When working for an Argentine company, New Yorkers should be aware that Argentine debtors are now subject to employee take-over under the nation’s amended bankruptcy code, signed into law by President, Cristina Fernandez de Kirchner. Argentine Bankruptcy Law 24,522 as amended by Law No. 26,684,1 lets employees of a bankrupt company which has established a union or cooperative to:
- suspend the enforcement of claims filed by creditors for up to 2 years, and
- request the judge to appoint the cooperative as the successor to the debtor’s management.
Germany and France may have pro-labor bankruptcy codes compared to Argentina’s modified bankruptcy code.
While the ability to act as a receiver or administrator in managing the Argentine debtor’s business and preventing foreclosure by secured creditors are significant developments under the amended bankruptcy code, other amendments that move up employee rights above other creditors in a bankruptcy proceeding include:
- bidding to obtain shares or “quotas” representing capital in a cramdown proceeding;
- entering into agreements to bind a debtor’s assets;
- guaranteeing the performance of contracts with labor credits, with labor credits to include salaries and related compensation claims of workers;
- appealing a court decision to discontinue or liquidate a debtor’s business;
- requesting technical assistance from the Argentine government in managing a debtor’s business;
- buying the debtor’s assets at a price decreased by the amount of labor credits owed to the members of a cooperative; and
- exercising certain preferred purchaser rights at the appraised value of a bankrupt company.
With a two-thirds vote, a worker cooperative may petition an Argentine bankruptcy judge to order the continuation of a debtor’s business and suspend foreclosure actions for a 2-year period. A worker cooperative may incur liabilities for the debtor, if liabilities are considered “minimum and necessary” by the receiver and authorized by a judge.
Argentine amendments may reflect the Argentine President’s pro-labor policies while hurting Argentine businesses. The amendments will likely increase the cost of capital for Argentine businesses, when creditors increase pricing to offset risk when they lend. The amendments to the bankruptcy law may create uncertainty for foreign investors.
Look to an experienced New York bankruptcy attorney to stay informed of the application of changes to rights and standing in bankruptcy proceedings.