By Belén Carreño

MADRID, Reuters – Spain’s Government proposed Tuesday to amend its bankruptcy law in order to make it easier to file for bankruptcy and to meet a key condition with Brussels that will allow them to receive European Union recovery money.

International Monetary Fund has criticised the insolvency system as slow and complicated, often leading to companies closing down.

Journalists were told by Justice Minister Pilar Llop that they do not wish any business to be forced to shut down due to temporary financial problems.

Spanish companies were active during the pandemic in applying to state-backed liquidity lines and credit.

To avoid an avalanche in business failures, since the Spanish lockdown began in March 2020 the obligation of declaring bankruptcy has been lifted. The moratorium was extended by the government to June 2022.

However, economists are concerned that this extension could conceal “zombie companies” which under normal circumstances would have to be liquidated.

Now, the draft proposal will be submitted to Congress in the form of a bill. It is anticipated that it will be included on the statute books around mid-2022.

It includes a pre-restructuring approach to insolvency prevention. This will allow for early resolution of debts, avoiding liquidation, and allows you to negotiate them.

A special program has been created by the government for businesses with fewer than 10 employees. It is intended to save small businesses money and time when they file for bankruptcy.

Llop promoted Llop’s idea of “second chances,” which makes it simpler for failed business owners to start new businesses.

This bill introduces new mechanisms that will speed up administrative work, including bonuses to facilitate the resolution of urgent cases.