COVID and Insolvency Reforms – Trends and

Expectations

- Sikha Bansal

Partner, Vinod Kothari & Company

resolution@vinodkothari.com

COVID-19 is already creating a havoc in all spheres, and its long-term adversarial implications on the

economy (and the world economy) is not lightly apprehended. The situation becomes all the more

peculiar for businesses which, at the time the disaster hit, were already struggling to get through financial

stress.

Debt recovery and enforcement actions are nightmares for any person – corporate or non-corporate.

Though insolvency proceedings undertake a balanced approach, yet the implications might not be too

debtor-friendly (especially, in Indian context). Therefore, in such difficult times, it becomes important to

save businesses, which can later save the economy.

Economies across the globe have called for a stand-still – ‘as is where is’ – that is, the countries have

barred enforcement/insolvency actions against defaults during this period. In this article, we examine the

reforms/measures undertaken by various countries (BRICS/US/Australia/some European nations) to draw

cues as to how we can adapt to such a situation.

The intended outcome of this article is to list out views and recommendations in the light of such global

reforms.

Besides, readers might be interested in other regulatory issues (and response of the authorities to such

issues). We have collated our analysis of such regulatory reliefs1.

1. Possible effects of COVID-19 on insolvency proceedings2

Before we discuss what kind of relaxations might be important for us, in the Indian context, we need to

identify various ‘problem areas’ – that is, those stages in the insolvency laws which might be adversely

affected by the ongoing crisis.

The issues can be listed, depending upon at what stage the proceedings are, as below –

1.1. Incipient proceedings before disaster period

1 See: http://vinodkothari.com/covid-19-incorporated-responses/ 2 Under the Insolvency and Bankruptcy Code, 2016 (‘Code’)

The debtors would have already defaulted. The creditors might have served the debtors with statutory

notices3 requiring the debtors to either pay or face insolvency; and the debtor would have again failed to

pay. Therefore, the creditor had all the essential requirements fulfilled to initiate insolvency proceeding,

but for the disaster, could not do so.

However, there might be cases where the debtor has defaulted, but the creditor so far has not served the

notice and is still intending to initiate insolvency proceedings against the debtor.

1.2. Ongoing proceedings

A proceeding can be said to be ongoing where –

(a) the application for initiation of insolvency has been filed, and the same is pending

admission/rejection by NCLT,

(b) the order for admission of corporate insolvency resolution process has been passed.

Cases as in (b) are the worst affected in several ways, including by practical difficulties arising in the

processes, e.g. –

Resolution proceedings are to be conducted within strict timelines, where each sub-process is

also required to be completed within minimal timelines – total time limit for corporate insolvency

resolution process is 180 days + 90 days (extension) = 270 days. In any cases, including the time

for litigation, etc., the time limit shall not go beyond 330 days. The disaster is cutting short the

time available in hand.

The corporate debtor is to be managed as a going concern during the corporate insolvency

resolution process period. The units which were otherwise operating fine, might have to suffer

halt in operations – that may substantially impact the going concern status of the entity, as well

as pose liquidity crisis in the hands of the resolution professional. Even well-to-do businesses

might need a considerable time to get up on feet and recover from the effects of this disaster,

and the same might be extremely difficult for entities in corporate insolvency resolution process.

The disaster has hit industries across. With an already stressed market for NPAs, and stressed

units, the chances of resolution applicants turning up with resources would be bleak, even after

the disaster ends.

The creditors can be said to be in a situation of ‘no-where to go’ – they cannot enforce their

security (as for moratorium), and they cannot have a resolution plan (at least, for the time being).

Liquidation processes, too, are time-bound – any extension in the timeline of 1 year would require

NCLT approval. The disaster has already taken away a substantial part of this timeframe.

3 The statutory notice is mandatory for operational creditors and not financial creditors; however, generally, the financial creditors also serve the debtors with a final notice. Further, note that the minimum default limit, with effect from 24.03.2020 has already been raised to Rs. 1 crore.

The sale processes in liquidation or even if there had been schemes of arrangement – all have

been severely affected. The processes are to re-run/resume again. Further, the potential buyer-

base of such assets can also reduce substantially.

There might be several cases pending before NCLT/NCLAT, or even SC.

Besides, the insolvency professional would be in dilemma as to how to go about the different functions

involved in the resolution/liquidation processes – for example, claim verification, invitation for sale,

identification of vulnerable transactions, etc.

