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This chapter explains the Chilean insolvency regime with a special focus on its cross-border insolvency regulation and application in relevant recent cases involving Chilean courts.
- Chilean insolvency domestic regulation and proceeding
- Chilean insolvency regulation for cross-border cases
Referenced in this article
- Chilean Insolvency Act– (Ley N° 20.720, ‘Ley de reorganización y liquidación de empresas y personas’)
- SUPERIR – Chilean Bankrupcy Agency (Superintendencia de Insolvencia y Reemprendimiento)
- UCBIL – UNCITRAL Model Law on Cross-Border Insolvency
- Arcano case
- Avendaño case
- Astaldi case
- Elimco case
- Enjoy case
- Latam case
- AD Retail case
Chile lacked a modern insolvency law until 2014. That year, the Chilean government enacted Law No. 20.720 on Restructuring and Liquidation of Companies and Individuals (the Chilean Insolvency Act). The Chilean Insolvency Act was enacted with the aim, among others, of:
- improving domestic insolvency proceedings by:
- giving special consideration – through the restructuring procedure – to entrepreneurs’ ability to start new businesses following a failure, in order to avoid discouraging entrepreneurship, considering its key role in the Chilean economic growth; and
- enhancing recovery rates and reducing the length of the liquidation procedure, in order to provide creditors with a timely and orderly process for the collection of their credits in cases of unviable debtor businesses, in-line with international standards and statistics provided by the OECD as well as by the World Bank’s Doing Business Reports; and
- providing an effective regulation for addressing cross-border insolvency cases.
The available public data shows that the Chilean Insolvency Act is on the right track according to international standards and has achieved certain of the objectives set by the legislator; except for fostering in reorganisation proceedings where there has been no actual improvement.
A 2018 working paper from the OECD’s Economics Department explored cross-country differences in key features of insolvency that have been found to impact the timely initiation and resolution of personal and corporate insolvency proceedings. Insolvency regimes of OECD members were quantitively analysed based on a questionnaire evaluating 13 design features, grouped into four composite indicators, with results being graded on a 0 (closest to best practice) to 1 (furthest from best practice) scale. A comparison of indicator values for 2010 and 2016 was made.
Among the 13 key features measured in the study, Chile’s 2014 Insolvency Act seems to have brought about marked improvements in relation to itself and relative to its OECD peers. As shown in Table 1, Chile improved in five of the 13 design features during the 2010–2016 period, bettering its score in all four composite indicators. Whereas in 2010 Chile lagged far behind the OECD average, it now ranks eight in the group, boasting an average score of 0,25 when considering all 13 key features. Although these improvements occur in the context of overall OECD progress in insolvency regime design, the authors recognise Chile among the ‘countries with the biggest reform in this area’.
Table 1: OECD and Chile scores in specific key features of insolvency regimes (2010–2016)
|Composite Indicator||Feature||2010 OECD||2010 Chile||2016 OECD||2016 Chile|
|Personal costs||Time to discharge||0.64||1||0.59||0|
|Exemption of assets||0.46||0.5||0.43||0.5|
|Prevention and streamlining||Early warning systems||0.68||1||0.61||1|
|Special procedures for SMEs||0.86||1||0.66||0|
|Barriers to restructuring||Restructuring by creditors||0.44||1||0.37||1|
|Length of stay on assets||0.5||0||0.46||0|
|Priority of new financing||0.4||1||0.33||0.5|
|Retention of management||0.11||0||0.11||0|
|Degree of court involvement||0.69||0.8||0.69||0.8|
|Honest and fraudulent bankrupts||0.32||0||0.24||0|
|Rights of employees||0.35||1||0.32||0.5|
Prepared by the authors on the basis of OECD data.
Similarly, the World Bank’s Doing Business reports show that the Chilean insolvency proceedings have evolved since 2014, both in terms of the duration of the insolvency proceedings and regarding the recovery rate.
Table 2: Chilean Insolvency Index – World Bank
|Time (Years)||Recovery rate (cents on the dollar)|
Prepared by the authors on the basis of World Bank data.
Furthermore, the Chilean Insolvency Act solved the former regulation’s lack of cross-border insolvency rules by adopting the UNCITRAL Model Law on Cross-Border Insolvency. Indeed, Chilean courts are currently applying the principles and regulations advocated by UNCITRAL in cross-border insolvency cases that involve both foreign creditors regarding companies with assets in Chile and cases in which Chilean creditors are pursuing assets located abroad (see ‘Cross-border insolvency proceedings’ section, below).
