
CONCLUSION
The practical consequence of this judgement is that the administration may not carry out enforcements and procedures for credits against the bankruptcy assets without carrying out the relevant judicial procedures beforehand. The judgement is especially relevant for companies under insolvency procedures without the financial resources to face tax or social security payments.
Vilá Abogados
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2nd February 2015