1.3. Default during/after disaster period

An entity/an individual is amenable to committing

a default during the disaster period. There might be

several reasons for the same, including a systemic

dependence of entities for supplies and payments,

e.g. – financial stress, halt in operations with no

corresponding relief for expenses such as

employee expenses, overrun in expenses to

manage operations during such difficult times, or

even for technical reasons such as difficulties in

administration and processing payments.

One can envisage the following when it comes to

default during/after disaster period –

S. No. Possible scenario Remarks

(i) No default pre-disaster, but the entity

starts failing obligations in the disaster

period. However, the default is cured

after disaster period.

The same is not a problematic issue, as the default is

cured after disaster.

(ii) No default pre-disaster, but the entity

starts failing obligations in the disaster

period, and the same continues after

disaster period

Most probably, this is because of the effect of

disaster.

Here it would be important to define a cooling

period to –

To allow the effects of disaster to cool down,

and

To disallow entities from misusing

relaxations for an unreasonable period

An important consideration here would be the

sector and the industry in which the entity operates.

(iii) No default pre-disaster and during the

disaster. However, the entity starts

defaulting post disaster.

This might be an indication of percolation of disaster

effect. The financial position of the entity might have

been so effected such that initially, it might have

been possible for the entity to repay obligations, but

the same becomes difficult at a later stage.

Therefore, the legislature can consider granting a

‘cure-period’ to all entities, which is over and above

the ‘disaster period’.

(iv) Existence of default pre-disaster,

continuing default during disaster

period.

This cannot be a case where the disaster is a reason

of default. The inability of the entity might have

been magnified because of the disaster, but disaster

is not the cause of failure to pay.

Therefore, it is important to restrict such cases from

taking benefit of relaxations pertaining to disaster.

1.4. Other important considerations

There can be several other areas which might pose practical issues at a later date. Say, a company enters

into certain transactions during this disaster period, where it has to provide its goods/services at lower

rates, or may be, has to trade at unfavourable terms, even after knowing that the company is in incipient

stress. Can such transactions be later challenged by the insolvency professional as undervalued

transactions or wrongful trading, etc.?

Also, there would be resolution proceedings which had been concluded – the resolution plan would have

been sanctioned and the obligations of the resolution applicant under the resolution plan should have

been triggered; however, the present circumstances may limit the capability of the resolution applicant

to meet the obligations under the repayment plan.

2. Measures adopted in India

Pending announcement of a holistic mitigation remedy, the Indian Government and the judiciary have

undertaken several intermittent measures with respect to insolvency regime, besides addressing the issue

of NPAs, as briefly discussed below –

2.1. RBI moratorium on loan repayments/asset deterioration

The Reserve Bank of India announced a regulatory package on 27th March, 20204, and allowed banks and

other financial institutions to grant moratorium upto 3 months beginning from 1st March, 2020. We have

earlier dealt with micro-issues and queries relating to said measure in our FAQs5.

Recently, the RBI Governor announced measures relaxing ageing provisions as well, that there would be

an asset classification standstill on all accounts, which were standard as on 1st March, 2020, i.e. the 90-

day NPA norm shall not apply – see our quick note6.

These provisions will provide relief to borrowers as enforcement/insolvency actions against such debtors

can be avoided for defaults occurring solely because of the disaster7.

2.2. Suo-moto order by Supreme Court

The Hon’ble Supreme Court has taken suo-moto congnizance of the situation arising out of the challenge

faced by the country on account of Covid-19, vide order dated 23rd March, 20208. As per the order, a

period of limitation in all proceedings in various courts/tribunals across country, irrespective of the

limitation prescribed under the general law or special laws, whether condonable or not, shall stand

extended w.e.f. 15th March 2020 till further order/s to be passed by SC in present proceedings.

2.3. Relief by insolvency regulator

The insolvency regulator, viz., the Insolvency and Bankruptcy Board of India (IBBI) too, issued notification

dated 29th March, 20209 so as to envisage that the period of lockdown shall be excluded for the purpose

of computation of timelines under the regulations for corporate insolvency resolution process. For the

exemption, the activity should not have been completed due to lockdown. Vide press release10 of the

same date, it was clarified by IBBI that the relaxation under the said notification would be subject to

overall time limit provided under the Code.

Similar such notification, dated 17th April, 202011, has been issued with respect to liquidation process.