The following section briefly describes the insolvency proceedings applicable to enterprises. The final section describes the Chilean cross-border insolvency regulation and provides a description of recent cases in which such regulation has been applied.
The Chilean Insolvency Act provides four different types of proceedings, depending on whether the debtor is an enterprise or an individual. Notably, the Chilean Insolvency Act applies the enterprises’ insolvency proceedings to those individuals whose income originates from liberal professions, such as doctors, lawyers and tax consultants (ie, individuals who do not receive a salary as dependent workers).
For individual debtors, the Chilean Insolvency Act provides two types of proceedings:
- a renegotiation procedure, whose aim is to assist debtor and creditors in reaching an agreement for renegotiating the former’s debt; and
- a liquidation procedure of the individual debtor’s assets.
The law deliberately refrained from naming the latter ‘liquidation of the individual debtor’ to avoid stigmatising those individuals whose businesses became insolvent.
For enterprise debtors, the Chilean Insolvency Act also provides two types of proceedings:
- a reorganisation procedure, the aim of which is to assist debtor and creditors in reaching an agreement regarding a reorganisation and restructuring of the debtor’s business operations and its debt, in order to allow the debtor to continue operating its business and pay its debts; and
- a liquidation procedure, the aim of which is to orderly liquidate a debtor’s assets to pay its liabilities in a single procedure with all of its creditors.
Although the Chilean Insolvency Act was enacted with a preference for restructuring solutions over liquidation schemes (ie, to shift from the Chilean traditional pro-liquidation focus to the promotion of an efficient reorganisation of debtors), practitioners and judges agree that reorganisation proceedings still represent a minor portion of actual Chilean insolvency cases.
The following sections briefly describe the insolvency proceedings applicable to enterprise debtors.
The reorganisation procedure for enterprises
Key benefits of filing a restructuring petition include, among others:
- the imposition of an automatic stay to provide the debtor with protection from creditors and time to negotiate – and potentially reach an agreement – with its creditors for restructuring its financial affairs as well as for orderly paying its debts; and
- the possibility of tackling a forced liquidation proceeding and replacing it with a restructuring one.
The reorganisation procedure considers the following main stages, which, according to the Chilean Insolvency Act, must last up to four months.
A reorganisation procedure commences with the debtor’s filing of a restructuring petition with the competent court (the general jurisdiction court the debtor is domiciled). No specific requirements apply for filing a restructuring petition. In fact, the distressed company may file a restructuring petition even during a forced liquidation proceeding.
Nomination of the insolvency overseer
After filing for a reorganisation procedure before the court, the distressed company must request that the Chilean Insolvency Agency (SUPERIR) nominate an insolvency overseer. Since the debtor company will generally continue to operate its business, the insolvency overseer has a two-sided role: it must assist the debtor and its creditors to reach a reorganisation agreement; while, at the same time, it must oversee and safeguard the creditors’ collection ability, requesting the applicable interim conservative measures to the court when necessary. The insolvency overseer is elected by the debtor’s major creditors. Finally, the SUPERIR informs the court of the elected insolvency overseer by sending a letter to the court.
Reorganisation procedure resolution and triggering the financial
The debtor must file with the court a report describing its assets and debts. The debtor has therein to identify its pledged or mortgaged assets that are ‘essential to run its business’, and thus to comply with the payment plan agreed in the proposed reorganisation agreement. The assets declared by the court as ‘essential to run’ the debtor’s business may not be foreclosed during the term of the reorganisation agreement.
If the financial report is deemed complete by the court, it issues a resolution opening the Reorganization Procedure.
