The «related entities» under the Law 20.720. Consequences and critical comments

Abstract

The incorporation of the related entities under the Law No. 20.720,
coincident with the principle of respect for par condiciocreditorum,constitutes
a novelty in our legislation. On the other hand, related entitiesare of importance
with regard to the continuity of an insolventor nearly so company, becausethey
are tied-in as to the refinancing in the cases whererelated entities
provide a lifeline in the timeof a crisis. Through this paper we offer critical
judgment about, firstly, whether or not the incorporation and regulation
of this legal concept is convenient as such; secondly, its implications in the
bankruptcy processfrom the point of view of legal certainty by the creditors
of the related entities, and finally,the consequences within the process of
restructuring and refinancing of legal entities in crisis or in a situation of
insolvency. To accomplish these goals we will analyze the basis considered
by the legislator for incorporation and regulation of this institution and the
effects ontothe related entities, namely the subordination of their credits.