2.4. Suo-moto order by NCLAT

The National Company Law Appellate Tribunal too, took suo moto cognizance of the unprecedented

situation and ordered on 30th March, 202012 that the period of lockdown shall be excluded for the purpose

4 https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11835&Mode=0 5 See FAQs: http://vinodkothari.com/2020/03/moratorium-on-loans-due-to-covid-19-disruption/ 6 http://vinodkothari.com/2020/04/the-great-lockdown-standstill-on-asset-classification/ 7 As a side-note, it may be noted that ineligibility of a resolution applicant to submit resolution plans under section 29A would depend on the length of time for which the account has remained an NPA. 8 Order: https://ibbi.gov.in/uploads/order/ba13679c3c9779782c75ad2dbd7c65ca.pdf 9 Amendment in CIRP Regulations by insertion of regulation 40C- https://ibbi.gov.in/uploads/whatsnew/be2e7697e91a349bc55033b58d249cef.pdf 10 See https://ibbi.gov.in//uploads/press/92797aa5f444ab7215707834d4821409.pdf 11 See: https://ibbi.gov.in/uploads/whatsnew/4697af9d01b6c12c0816f4be28ea6835.pdf 12 See https://ibbi.gov.in/uploads/order/0fd02d6fd104fcdd63936eb4cb23021b.pdf

of counting of the period of corporate insolvency resolution process, in all cases where corporate

insolvency resolution process has been initiated and pending. Further, any interim order/ stay order

passed by NCLAT under the Code shall continue till next date of hearing, which may be notified later.

As the authorities try to provide all possible relief amidst the ongoing crisis, what we need is probably a

holistic mitigation framework to deal with all possible problem areas – as we can see for other countries

as well.

3. Global responses to COVID effect on insolvency regimes

In the said pretext, countries across the globe have promulgated relaxations under their respective

insolvency laws, both personal and corporate. In general, the insolvency and winding up proceedings have

the same trigger event, which is default.

A cursory reading of the amendments/propositions with respect to insolvency laws across countries (see

at the end of this analysis), would indicate a certain level of commonness in the measures, e.g. –

moratorium on presumption/determination of default,

increase in the minimum limit of default,

increase in time limits for repayment by debtor on being served statutory demand notices,

extending timelines for reorganisation proceedings,

temporary relaxations in provisions relating to wrongful trading during insolvency,

An important observation from the measures is that the relaxations do not extend to entities which had

been in default before the event of disaster – that is, a disaster cannot be an excuse to cover a default

which did not happen because of the disaster. Therefore, a pre-existing default is not saved from the

COVID mitigation laws.

4. Possible measures/recommendations

In general, it is important to define/set limits on the period for which the relaxations would be applicable.

Some of the countries have called it ‘prescribed period’, while some have referred to it as simply

‘moratorium’. Some of the countries have prescribed retrospective inception of such moratorium (e.g.

from 1st March, 2020). Note that RBI too, in its notifications/announcements, has designated 1st March,

2020 as the inception of the period. We may refer it as disaster period. Such period may initially be for 90

days (that is, upto 31st May, 2020) and can be extended/shortened as may be notified by the Central

Government.

At the outset, the word ‘disaster’ may be defined with reference to section 2(d) of the Disaster

Management Act, 2005, which can include pandemics, such as this, as well.

On the point as to whether a blanket prohibition on initiation of insolvency proceedings (or say

enforcement action) during the Disaster Period should be there, there might be possible counter-

arguments –

(i) In favour – This would save the stressed entities from insolvency proceedings.

(ii) Against – It might be argued that, what matters is not the point of time at which the proceedings

initiate, but the point of time at which default occurred. Where default occurred prior to the

disaster, there must be no reason to prohibit the creditor to initiate insolvency proceedings. In

any case, given the circumstances, where the court-functioning is extremely limited, it might itself

be impractical to think of initiating such long-term proceedings. It may be noted that such

proceedings may not even be categorized as ‘urgent or unavoidable’ by the courts. Further,

certain measures can ensure that, where the cause of default is disaster, the debtors are

adequately protected (see recommendations below). Putting a blanket prohibition on creditors

might be putting fetters on legal rights of the creditors and may be practically not feasible.

However, the legislators may think of providing a ‘cure period’ to all entities, which would be

over and above the ‘disaster period’.

Now, the recommendations below seek to address specific problem areas –

S.

No.

Probable problem areas Possible recommendation

(i) The debtor defaults during the Disaster

Period.

Exclude from the definition of ‘default’, default

occurring during the Disaster Period. Alternatively,

proviso/explanation may be given under sections 4

and 78.