From the date in which the reorganisation procedure decision was issued and for the following 30 days, the debtor benefits from a period of financial protection (Financial Protection Period) that can be extended for up to 60 additional days. The Financial Protection Period aims to grant the parties a reasonable and protected time frame for reaching a reorganisation agreement. The Financial Protection Period involves the following effects or advantages:
- it is forbidden from declaring the insolvent enterprise’s liquidation or filing liquidation, foreclosure or restitution proceedings against it – any of the prior proceedings will be stayed, as well as the applicable statute of limitations;
- the term of all contracts entered into by the insolvent enterprise shall not be unilaterally altered – therefore its creditors are not entitled to terminate any of these agreements, nor accelerate or enforce any guarantees based on the commencement of insolvency proceedings;
- if the insolvent enterprise appears in a public registry as a subcontractor or supplier of a service, it may not be discriminated by the authority with its deletion or forbidden from participating in public tenders, as long as it has complied so far with its related obligations;
- the insolvent enterprise management will be under the insolvency overseer’s supervision;
- the insolvent enterprise is unable to create security interests over its assets or to dispose of them, except within its ordinary course of business; and
- in case the insolvent enterprise is a legal entity, it will not be able to amend its by-laws, articles of association or the authority of its representatives. Also, the transfer of shares in order to be registered in the entity’s register will require the overseer’s authorisation.
The last restriction does not apply when the insolvent enterprise is a public corporation that publicly offers its shares.
In the Reorganisation Procedure resolution, the court will order the insolvent enterprise to provide a reorganisation agreement proposal. The law does not specify the proposal’s content; instead, it provides that the insolvent enterprise may propose any measure to restructure its liabilities and assets. Moreover, the law entitles the insolvent enterprise to propose different agreements to its secured and non-secured creditors or even propose one or more alternatives to a specific category of creditors.
It is worth noting that the Chilean Insolvency Act resolved one of the biggest issues regarding the measures that can be entered under a reorganisation agreement. Under the repealed insolvency law, creditors had to pay a tax of 35 per cent over any remitted or condoned debt to the insolvent debtor; which certainly discouraged several reorganisation agreements. The Chilean Insolvency Act permits creditors to consider some debt remissions as a deductible expense for tax purposes, thus avoiding to pay taxes over those deductions.
The only relevant limitation set by the Chilean Insolvency Act is that the reorganisation agreement proposal and its conditions or modalities must be the same for all creditors of the same category. The Chilean Insolvency Act provides two possible categories of creditors: secured creditors and non-secured creditors. However, that does not necessarily mean that those are the only admitted categories that can be used in a reorganisation proposal. Although some commentators have argued in favour of only admitting as valid those two categories of creditors (ie, secured and non-secured creditors), others have recently concluded that debtor and creditors can agree on other alternative categories. In fact, there are precedents in which the debtor has proposed reorganisation agreements considering additional categories of creditors to the ones explicitly described in the Chilean Insolvency Act, which have been approved both by the creditors and the courts.
The reorganisation proposal shall be voted by the debtor’s creditors in a creditors’ meeting.
If the reorganisation proposal is rejected by the creditors, the court will immediately issue a liquidation resolution, unless creditors representing at least two-thirds of the total credits of the debtor agree to allow the debtor to submit a new proposal.
If the reorganisation proposal is approved and becomes final, the debtor and its creditors (whether they voted or not) become bound by it. The agreement’s approval requires the debtor’s consent and approval by each category of creditors, which in turn requires the favourable vote of creditors representing at least two-thirds of the total debt with right to vote attending the meeting corresponding to the relevant category of creditors (only creditors whose claims appear in the list of recognised credits shall be entitled to vote). Notably, the approval of the proposal regarding a certain category of creditors would be subject to the condition precedent that the proposal shall also be approved by the other categories of creditors contemplated in said proposal – the law intends to prevent a class of creditors with particularly large credits from imposing unfavourable conditions on classes of creditors that represent smaller credits.
In the five days following the publication of the approved proposal in the Insolvency Gazette (Boletín de Quiebras), creditors may challenge the proposal on the grounds set in the Chilean Insolvency Act. If the proposal is not challenged (or if the challenge made by creditors is rejected), the court issues a resolution declaring the proposal as approved. This resolution may be appealed without suspending the liquidation procedure.
The Chilean Insolvency Act requires an overseer to be appointed for at least one year from the approval of the reorganisation agreement, in order to supervise compliance with it.
Any of the creditors affected by the debtor’s lack of performance or conduct that has aggravated the poor condition of its business is entitled to file a lawsuit against it. However, the Chilean Insolvency Act allows the debtor to comply in a specific time frame in order to avoid the consequences of lack of compliance.
If the court declares that there was lack of compliance or that the agreement was void, once the judgement is final and conclusive it will issue a liquidation resolution.
