A smile for ICOs

A leading technology industrial company saw its activity reduced to 20% in recent years, but given the strength of its balance sheet (its assets were six times its payable liabilities) and the prudence of its partners maintained its activity and at the end of 2018 it decided to reduce activities residual and obsolete, eliminated its overlapping management structure that responded to the good times.

All of this was undertaken during 2019, with the efforts involved in maintaining a treasury in which the fall in sales history, the elimination of superfluous activities and the remodeling of the board converged.

The foundation

It is in the creditors that sovereignty resides in the bankruptcy proceedings or interest in the bankruptcy

In March 2020, it was proposed to carry out an ERE that would affect 60% of the workforce (90 of its 150 workers). To all this came the state of alarm and the company, to meet the orders, closed only the mandatory days.

While debating how to undertake such a drastic ERE while maintaining activity, Covid-ICO credits emerged. Taking advantage of them, in May he formalized an injection for one million euros, which provided him with cash for the next future. The partners, before disposing of the funds, voluntarily agreed that the company would grant a first mortgage for the security of the payment of these Covid-ICO credits.

In June, the company presented, consecutively, a voluntary contest and the ERE, highlighting in both that the continuity and treasury of the company was thanks to Covid-ICO credits. Despite this, the bankruptcy bodies questioned and canceled the mortgage on the loans, noting that according to bankruptcy legislation, the guarantee had been given to the detriment of the bankruptcy interest (?).

The bankruptcy law is complete and its interpretation cannot be made exclusively from a single prism. The happy ending, precisely, comes from the application of it, as the company has proposed in its creditors agreement a unique deal whereby the Covid-ICO credits will be paid in full on the calendar and with the initially agreed interest. All of this has been possible due to the express support of 75% of the creditors affected by the agreement and not benefited by the unique treatment.

The moral of this story of which it is not necessary to offer more details is that the proper use of these Covid-ICO credits has been saved by the creditors, in whom the sovereignty in the bankruptcy procedures or interest of the contest lies, expressly and legally recognizing the preference of credits when verifying that the current activity of the firm is also due to them.

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