Clarify that the exclusion is not applicable where

there was a default existing prior to Disaster Period.

This can be a blanket exclusion – meaning, that the

adjudicating authority need not get into the ‘cause’

of default if the default occurred during the Disaster

Period.

(ii) Minimum default limit is low. The minimum default limit has recently been raised

to Rs. 1 Crore for corporate debtors, which seems

adequate. However, the limit for personal guarantors

remains at Rs. 1000/-, which is a disparity.

(iii) Creditor may have served demand

notice to the debtor, which must be

responded within 10 days.

The period of 10 days shall be extended by the

Disaster Period.

(iv) Corporate insolvency resolution

process is initiated, and the time limit

The same has been addressed in the NCLAT order,

however, a legislative amendment may be needed.

for completion of 270 days (max. 330

days).

Exclude the Disaster Period from the CIRP Period for

the sole purpose of extending the time availability.

The same shall not, in any manner, affect the

maintainability of costs incurred by the resolution

professional during the period, neither any other

provision depending on the definition of corporate

insolvency resolution process period.

(v) Obligations of resolution

applicant/guarantor under resolution

plan

This would be prominently contractual, and terms

would be decided by the resolution plan itself, as

sanctioned by NCLT. If there are force majeure

clauses, the same should suffice.

(vi) The entity might have to trade on

unfavourable terms during the Disaster

Period.

Some of the countries (including UK) have

relaxed/sought to relax provisions relating to

wrongful trading in the penultimate period preceding

insolvency, so as to grant immunity to the

management.

However, providing a blanket exemption might not

be desirable as ‘wrongful’ in itself is a subjective term

and determination of whether an act was wrongful or

not has to take into consideration facts and

circumstances as prevalent at the time of the act. It is

felt that such cases may be examined on case to case

basis at appropriate juncture, without a presumptive

relexation.

Besides, it might be important to amend enforcement laws, such as Securitisation, Reconstruction of

Financial Assets, and Enforcement of Security Interest Act, 2002 so as to prohibit creditors from initiating

enforcement actions with respect to defaults occurring in the disaster period. This will also provide relief

to guarantors of corporate debtors.

5. Annex: COVID and Global Insolvency Reforms

A cross-country study of how various countries have made an attempt to deal with various issues arising

out of the present situation will enable one to have an idea of best possible measures.

The details below have been collated from various sources including government announcements, press

releases, and several news pieces, articles available in the public domain13.

5.1. Singapore

Singapore has passed COVID – 19 (Temporary Measures) Act 202014. The said talks about ‘prescribed

period’ which the Minister may prescribe (see, section 3) and it should not exceed 6 months and it can be

extended or shortened more than once.

Part 2 provides temporary relief for inability to perform contracts. Part 3 of the Singapore Act deals with

modifications to bankruptcy and insolvency laws of the country, viz. the Bankruptcy Act; and the

Insolvency, Restructuring and Dissolution Act 201815.

The reliefs with respect to companies include the following –

The cut-off amount for initiating winding up application on inability to pay debts has been raised

from $15000 to $ 100000 during the prescribed period;

The time limit within which the company should pay has been extended from 3 weeks to 6 months

The provisions (section 239) relating to wrongful trading has been relaxed such that a company is

not to be treated as incurring debts or other liabilities without reasonable prospect of meeting

them in full if the debt or other liability is incurred during the prescribed period (including other

factors, such as ordinary course of business and before the appointment of a judicial

manager/liquidator)

Presumption of inability to pay debts (for the purpose of creditor’s application) has to be made

on lapse of 6 months from serving the statutory demand notice (at present, the same is 21 days)

Where the debt/aggregate of debt does not exceed $250000, in which case, the Court, instead of

making a bankruptcy order, adjourns the application for 6 months to assess whether the debtor

is eligible for debt repayment scheme.

5.2. Australia

On 23rd March 2020, the Australian Government passed the Coronavirus Economic Response Package

Omnibus Bill 202016. The amendments apply for a 6 month period. Schedule 12 of the said law deals with

temporary relief for financially distressed individuals and businesses.

Statutory demands issued from 25th March 2020 must now be for more than A$20,000 (earlier, A$2,000),

and they must allow a minimum of 6 months for the debt the subject of the statutory demand to be paid

or compromised, or for an application to set it aside to be filed and served (earlier, 21 days).

