As explained before, our legislation provides three different types of bankruptcy proceedings which allow negotiation between the debtor and its creditors with the purpose of maximising the value of the debtor’s assets.
Ordinary Restructuring Proceeding
This can be initiated voluntarily at the request of the debtor, or involuntarily by one or more creditors. This proceeding is applicable to debtors who are immersed in a financial and economic crisis situation, and in order to qualify, they must meet certain requirements provided in the Peruvian Bankruptcy Law.
This proceeding begins with a publication that generates a framework, which protects the debtor’s estate and suspends the enforceability of its obligations (automatic stay). In this proceeding, recognised creditors adopt decisions at a creditors’ meeting and may choose to reorganise the debtor’s assets or, alternatively, approve its liquidation. If creditors opt for reorganisation, the company must submit a proposed Restructuring Plan that must be approved by a qualified majority of recognised creditors. In Ordinary Restructuring Proceedings, the shareholders’ meeting is replaced by a creditors’ meeting. Also, in certain cases, the debtor’s administration is replaced by an administrative entity registered with INDECOPI. This process concludes with the payment of claims contained in the restructuring plan.
Preventive Refinancing Proceeding
This is initiated exclusively at the request of the debtor and is applicable to those debtors facing a financial crisis, but that still have financial and economic solvency which requires them to refinance their obligations to have better management of their liquidity.
In this scenario, the debtor faces a temporary impossibility of complying with the payment of obligations to its creditors. The debtor can request a suspension of the enforceability of its obligations (automatic stay) and must propose a Global Refinancing Proposal to creditors. The creditors’ meeting must decide on the viability of the Global Refinancing Proposal filed by the debtor. With the approval of the referred proposal, the proceeding ends and the company exits the insolvency proceeding.
Accelerated Bankruptcy Refinancing Proceeding (PARC)
Taking into consideration the consequences generated by the pandemic, new insolvency legislation was passed in May 2020 approving a proceeding called the Accelerated Bankruptcy Refinancing Proceeding. This is a transitory, exceptional and electronic proceeding. This proceeding is similar to the Preventive Refinancing Proceeding explained above, as it is initiated exclusively at the request of the debtor and is applicable to those debtors who are facing a financial crisis caused exclusively by the COVID-19 crisis, but who still have financial and economic solvency which requires them to refinance their obligations to have better management of their liquidity.
Once the commencement of an Accelerated Bankruptcy Refinancing Proceeding is published, an automatic stay is imposed. The automatic stay suspends enforcement of its obligations and protects the debtor’s estate. The purpose of this new legislation is to provide a platform that allows companies to negotiate with their creditors the approval of a Business Refinancing Plan. With the approval of the Business Refinancing Plan, the proceeding ends. In this case, the appointment of a supervisor to verify the compliance of the Business Refinancing Plan is allowed. This is a very short proceeding that shall last between 45 and 90 business days.