The Simplified (or out-of-court) Reorganization Proposal
The Chilean Insolvency Act also provides a simplified reorganisation procedure that considers a ‘pre-packaged insolvency proposal’. Under the simplified reorganisation procedure, any insolvent enterprise can enter into a simplified reorganisation agreement with its creditors and submit it to the competent court for approval.
The Chilean Insolvency Act is stricter with the creditors’ support needed for its approval because it requires the support of two or more creditors who represent at least three-quarters of each category.
The court oversees the reorganisation proposal it complies with the applicable legal requirements and, if it does, the court issues a Simplified Reorganization Resolution rendering the agreement binding for the debtor and its creditors.
Here, the Chilean Insolvency Act provides that an overseer’s report is required, mainly regarding the probability of compliance with the agreement and how much the insolvent enterprise’s creditors would receive if it was liquidated instead.
Furthermore, the court may require that creditors appear in court to accept it or reject it. Following the acceptance, if requested, and absent an objection, the court shall approve the simplified reorganisation proposal.
According to the public records available at the SUPERIR website, only three simplified reorganisation proposals have been filed up to date.
The liquidation procedure
The liquidation procedure’s purpose is to orderly liquidate an insolvent enterprise’s assets to pay its creditors. The Chilean Insolvency Act provides voluntary and compulsory liquidation processes.
The voluntary liquidation procedure considers the following main stages:
The compulsory liquidation procedure considers the following main stages:
The entire duration of the liquidation process varies depending on multiple factors, though.
Liquidation procedure petition and the debtor defence
As mentioned above, the Chilean Insolvency Act provides a voluntary and a compulsory liquidation procedure. While the debtor is the only one able to file a voluntary liquidation procedure petition, the compulsory procedure petition could be filed by any creditor before the court competent in the territory of the debtor’s domicile. Notably, the compulsory procedure could even be declared by the court ex-oficio under certain circumstances.
Any creditor can file a compulsory procedure petition, provided that:
- the debtor has a ‘ready-to-be-enforced’ overdue debt with such creditor;
- the debtor has two or more ‘ready-to-be-enforced’ overdue debts from different obligations, at least two foreclosure proceedings have been initiated against the debtor, and the debtor has not deposited with the court enough assets to pay both overdue debts as well as the applicable collection costs; or
- the debtor or its representatives have fled and the debtor’s office has been shutdown without having appointed a representative with enough powers to comply with the debtor’s obligations and respond to new judicial claims.
The liquidation petition filed by a creditor must be accompanied by a security deposit of UF 100 (US$3,800).
Although the debtor can challenge the liquidation petition made by a creditor, its response can only be based on the limited defences set by the law (eg, that the alleged debts have been already paid or have been extinguished by other means).
The court issues a liquidation resolution (the Liquidation Resolution) once the liquidation petition fulfils the requirement set by the Chilean Insolvency Act (and the debtor response is rejected, if applicable). This resolution may be appealed without suspending the liquidation procedure.
The Liquidation Resolution
The Liquidation Resolution produces, among others, the following effects.
The insolvent enterprise becomes immediately inhibited from managing its existing assets. A liquidator will be in charge of managing the debtor’s assets, except for the assets acquired by the debtor pursuant to non-gratuitous titles after the issuance of the Liquidation Resolution.
Determination of creditors’ rights
The Liquidation Resolution irrevocably determines the rights of all creditors as of the date it was issued – the credits’ amounts, guarantees and securities may not be modified thereafter.
Maturity and enforceability of all monetary debts
All debts become due and payable, in order to enable the creditors to intervene in the monetary liquidation proceeding and collect the distributed payments up to the current value of their respective credits.
Voluntary set-off prohibition
Any set-off of reciprocal obligations between the insolvent enterprise and the creditors that would not have occurred by the mere operation of the law prior to the Liquidation Resolution becomes outlawed. Exceptionally, it may operate over related liabilities derived from the same agreement or negotiation.
Accumulation of trials
All pending civil cases against the insolvent enterprise before any court shall be joined to the liquidation proceeding, except for those contemplated by law (eg, compulsory arbitral proceedings). After the Liquidation Resolution notice, all civil lawsuits shall be tried in the court knowing the enterprise’s liquidation.
Extinction of interim measures and attachments
All interim measures and attachments ordered prior to the Liquidation Resolution will become immediately void.
