Within the scope of Bankruptcy Law, the concept of the transfer or sale of a productive unit is very interesting, since it makes it possible to satisfy the various interests at stake, namely, the employer, the workers, the suppliers, the clients and the creditors of the company, so that this transfer is configured as one of the possible tools aimed at preserving the business network and employment, referred to in the Second Statement of Royal Legislative Decree 1/2020, of May 5, by which the Consolidated Text of the Insolvency Law (hereinafter, TRLC) is approved.
The definition of the concept of productive unit is not a trivial issue because the legal consequences that a transfer can have in the event that the concept contains human elements such as workers or in cases where workers are not a consideration, are quite different. A first line of opinion is based on the provisions of the Judgment of the Court of Justice of the European Union of November 20, 2003, according to which a productive unit needs to include the personal element of workers. But another criterion can also be followed, under the provisions, among others, of the Judgment of August 7, 2018, which establishes a more flexible concept and considers the productive unit to be a set of material means that allow the implementation of the operation of a business, without the requirement of the personal element.
In Spanish Law, the most common opinion understands that this figure may or may not contain the element of workers, that is to say, the most flexible criterion is followed. At the legal level, there are several references to this figure, which has been treated in a non-unitary way in various legislative provisions, namely: in article 44.2 of the Workers’ Statute (economic entity that maintains its identity understood as a set of organized means aiming at carrying out an essential or accessory economic activity), 42.1.c) of the General Tax Law (persons or entities that come into the position of ownership or the exercise of economic activities or operations due to any concept) and we also find a reference thereto in article 149.4 of the former wording of the Insolvency Law, pursuant to the legal liquidation rules (economic entity that maintains its identity understood as a set of organized means aiming at carrying out an essential or accessory economic activity).
One of the main new developments of the TRLC is that it establishes a precise definition of the concept of a productive unit, found in Chapter II (The inventory of the active assets), Title IV (The active assets), of the First Book (Insolvency of creditors), indicating, in the second section of article 200 (called Productive Units), considering a productive unit as the set of organized means aimed at the development of an economic activity, whether it is essential or accessory. Likewise, there is another reference thereto in Article 324 of Chapter I, Title VII, (entitled the proposal for an agreement with assumption), in the first section of which it is indicated that the proposal for an agreement may consist of the acquisition, either by a natural person or legal entity, as determined in the proposal itself, either of the whole set of assets and rights of the professional or business activity of the insolvent party, or of certain production units, with the assumption by the acquirer of the commitment to continue such activity for the minimum time established in the proposal, and of the obligation of total or partial payment of all or some of the insolvency credits. And in the second section, the same article establishes that the transfer of the productive unit or units to the acquirer determined in the proposal for an agreement will be subject to the special rules established in this law for this kind of transfer.
Another novelty introduced by the TRLC, also in coherence with the principle of maintaining the company, is the possibility that the disposal or sale of a productive unit may be carried out at any time (as established in article 215), which leads us to analyze when the transfer of the productive unit could be carried out.
In the light of the wording offered by the TRLC, one view is that it could be carried out even in a pre-bankruptcy setting, without the need for and / or before the filing of the insolvency claim, through the channel established in article 583 (Communication of the opening of negotiations with creditors), located in the Second Book (On Pre-insolvency Law), Title I (The communication of the opening of negotiations with creditors), Chapter I (The communication of opening of negotiations with creditors). Although for this to happen, said article 583 should be completed or integrated with other legal provisions, such as the Voluntary Jurisdiction Law (regarding the appointment and remuneration of the insolvency administrator).
Another option would be within the insolvency procedure, making the request together with the filing of the insolvency claim, under the provisions of article 523 (Mandatory application of the abbreviated procedure), which provides that the judge will necessarily apply the abbreviated procedure when the debtor has completely ceased in its activity and has no employment contracts in force or when the debtor submits, together with the insolvency request, a liquidation plan containing a binding written proposal for the acquisition of the productive unit in operation.
A further option would be, within the insolvency procedure, in the common phase (articles 306, 307 and thereafter).
Another alternative would be in the setting of an agreement, through the channel established in article 324 (The proposal for an agreement with assumption), the first section of which indicates that the proposal for an agreement may consist of the acquisition, by a natural person or legal entity, determined in the proposal itself, either of the set of assets and rights of the active assets affected by the professional or business activity of the insolvent party, or only of certain production units, with assumption by the acquirer of the commitment to continue that activity for the minimum time established by the proposal, and the total or partial payment obligation of all or some of the insolvency credits, and in the second section, the transfer of the productive unit or units to the acquirer determined in the proposal for an agreement will be subject to the special rules established in this law for this type of transfer.
Finally, another possible moment would be the liquidation phase, under the provisions of article 416 (The presentation of the liquidation plan) and subsequent articles of the TRLC.
Another relevant development introduced by the TRLC is the handling of the assumption of labor debt, which is dealt with in two specific articles. Article 221 (Succession of a company) establishes, in section one that, in the event of disposal of a productive unit, for labor and social security purposes, it will be considered that there is a succession of a company, and in section two, that the judge of the insolvency procedure will be the only competent judge to declare the existence of company succession. In turn, article 224 (Effects on credits pending payment) specifies that the transfer of the productive unit will not entail the obligation to pay the credits not satisfied by the insolvent party before the transfer, whether they are insolvency credits or credits against the insolvency assets, except when company succession occurs with respect to the labor and social security credits corresponding to the workers of that productive unit. In turn, this article also clarifies that the judge of the insolvency procedure may agree, with respect to these credits, that the acquirer is not subrogated in the part of the amount of wages or compensation pending payment prior to the disposal, which is assumed by the Salary Guarantee Fund in accordance with the revised text of the Workers’ Statute Law, approved by Royal Legislative Decree 2/2015, of October 23.
Although to date we still have to experience the practical application that the judges will carry out these precepts, which have entered into force on September 1, 2020, we can conclude by praising the new developments introduced by the TRLC, especially with the implementation of the concept of productive unit, as well as a regulation that improves the previous wording, which will undoubtedly favor the use of this figure within commercial traffic, as it can be used both in the pre- or extra-insolvency phase, as well as in the insolvency phase, all of this supporting the principle of the maintenance and conservation of the company.
Mireia Bosch
Vilá Abogados
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Barcelona, 18th September 2020
