When an composition agreement is terminated due to non-fulfillment and the disappearance is declared of its effects over the credits, the affected credits will be recognized for their original amount, and the definitive texts will include the fraction pending of payment, even if the resulting amount after applying the debt relief agreed has been paid in full
This judgment questioned how credits affected by debt relief in the composition agreement should be calculated in the list of creditors prepared by the insolvency administration when the composition agreement is terminated due to the declaration of a non-fulfillment under article 140 of the Insolvency Act.
In the case examined, a banking entity that had adhered to the composition agreement proposal involving a grace period of one year and debt relief of 25% opposed the updating of the definitive texts made after the non-fulfillment of the composition agreement. The insolvency administration had considered that the termination of the effects of the composition agreement by opening the liquidation phase could not affect credits whose amount had been paid in full in application of the grace periods and debt relief agreed.
However, the court considered that the Insolvency Act does not (i) differentiate between the possible causes determining the non-fulfillment of the composition agreement, or (ii) discriminate between the effects of such non-fulfillment in respect of the creditors affected by it and those that are not. The non-fulfillment in itself does not pre-judge the possibility of the creditors having their credits paid in the liquidation phase. The contrary would imply a collection privilege for creditors with partially paid credits, void of any legal support.
Finally, the judgment clarified that the application of the payment rule of article 157.2 of the Insolvency Act (“ordinary credits will be paid pro rata”) must be interpreted in the sense that the opposing entity will not receive anything in liquidation until all the remaining ordinary creditors appearing in the definitive texts have received at least 75% of their credit.