Originally published on February 1, 2002
Co-written by Mariela del Carmen Caparrs & Alejandro Breit
On January 30, 2002, the Argentine Congress enacted the Emergency Business and Production Act (Ley de Emergencia Productiva y Crediticia, Law No. 25,563, the "Act"). The Act is an omnibus measure that contains various provisions intended to protect debtors and others perceived as the most adversely affected by Argentina's prolonged economic slump and recent freeing of the currency. This article focuses on the Act's amendments to Law No. 24,522 (Ley de Concursos y Quiebras, the "Bankruptcy Code"). As a result, certain significant provisions not directly bearing on bankruptcy law are omitted and discussed in other memoranda. The full text of the Act can be found at http://infoleg.mecon.gov.ar/quiebras.htm.
The controversy of various provisions of the Act has led to speculation that it may be vetoed by the president. The president has the right to veto the entire Act or may exercise a line-item veto right to eliminate certain provisions. This veto right must be exercised within 10 business days. Accordingly, while the measures discussed below represent current law, they are subject to change. We will keep you apprised of events.
Here are the most significant amendments to the Bankruptcy Code:
"Exclusivity Period" Extended. Under former rules, the period during which the debtor had the exclusive opportunity to propose a reorganization plan to creditors ranged from 30 to 60 days. The Act extends the exclusivity period to 180 day. Moreover, for reorganization proceedings (concurso preventivo) already commenced, the Act extends the close of the relevant exclusivity period an additional 180 days.
"Haircut" Limit Eliminated. Previously, the Bankruptcy Code limited the reduction of creditor's claims to no more than 60% of the verified amount. The Act eliminates this threshold.
Cram-down Proceeding Eliminated. The Bankruptcy Code provided for a cram-down proceeding in which a creditor or other interested party could propose and obtain acceptance of a repayment plan if the debtor's plan failed, permitting the proposing party to capitalize the payment to creditors and assume ownership of the debtor's business. The Act eliminates the cram-down proceeding. If the debtor's plan is not accepted, the reorganization is converted to a bankruptcy proceeding.
Guarantor Liability Reduced. The Act limits the liability of guarantors of the...