13 Primary Source: INSOL International Coronavirus (COVID-19) Tracker of insolvency reforms globally (as at 3 April 2020), see: https://www.insol-europe.org/technical-content/covid19 14 https://www.moh.gov.sg/docs/librariesprovider5/pressroom/press-releases/annex-for-notification-8-apr-2020.pdf 15 https://sso.agc.gov.sg/Acts-Supp/40-2018/Published/20181107?DocDate=20181107 16 https://www.legislation.gov.au/Details/C2020A00022

The duty to prevent insolvent trading, and the associated personal liability for directors, will now not apply

to debts incurred in the ordinary course of the company's business. This will apply to debts incurred on or

after 25th March 2020 for 6 months.

5.3. United States

The United States has promulgated a bill to be called ‘Coronavirus Aid, Relief, and Economic Security Act”

or the ‘CARES Act’17. The US Bill, among other things, speaks about loan forgiveness to small businesses

covered under the Small Business Act.

Further, the Governor of the State of New York signed an Executive Order [No. 202.9] on 21st March 202018

which provides that ‘it shall be deemed an unsafe and unsound business practice if, in response to the

COVID-19 pandemic, any bank which is subject to the jurisdiction of the Department shall not grant a

forbearance to any person or business who has a financial hardship as a result of the COVID-19 pandemic

for a period of ninety days’.

5.4. BRICS nations

Brazil

Brazil has introduced a bill (PL No. 1,397/2020) to modify the current bankruptcy law, Law No.

11,101/2005.

The reforms include19 the following –

The minimum amount for the declaration of bankruptcy for the purposes of Article 94, I, of LRF,

is now considered BRL 100,000.00, verified on the date of the respective request

Prohibition for the creditors to exercise their rights against the co-obligors, guarantors and third-

party obligors;

Prohibition to declare liquidation of company for failure to comply with the judicial reorganization

plan;

The obligations provided for in the judicial or extrajudicial reorganization plans already approved,

regardless of the resolution of the creditors meeting, will not be due from the debtor for a period

of 120 days, in which the declaration of liquidation is prohibited;

The debtors who already have a judicial or extrajudicial reorganization plan ratified by the court

will be allowed to present a new plan and may subject credits subsequent to the judicial or

extrajudicial recovery request already approved, with the right to a new stay period, subject to

another approval by creditors under the terms of the specific procedure

Russia

17 See: https://www.congress.gov/bill/116th-congress/senate-bill/3548/text 18 See: https://www.governor.ny.gov/news/no-2029-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency 19 Source: Various articles/press notes

Russia has passed Federal Law No. 98-FZ dated 1 April 202020. As per the law, the Government has

imposed moratorium on 3rd April, 202021.

The moratorium will be for 6 months from 3rd April, 2020.

The moratorium is sector-specific (airlines, airports, education, tourism, etc.) and also applies to

systemically important and strategic enterprises (oil and gas, metal industry, etc.), as determined

by the Government.

The creditor petitions filed in the court during moratorium will be returned.

The Russian Government has also decided on soft loan programmes for small companies22.

South Africa

The Companies and Intellectual Property Commission has issued a practice notice dated 24.03.202023.

Under the Companies Act, 2008 of the country, the Commission has power to issue notices where it has

reasonable grounds to believe that the company is trading or carrying on business recklessly, with gross

negligence or for a fraudulent purpose. In light of the pandemic and the declaration of a national state of

disaster under the disaster management law, the said Commission will not invoke such powers in the case

of a company which is temporarily insolvent and still carrying on business or trading. This is applicable

only where the Commission has reason to believe that the insolvency is due to business conditions, which

were caused by the pandemic.

5.5. European Nations

United Kingdom

UK has announced measures for protection of businesses during the pandemic – press release dated

28.03.202024. As can be inferred from the press release, the rules are proposed to enable UK companies

undergoing a rescue or restructure process to continue trading, giving them breathing space that could

help them avoid insolvency. This will also include enabling companies to continue buying much-needed

supplies, such as energy, raw materials or broadband, while attempting a rescue.

Under the plans, the UK’s Insolvency Framework will add new restructuring tools including:

(i) a moratorium for companies giving them breathing space for from creditors enforcing their debts

for a period of time whilst they seek a rescue or restructure;

(ii) protection of their supplies to enable them to continue trading during the moratorium; and;

(iii) a new restructuring plan, binding creditors to that plan

20 Source: Various articles/press notes 21 http://government.ru/docs/39372/ 22 http://government.ru/news/39237/ 23 http://www.cipc.co.za/files/1015/8504/6745/Practice_Note_1_of_2020.pdf 24 https://www.gov.uk/government/news/regulations-temporarily-suspended-to-fast-track-supplies-of-ppe-to-nhs-staff-and-protect-companies-hit-by-covid-19

The proposals will include key safeguards for creditors and suppliers to ensure they are paid while a

solution is sought.

