BARCELONA PROVINCIAL COURT (DIVISION 15) RULING OF JUNE 31. 2015, NO. 170/2015: CHANGE IN THE RULE FOR DETERMINING THE EXISTENCE OF A GROUP UNDER THE INSOLVENCY ACT

In this judgment, the Provincial Court of Barcelona modified its previous position (despite a degree of dissent) on the concept of group for insolvency proceeding purposes.

The case involved an insolvent company that had sold several vehicles to another company in the months before the insolvency declaration. The purchase price of the vehicles was offset by a claim that the purchaser had against the insolvent entity. The same equity partner was 99% owner and manager of both entities.

The ownership structure was as follows:

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The Provincial Court of Barcelona found that the insolvent entity and creditor belonged to the same group a nd applied the presumption of harm under article 71.3. 1of the Insolvency Act. Under article 93.2.3 of the Insolvency Act, it determined that for a company to qualify as a person spec ially related to the insolvent entity,the insolvent entity and creditor (in this case, the buyer) must form part of the same group; it does not require proof of a vertical or subordination relationship between them. Thus,two subsidiaries managed by the same person, who is also their majority owner, are part of the same group in w hich control is exercised by a third party (in this case, a natural person), i.e., the subsidiaries are part the same vertical group.

BILBAO COMMERCIAL COURT NO. 2 RULING OF JULY 24, 2015, NO. 195/ 20 1 5: CHALLENGE OF A COURT-SANCTIONED A REFINANCING AGREEMENT

The judgment resolved the challenge of dissident creditors subject to a court-sanctioned refinancing agreement providing for the extension of maturities and debt distribution in tranches, release of late payment interest accrued up to the closing date, the conversion of debt into participating loa ns or debt release under certain conditions, and the suspension of contribution obligations.

First, the court considered the dissidents' potential lack of standing "due to their participation in a syndicated loan under which over 75% of the credit became subject to refinancing ." The resolution did not weigh the merits, but merely stated that the auditor's certificate did not independently specify the percentage of votes in favour of the facility, and that it was not the court's task to supply the auditor's omission on this point.

Concerning the concept of disproportionate sacrifice, the court reasoned that where financing obligations have not been repaid, it must trace the path of indebtedness from the outset and not from the date it was most recently refinanced, as the challengers suggested. It rejected the claim of discrimination in the proposed payment schedule and distribution of debt as "not sustainable," because the dissidents' comparative analysis did not consider the outsta nding amount or the full set of guarantees issued to the creditors.

The judgment also analysed the financial institution's alleged grounds for the challenge with respect to the suspension of the fund contribution obligation that one of the refinanced group's companies had acquired under financing issued by that entity to its subsidiary. The judge considered this particular entity was classified as a financial creditor of the company of the affected group because it could enforce financial commitments assumed on behalf of the borrower. The magistrate also rejected the claim of disproportionate sacrifice , as the suspension of contributions would depend on the group company 's debt restructuring.

OVIEDO COMMERCIAL COURT NO. 1 RULING OF MAY 27, 2015: FORTUITOUS (NON­ TORTIOUS) INSOLVENCY PROCEEDING WITHIN A CORPORATE GROUP

The Commercial Court examined whether a transaction to withdraw assets from an insolvent entity, which was independently valued as detrimental to the estate, was justified or offset by other transactions conducted under the group.

Citing comparative law and two Provincial Court judgments, the court decided to classify the insolvency proceeding fortuitous as, despite the proof of cash outflows made throug h loans to other group companies, the loans were sufficiently secured by guarantees that the subsidiary received as consideration for them. 3