The restructuring plan has been the star figure in the reform of bankruptcy law 16/2022. The law itself defines it as a plan that modifies the structure of the assets, liabilities or equity of a company or any other operational change that may take place in the company in order to make it viable.
The reform that came into force has introduced a number of changes with the aim of improving pre-bankruptcy procedures, helping companies to overcome cyclical problems and achieve viability.
The law classifies the difficulties faced by companies into three levels of insolvency:
1. Current insolvency: the company is no longer able to meet its payment obligations.
2. Imminent insolvency: it is expected that the company will not be able to meet its payment obligations in the near future, which will not exceed three months.
3. Probability of insolvency: there are factors that could lead to insolvency in the medium term, typically two years.
The spirit of this reform rests on the idea of recovering those companies in difficulties and which can be considered viable with the introduction of changes in their financial, economic or productive structure, overcoming the current weak condition.
The restructuring plan offers a variety of financial and operational measures for the recovery of the company. These tools allow for the implementation of multiple restructuring strategies.
What is the difference between a Restructuring Plan and an arrangement with creditors?
| INSOLVENCY PROCEEDINGS | RESTRUCTURING PLAN | |
|---|---|---|
| MOMENT | Current or imminent insolvency | Actual, imminent or likely insolvency. |
| OBJECTIVE | Liquidation of assets for the payment of creditors. | Avoiding insolvency and ensuring the viability of the company by modifying its financial, operational or capital structure. |
| PERIMETER | All assets, liabilities and equity. | Only elected assets and liabilities. |
| EFFECTS | Suspension of the debtor's administrative powers, judicial intervention and attachment of assets. | No suspension |
| PROCEDURE | Complex and time-consuming | Flexible and fast (approx. 6 months) |
| APPROVAL | No | Sometimes |
| COST | High: payment administrator, lawyers and other professionals | Less costly: no judicial intervention. |
The restructuring expert
The law introduces the figure of the restructuring expert, who acts as an independent professional who validates and certifies the restructuring plan, based on his or her specialised knowledge. This figure should not be confused with that of an insolvency administrator or an auditor.
Although the regulations do not regulate their expertise, they do mention that they must have training and experience in legal, economic and financial areas to assist in restructuring. In companies with a higher degree of complexity or an international dimension, more expertise may be required.
Functions:
- It assists the parties in negotiations.
- It validates the feasibility of the restructuring plan proposed by the company.
- Prepares majority certification reports for the approval of the restructuring plan.
Incompatibilities:
- Have provided restructuring services in the previous two years.
- Incompatibility situations foreseen for audit services.
The restructuring expert assists the debtor and creditors in the presentation of the plan and has key tasks such as requesting the valuation of the company.
Valuation of companies undergoing restructuring
The valuation of the assets of a company undergoing restructuring is a crucial step that provides key information for the restructuring plan. The valuation report under the new Insolvency Act is prepared on the basis of two scenarios: going-concern value and liquidation value.
How does Gesvalt help?
Gesvalt has the capacity to develop the viability plan as advisors to part of the company that is in a difficult situation, and to assist in the operational reorganisation of the company.
We also have the capacity to:
Drawing up restructuring plans. Based on the viability plan, we establish a payment schedule defining how it will be paid, who the beneficiaries will be and the amount. Appointed by the debtor or creditor.
Company valuation. As a preliminary step, it must be defined whether the company has more value in continuation or liquidation. The restructuring expert can ask Gesvalt for an independent expert opinion to carry out the valuations in both scenarios. Appointed by the debtor or creditor.
Valuation of the production unit. If the separate sale of a production unit is established, Gesvalt prepares a valuation report. Appointed by the restructuring expert or insolvency administrator.
Valuation of intangible assets. Goodwill, trademarks or intellectual property. Appointed by the restructuring expert or insolvency administrator.
Valuation of fixed assets. Valuation of machinery and equipment. Appointed by the restructuring expert or insolvency administrator.
Gesvalt guarantees objectivity and transparency, and provides sector and market knowledge. The company has CEFA, CESGA, CEVE, RICS certified staff, specialised in finance, risk, auditing and taxation.
In addition, we have more than 30 years of experience, valuing and advising companies in all sectors of activity. With international coverage in valuations under international standards as a member of Valuation Research Group and representative in Europe.