Learn about the bill that seeks to establish emergency legislative decrees on corporate insolvency as permanent legislation

Article 1. Incorporation of Legislative Decree 560 of 2020

What is incorporated

• Expedited access to reorganization mechanisms, because the judge will not audit the content or accuracy of the documents submitted, nor the financial information or compliance with accounting policies, which will be the sole responsibility of the debtor and its accountant or statutory auditor, as appropriate.

• Negotiation procedures with less intervention by the judge

• Emergency negotiation of a reorganization agreement.

• Corporate recovery proceedings before the Chambers of Commerce and its expedited judicial validation.

• Extraordinary rescue mechanisms to protect business, employment and credit.

• Capitalization of receivables.

• Discharge of liabilities.

• Sustainable debt covenants.

• Stimulus to the financing of the debtor in reorganization during the negotiation of an agreement, being the insolvent debtor able to obtain credits for the development of the ordinary course of business during the negotiation, obligations that will have the preference of administration expenses. If new financing is not obtained for the development of the ordinary course of business, authorization may be requested to obtain it through the granting of guarantees.

• Salvage of companies in a state of imminent liquidation by the creditors through the expression of their interest in contributing new capital, as long as it is evidenced by the information contained in the file that the equity of the insolvent company is negative.

What is not incorporated

• Flexibility in the payment of small creditors to mitigate their impact on the company's reorganization process.

• Deferral of administrative expenses.

• Preservation of the Company, employment and the reorganization agreement through the modification of deadlines in the agreements in execution.

• Tax aspects in insolvency proceedings.

• Temporary suspension of rules.

• Validity.

Article 2. Incorporation of Legislative Decree 772 of 2020

What is incorporated

• Expedited access to the reorganization and liquidation mechanisms, because the judge will not audit the content or accuracy of the documents submitted or the financial information or compliance with accounting policies, which will be the sole responsibility of the debtor and its accountant or statutory auditor, as appropriate.

• Special proceedings for small insolvencies.

• Abbreviated reorganization process.

• Simplified judicial liquidation process.

• Mechanisms for the protection of business and employment through the lifting by operation of law of precautionary measures practiced on assets other than those subject to registration.

• Protection mechanisms for the buyers of real estate destined for housing through the payment of the mortgage loan without authorization of the judge, for the lifting of the mortgage and the transfer of the respective real estate. Likewise, the clauses of the agreement must respect the commitments of the promise contract or its equivalents.

• Mechanisms for the recovery of value in liquidation processes, where preference will be given to the awarding in block or as a productive unit. If this cannot be done, the assets will be awarded separately, always with the criterion of value generation. Likewise, trust agreements may be executed for the total or partial transfer of the assets and adjudication as payment with fiduciary rights.

What is not incorporated

• Strengthening of the list of paralegals for insolvency proceedings.

• Reasonable and justified deferral of administration expenses.

• Mechanism to establish and pay the liquidators' fees in simplified judicial liquidation proceedings, which was declared unconstitutional by the Constitutional Court through judgment C-378 of 2020.

• Treatment of some income of debtors in the regime of Law 1116 of 2006, and Legislative Decrees 560 and 772 of 2020.

• Temporary suspension of rules.

• Validity.

Article 3. Derogations

• The adjudication agreement for failure to file a reorganization agreement or for failure to confirm the reorganization agreement that has been filed. Where the aforementioned agreement is applicable, the judicial liquidation or simplified judicial liquidation will proceed, as the case may be.

• The liquidation processes by adjudication in progress initiated prior to the entry into force of Legislative Decree 560 of 2020, shall continue their proceedings.

Article 4. Validity

• As of its publication.