The insolvency moratorium that allowed companies with pandemic-related losses to avoid liquidation will end on 31 December 2024. This will require companies still facing financial imbalances to seek alternative financing to avoid liquidation.
The measure introduced in 2020 to give companies time to stabilise suspended the obligation to liquidate companies with negative equity. Many companies were able to avoid this, although losses remained on their balance sheets. At the end of the moratorium, companies will have to review their financial statements.
This moratorium, which was extended until the end of 2024 by Royal Decree-Law 20/2022 of 7 December 2022, was established by various decrees during the pandemic to support companies affected by economic loss derived from the COVID-19. One of the main measures was to postpone the obligation to file for bankruptcy proceedings for those companies with negative equity, giving them additional time to regain solvency and stabilise their finances. This was achieved through regulations such as Royal Decree-Law 19/2020, which addressed the modification of the deadlines for the preparation of annual accounts and the declaration of the corporate tax.
In addition, Royal Decree-Law 5/2021 established a framework for financial support, including direct aid lines and a recapitalisation fund managed by SEPI and COFIDES, aimed at viable companies severely affected by the pandemic.
Before the end of the 2024 period, it is crucial that all companies that have not yet managed to restore their equity are aware of the measures they can take to do so: a capital reduction to adjust net equity, a capital increase, contributions from partners or groups, or participating loans from partners that can be accounted for as net equity.
Author: Berta Piñero (Accounting Manager)