Suspension of the creditors’ right to individually foreclose the insolvent enterprise’s assets
Once the Liquidation Resolution is issued, the right of all creditors to individually foreclose the enterprise’s assets is suspended. Despite this, the secured creditors will, in general, still be able to continue with its individual foreclose proceeding or to commence a new one. These creditors may also exercise this right in the context of the liquidation proceeding. In all cases, the foreclose proceeding is only limited to the secured asset and receiving the proceeds of collection is subject to the requirement of guaranteeing their contribution to the payment of certain preferred credits in case the other assets are insufficient to cover them.
Verification of credits
During the 30 business days following the notification of the Liquidation Resolution, the creditors must report to the court their credits against the debtor with the court, in order to be considered for the liquidation process. This period is calculated differently depending on whether the creditor resides in Chile or abroad. The creditors that report their credits after said deadline would only be able to collect from what remains after having paid the creditors who verified their credits in a timely manner.
In the 10 business days following the publication of the Liquidation Resolution in the Insolvency Gazette (Boletín de Quiebras), the insolvency liquidator, the debtor or any of the creditors that have reported their credits in a timely manner can challenge any of the other reported credits in the liquidation process. Finally, the court issues a resolution determining:
- the credits that will be excluded for the liquidation process;
- those that will be admitted for the collection process; and
- the right to vote that each admitted creditor will have in the creditors’ meetings.
Liquidation and payment
Finally, the creditors’ meeting defines the ways by which the debtor assets will be sold or liquidated. Once the creditors admitted for collection are paid with the proceeds of the debtor’s liquidated assets, the liquidator issues a final account report.
If the creditors or the debtor do not challenge the final account report, or if, having challenged it, the court rejects those objections, the court issues a final resolution ending the insolvency process.
Once the resolution declaring the termination of the liquidation procedure becomes final, the outstanding balances of the debtor’s obligations are deemed extinguished for all legal purposes.
The Chilean Insolvency Act provides that, subject to certain conditions, all acts, agreements or payments that are entered into or performed within certain time frame prior to the commencement of a reorganisation or liquidation proceeding, and that jeopardise the liquidation estate, may be challenged with the aim of declaring them unenforceable. The relevant lawsuits may be filed by any of the creditors or, under certain circumstances, by the liquidator or the overseer within one year from the reorganisation or liquidation resolution.
Conditions for this challenge action depend on the nature of the acts, agreements or payments that may be subject to an objective (ie, without defences such as good faith and lack of knowledge being available) or subjective (ie, admitting such defences) regime.
The following acts are subject to the objective regime if they were executed within one year before the commencement of the insolvency proceedings:
- all payments made prior to the maturity date of the obligation;
- all payments of obligations made in a different manner from the original terms of the contract;
- all the mortgages, pledges and antichresis created to secure previously existing obligations; and
- acts and agreements for no consideration.
Furthermore, all the amendments to the articles of association of the debtor in liquidation that entailed a decrease of the debtor’s equity, executed within the six months prior to commencement of an insolvency procedure, are also subject to this regime.
Any acts or contracts other than those described above that are entered into, performed or executed within the two years prior to the reorganisation or liquidation proceeding was initiated may be declared unenforceable against the debtor’s creditors in case the plaintiff proves the fulfilment of each and all of the following requirements:
- knowledge by the counterparty of the poor condition of the debtor’s business; and
- that the act or contract has damaged the creditors or altered their equal standing in the insolvency proceedings.
The Chilean Insolvency Act considers that an act or contract that was not entered into arm’s-length conditions causes damages to the creditors.
Cross-border insolvency proceedings
The Chilean Insolvency Act introduced a new Chapter IV adopting the UNCITRAL Model Law on Cross-Border Insolvency. Chapter IV basically applies when:
- a foreign court or a foreign representative requests assistance to a Chilean competent insolvency representative, courts, liquidator and other persons involved in insolvency proceedings concerning a foreign insolvency proceeding;
- a Chilean competent insolvency representative requests assistance to a foreign competent insolvency representative, concerning a pending Chilean insolvency proceeding;
- both a foreign insolvency proceeding and a Chilean insolvency proceeding in Chile are being conducted simultaneously with respect to the same debtor; or
- creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or participating in, a Chilean insolvency proceeding.
