Calculation of Majority to Pass Bankruptcy Law Restructuring Agreement: Exclusion of the AFIP

According to section 45 of bankruptcy law (the "LCQ,"after its Spanish acronym),  to  obtain the approval of a debt restructuring agreement, the debtor must prove the compliance of a double majority of the creditors, corresponding both to capital and people, in each category proposed at the time of categorization of credits (section 42 of the LCQ).

Restructuring agreements contain withdrawals and waiting times that are part of the essence of a restructuring process as established in the LCQ. However, because there is no provision in the LCQ  that provides a different treatment to the rest of the creditors, the situation in which the Argentine Tax Authority (the “AFIP” after its Spanish acronym) finds itself is controversial, as it cannot accept the withdrawals and wait times like the rest of the creditors, on the basis that this would entail disposing of public funds.

The AFIP self-regulates this situation in the restructuring process of the debtor through Resolution 3587/2014, in which section 1 provides that debtors who obtain the approval of their restructuring agreements may pay their tax obligations of cause or title prior to the presentation in preventive bankruptcy, by adhering to the special regime of payment facilities established by the same rule.

Although in practice "ad hoc" solutions are observed, to achieve the approval of the restructuring agreements, there are differences between the LCQ regime and the tax self-regulation disposed by the AFIP, basically because the literal application of the tax rule can cause a breakdown of the “pars conditio creditorum" (equal treatment of creditors) and, secondly, because the tax regime indicates that the compliance of the AFIP will be obtained after approval of the debtor's agreement with the creditors, even though this could not happen, according to the LCQ, just without the prior consent of the Treasury.

In a recent ruling, Room B of the Court of Commercial Appeals issued that "… while it is notorious that AFIP cannot accept withdrawals in the payment of credits verified in debt restructuring processes; only accepting the waits disposed in the tax facilities granted by General Resolution 3587/2014, the exclusion of the right to vote as disposed in section 45 of the LCQ, for the purposes of calculating the majorities to obtain a restructuring agreement,   is a fair solution that seeks to avoid the debtor from being prevented from obtaining an agreement in the case" (Cámara Nacional Comercial., Sala B, 8/5/2019, “Dulcypass SA s/ concurso s/ incidente artículo 250” – Expediente N° 26873/2017/14).

Similarly,  there are other precedents for excluding the vote outside the cases provided in section 45 of the LCQ, in cases that the case law has qualified as "hostile creditors".

One of the first cases where this principle was applied was in "Supercanal Holding S.A. s / Concurso preventivo". There, it was understood that the exclusion of creditors whose will would be "conditioned" does not affect the bankruptcy public order. The case law generally characterizes the hostile creditor as the one presumed to vote against any proposal made, even the when it is 100% cash on the day after the agreement is approved (Dictamen de Fiscalía en “Supercanal Holding SA s/concurso preventivo s/inc. de apelación art. 250 CPCC”, del 14/2/2001).

Although in both cases the common feature is the extensive application of section 45 of the LCQ, in the case of the "hostile creditor", the basis of the aforementioned decision is to avoid an abuse of right, while with respect to the tax credit, the resolution of exclusion of the AFIP in the calculation of the majorities necessary for the approval of a restructuring agreement has its origin in the inconsistency existing between the LCQ and the tax regulations.