The government will also temporarily suspend the wrongful trading provisions retrospectively from

01.03.2020 for three months to give company directors greater confidence to use their best endeavours

to continue to trade during this pandemic emergency, without the threat of personal liability should the

company ultimately fall into insolvency. Existing laws for fraudulent trading and the threat of director

disqualification will continue to act as an effective deterrent against director misconduct. Therefore, the

directors, on the basis of a COVID-19 Declaration, would be able to avail the moratorium. During such

period, the company would not be deemed to be unable to pay debts for the purpose of a creditor winding

up petition.

A slew of other measures as announced by UK for businesses are here:

https://www.gov.uk/government/publications/coronavirus-covid-19-guidance-for-uk-

businesses/coronavirus-covid-19-guidance-for-uk-businesses-trading-internationally

Germany

The German Parliament has passed the COVID-19 Insolvency Suspension Act (COVInsAG), which came into

force on 27th March, 2020 with retroactive effect from 1st March 2020. Further, the Mitigation of

Consequences of the Covid-19 Pandemic in the areas of Civil, Insolvency and Criminal Procedure Law.

The reforms, amongst other things, cover the following –

the obligation on a company to file for insolvency in case of over-indebtedness/illiquidity will be

generally suspended until 30th September, 2020 (with an option to extend till 31st March, 2021) –

the relaxation is not available where the insolvency did not result from the pandemic or if there

are no reasonable prospects that the company's illiquidity can be eliminated until 30th September

2020;

where a company was not illiquid on 31 December 2019, it will be presumed that the insolvency

was caused by the pandemic and that there are reasonable prospects for eliminating illiquidity;

a creditor’s application will only be admissible if the debtor was insolvent before 1 March 2020;

personal liability for payments during insolvency shall not arise where the obligation for filing

insolvency is suspended and the payments are required in ordinary course of business to

maintain/resume business operations or implement a restructuring plan.

France

On 23rd March, 2020, the French Parliament adopted an emergency law establishing a “health state of

emergency,” declared for a period of two months from 24th March, 2020 to 24th May, 2020 (Emergency

Law No. 2020-290 of March 23, 2020 to deal with the Covid-19 epidemic)25.The reforms are applicable

until the expiry of 3 months after the date of cessation of the state of health emergency –

the situation of the debtor has to be assessed as on 12th March 2020 – therefore, if a debtor was

not in state of cessation of payments, but such a state has arisen during the period of health crisis,

it cannot be assigned to judicial reorganization;

duration of ongoing conciliation proceedings automatically extended until such period of 3

months;

the duration of the safeguard and reorganization plans shall be extended;

the president of the insolvency court may extend the time limits imposed on the court appointed

administrator;

the periods relating to the observation period, the plan, the maintenance of activity and the

duration of the simplified judicial liquidation are automatically extended until the expiry of such

3 month period.

Luxembourg

The Luxembourg Government issued the Grand-Ducal Regulation of 25 March 202026. The time limits

prescribed in proceedings before the judicial, administrative, military and constitutional courts are

suspended. Consequently, the 1-month period following the date of suspension of payments (i.e. the date

at which the company was unable to meet its obligations) to submit a bankruptcy petition is also

suspended.

Spain

The Spanish Government has enacted Royal Decree-Law 8/202027 and other pieces of law in response to

the pandemic.

Relaxation has been provided to directors of their obligation to commence insolvency proceedings within

two months of the company becoming insolvent. The measure will last until the state of emergency that

was declared on 14th March 2020 remains in place. If a third party commences insolvency proceedings

against the company while the state of emergency is still in place, the proceedings will be stayed until two

months after the state of emergency has ended.

25 https://www.concurrences.com/en/bulletin/news-issues/preview/the-french-parliament-adopts-an-emergency-law-establishing-a-health-state-of. See also https://www.clearygottlieb.com/news-and-insights/publication-listing/covid19-temporary-french-bankruptcy-law-adjustments 26 See: http://www.legilux.lu/eli/etat/leg/rgd/2020/03/25/a185/jo 27 https://www.boe.es/boe/dias/2020/03/18/pdfs/BOE-A-2020-3824.pdf