Chapter IV does not apply to the special insolvency proceedings applicable to banks and to certain financial entities.
Recognition of a foreign proceeding and reliefs
Any qualified representative empowered to act in a foreign insolvency proceeding can directly file petitions with the Chilean competent court through any lawyer admitted to practice in Chile; the involvement of the applicable foreign insolvency court or agency is not required for that purpose.
The petition for the recognition of a foreign proceeding must be filed before the Chilean courts by a lawyer admitted to practice in Chile and be accompanied by the applicable documents established in the law, duly legalised and translated into Spanish if applicable.
From the filing of the petition for recognition until the petition is decided upon, the court may, at the request of the foreign representative, where relief is urgently needed to protect the assets of the debtor or the interests of the creditors, grant relief of a provisional nature.
If the petition for the recognition of a foreign proceeding fulfils the Chilean Insolvency Act’s requirements, the court issues a resolution recognising the foreign insolvency proceeding. The recognition resolution – as with the UNCITRAL Model Law on Cross-Border Insolvency – distinguishes between a foreign main proceeding and a foreign non-main proceeding.
Upon recognition of a foreign proceeding that is a foreign main proceeding, by virtue of law:
- commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities is stayed;
- execution against the debtor’s assets is stayed; and
- the right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.
For a foreign non-main proceeding, the court decides whether to grant all or any of the above relief.
Without prejudice to the foregoing, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may grant additional reliefs pursuant to article 320 of the Chilean Insolvency Act.
Petitions for the recognition of a Chilean proceeding before foreign proceedings and cooperation with foreign courts and foreign representatives
Under the Chilean Insolvency Act, the body entitled to act before foreign courts is the SUPERIR. However, the SUPERIR can delegate its powers to the insolvency administrators who are intervening in the applicable Chilean insolvency proceedings.
The review and processing of the recognition petition will be regulated by the applicable foreign law.
The Chilean Insolvency Act contains specific rules for the cooperation and direct communication with foreign courts and foreign representatives for parallel insolvency proceedings. It states that the cooperation between the courts and representatives may be implemented by any appropriate means, including:
- appointment of a person or body to act at the direction of the court;
- communication of information by any means considered appropriate by the court;
- coordination of the administration and supervision of the debtor’s assets and affairs;
- approval or implementation by courts of agreements concerning the coordination of proceedings; and
- coordination of concurrent proceedings regarding the same debtor.
The Chilean Insolvency Act closely follows the UNCITRAL Model Law on Cross-Border Insolvency regarding the rules of payment for concurrent foreign proceedings.
Major events or developments
There have been six relevant cases of cross-border insolvency proceedings under Chapter IV of the Chilean Insolvency Act.
The first one is Arcano. Arcano is a corporation active in Chile, the United States, England and Australia that was involved in several ponzi scheme allegations. Arcano and its founder, Alberto Chang, are under liquidation proceedings in Chile. The current insolvency cases have been conducted with the cooperation and coordination between the Chilean insolvency authorities and the insolvency representatives of the foreign countries where Arcano and Chang have operations and assets. Cooperation with the foreign authorities made it possible to seize and liquidate assets located abroad.
In Avendaño, the Chilean courts issued a resolution recognising the foreign liquidation proceeding conducted in the United States’ courts against Claudio Pablo Avendaño Lucero. In its recognition resolution, the Chilean court ordered an interim relief suspending the right of Mr Avenaño to dispose of real estate located in Chile and authorised the creditors’ representative in Chile to conduct the applicable acts to liquidate such real state.
In Astaldi, Astaldi SpA (an Italian multinational major construction company) applied for a main foreign proceeding recognition before a Chilean court and requested as relief measure the Financial Protection Period for its agency in Chile, which is active in relevant construction contracts in Chile for public facilities. The Chilean court granted the relief measure, but did not declared nor denied the recognition. After the expiration of the Financial Protection Period, Astaldi’s agency filed a restructuring petition to avoid a compulsory liquidation requested by a creditor. On April 2019, Astaldi’s creditors approved the restructuring plan proposed by Astaldi’s agency in Chile, by which Astaldi agreed to pay US$58 million within a three-year period.
