The Spanish Insolvency Act has been reformed several times recently to solve technical problems and to facilitate the continuity of economically or operationally viable companies. In the final quarter of 2014 alone, two partial reforms of the act were approved.
Royal Decree-Law 11/2014, of September 5, on urgent measures in insolvency matters
Royal Decree-Law 11/2014, of September 5, on urgent measures in insolvency matters, introduced significant reforms relating to insolvency agreements and liquidations. It extends some of the rules on refinancing agreements to insolvency agreements, making it possible to extend certain effects of the agreement to privileged creditors (including public law creditors), and introducing measures to make the transfer of production units of the insolvent company more flexible, expressly regulating employment and social security issues.
Act 17/2014, of September 30, adopting urgent measures on matters of the refinancing and restructuring of corporate debt
Act 17/2014 makes more substantial changes to insolvency regulations:
- Notifying the start of negotiations (article 5 bis IA): Debtors can inform the court that negotiations have started to reach a refinancing agreement. From the date this notification is made, and until a settlement agreement is reached, no legal or out-of-court enforcement can be filed against any assets or rights that are necessary for the continuity of the debtor’s business activity.
- Approval of refinancing agreements (4th Additional Provision IA): Refinancing agreements signed with creditors can be legally approved if they meet certain conditions. Act 17/2014 introduces changes regarding the following:
- Concept of certain financial liability creditors.
- Those that can request approval of the agreement: Creditors that are party to the agreement can now request this (previously only the debtor could make this request).
- Establishes a 30-day period for the judge to hand down a judgment on any opposition to the approval of the agreement.
- Amendments relating to the remuneration of the insolvency administrators: The act also establishes a tariff (to be approved by regulations), depending on the number of creditors, accumulation and size of the insolvency, which the judge can reduce in the event of mismanagement.