In Elimco, a Chilean court recognised a foreign main proceeding conducted in Spain against Elimco Soluciones Integrales, SA, which was requested by its Chilean agency. This recognition was the first Chilean precedent with respect to an enterprise. Further, Elimco successfully obtained the automatic stay of several individual actions conducted against the company on separate trials. In January 2020, Elimco filed a voluntary liquidation procedure petition.
The fifth relevant case is Enjoy. Enjoy SA is Chile’s leading casino operator, which was heavily affected by the covid-19 pandemic and filed a restructuring petition before a Chilean court on April 2020. As Enjoy had entered into an indenture under the laws of the state of New York, which represented a significant fraction of Enjoy’s debts, the company filed on the United States Bankruptcy Court for the Southern District of New York a petition for recognition of a foreign main proceeding under Chapter 15 of the US Bankruptcy Code. Enjoy obtained such recognition and, on August 2020, the court granted full force and effect in the United States to the Chilean reorganisation agreement.
Finally, in Latam, Latam Airlines Group SA (Latin American’s largest airline) requested, before a Chilean court, recognition of a foreign main proceeding conducted before the United States Bankruptcy Court for the Southern District of New York under the rules of the Chapter 11 of the US Bankruptcy Code. Such recognition was swiftly granted by the Chilean court (only 3 days after the motion was filed by the debtor). In addition, upon request of the SUPERIR, Latam submitted a protocol of cooperation and cross-border communication between courts, which was approved by the Chilean court and subsequently by the United States Bankruptcy Court for the Southern District of New York, the Colombian court and the Cayman Islands court.
Furthermore, in 2020, there have been two relevant bankruptcy procedures.
First, AD Retail. AD Retail entered into a simplified reorganisation agreement that was submitted to the approval of a Chilean court. However, the proposed agreement was challenged by a creditor on the grounds that it granted undue advantages to some of the creditors and contained provisions forbidden by the Chilean Insolvency Act. Such challenges were dismissed by the court and the agreement was approved. The terms of the agreement stated that the liquidation of all the assets of AD Retail would be triggered if a certain affiliate of the debtor did not obtain financing within a certain time frame and, on the contrary, if such affiliate succeeded in such financing, the creditors of AD Retail that had contributed to said financing would obtain more favourable conditions under the reorganisation agreement. The financing was successful.
The second case is Enjoy. As mentioned above, Enjoy filed a restructuring petition to restructure its business and debt. The proposed agreement contained one proposal for secured creditors and another for unsecured creditors. Regarding the secured creditors (which, in turn, were secured bondholders), they were proposed to extend the maturity of their bonds and to reduce their interest rate. Moreover, those bondholders willing to provide additional financing to Enjoy would have priority over the others secured bondholders. On the other hand, the unsecured creditors (a significant fraction of which was also represented by unsecured bondholders) were proposed to swap their bonds and credits (as appropriate) with convertible bonds (that represented 80 per cent of their credits) and fixed income bonds (for the remaining 20 per cent). The conversion rate would differ depending on whether or not the unsecured creditors were willing to provide additional financing to Enjoy. The creditors of both categories approved the reorganisation plan. Enjoy obtained the needed financing to consider the restructuring agreement as successful.
Lastly, a bill amending the Chilean Insolvency Act is currently being discussed in Congress. Such bill intends to:
- apply the enterprises’ insolvency proceeding only to enterprises and individuals that regularly undertake commercial activities (and not to all individuals whose income is derived from liberal professions); and
- relax the requirements for individuals to request a renegotiation procedure, by reducing the terms of arrears and the minimum amounts of debt required, and eliminating other requirements.
 See Chilean Insolvency Act Bill Introductory Message, p. 5. The new law was truly needed. The repealed insolvency law was specifically entered for solving the economic crisis that affected Chile during the first years of 1980’s, and thus, it was mainly focus in providing a fast and effective liquidation process for creditors regarding Chilean insolvency corporations, without giving any actual consideration to: the extent to which that law would limit entrepreneurs’ ability to start new businesses following a failure; or address situations of corporate insolvency and financial distress involving companies with cross-border creditors.
 See Chilean Insolvency Act Bill Introductory Message, p. 5.
 See Chilean Insolvency Act Bill Introductory Message, p. 8.
 Adalet, Müge & Andrews, Dan (2018): Design of Insolvency Regimes across Countries. OECD, Economics Department, Working Paper No. 1504. In relation to the studied indicators, first, personal costs refer to the extent to which insolvency regimes punish failed entrepreneurs. Within this indicator, the paper analysed: the time to discharge (ie, the number of years a bankrupt must wait until they are discharged from pre-bankruptcy indebtedness); and the extent of exemptions of assets of the debtor that are not directly linked to the business. Second, prevention and streamlining concerned the possibility of early resolution of debt distress through the availability of: early warning systems; preventative restructuring frameworks such as pre-insolvency regimes; and special treatment for small and mediums enterprises (SMEs). Third, as regards barriers to restructuring, the authors looked at design features which lowered barriers to restructuring, including: the opportunity and incentives given to creditors for the initiation of restructuring proceedings; the existence and length of a stay on assets stopping premature liquidations; priority given to new financing; approval of restructuring plans by a qualified majority of creditors (ie, not requiring unanimity); and allowing managers to stay in charge of firms in distress. Finally, other features, namely: limiting court involvement only to indispensable procedural steps; distinctions between honest and fraudulent entrepreneurs; and the removal of stringent restrictions on worker and collective dismissals, were also considered.
 Adalet, Müge & Andrews, Dan (2018): Design of Insolvency Regimes across Countries. OECD, Economics Department, Working Paper No. 1504. p. 18.
 The ‘time’ item considers the number of years required for creditors to recover their debt. The period measured by Doing Business ranges from non-payment of debt to payment of part or all of the amount due to the bankruptcy. Delays arising from delaying legal tactics used by the parties, such as the filing of appeals or requests for postponement, are taken into account.
 The recovery rate is based on the time, cost and result of insolvency proceedings in each analysed economy.
 See Chilean Insolvency Act, Art. 2.13). Accordingly, an ‘enterprise’ considers both legal entities of private law as well as individuals whose income originates from liberal professions, even if those individuals do not actually run an actual business.
 President sent a bill to Congress to treat the individuals whose income originates from liberal professions as common individuals, and that creates a concept of ‘smaller company’. See Bill No. 12025-03 before the Chilean Senate.
 See Chilean Insolvency Act Bill Introductory Message, p. 7.
 See Chilean Insolvency Act, Art. 120.2 c).
 See Chilean Insolvency Act, Art. 37.
 See Puga, Juan Esteban (2014): Derecho concursal. El acuerdo de reorganización (4ª ed.). Santiago. Chile: Edit. Jurídica de Chile, p. 207.
 See Jequier, Eduardo (2017): La primera clase de créditos en el procedimiento concursal de reorganización judicial en Chile: ¿la gran ausente?. CES Derecho Review, Vol. 8, Núm. 2.
 See, for example, Docket Case No. C-3736-2019, 11° Juzgado Civil de Santiago.
 However, the secured creditors will be able to execute their collateral outside the insolvency process, if their collateral are assets that have not been declared as ‘essential for the debtor’s business’.
 See Contador, Nelson & Palacios, Cristian (2015): Procedimientos Concursales. Santiago. Chile: Edit. Thompson Reuters, p. 111.
 See Chilean Insolvency Act, Title 3.
 See Chilean Insolvency Act, Art. 117.
 See Chilean Insolvency Act, Art. 118.
 Note that this category includes derivative transactions entered into under the same master agreement, provided that the latter is one of the forms recognized by the Central Bank and subject to certain restrictions imposed by the latter to some institutional investors.
 Note that in this case the term is extended up to two years. The same time frame will apply to any act or agreement subject to the objective regime, in favour of a related party.
 See Chilean Insolvency Act, Art. 300.
 See Chilean Insolvency Act, Art. 330. See also UNCITRAL Model Law on Cross-Border Insolvency, Art. 32.
 See the Case Docket Number C-10134-2016, 25° Juzgado Civil de Santiago.
 See the Case Docket Number C-2660-2017, 2° Juzgado de Letras de La Serena.
 See the Case Docket Number C-34530-2018, 19° Juzgado Civil de Santiago.
 See the Case Docket Number C-13296-2016, 18° Juzgado de Letras de Santiago.
 See the Case Docket Number C-6689-2020, 8° Juzgado de Letras de Santiago.
 See the Case Docket Number C-8553-2020, 2° Juzgado de Letras de Santiago.
 See the Case Docket Number C-6210-2020, 11° Juzgado Civil de Santiago.
 See Bill of Law N°13560-03.