The Madrid Provincial Court (Section 28) ruling of December 7, 2012, and the Barcelona Provincial Court (Section 15) ruling of October 4, 2012, judged the insolvency categorisation of a credit the receivers had categorised as subordinate because they held that the creditor company belonged to the same corporate group as the insolvent company.6 In both cases, the provincial courts analysed the concept of group for the purposes of insolvency before and after the reform of the Insolvency Act introduced under Act 38/2011. Before that reform, the Insolvency Act did not define “corporate group” for the purposes of insolvency. Following the reform, Additional Provision 6 of the Insolvency Act refers to the concept of group as defined in section 42 of the Commercial Code.7 Before the reform, these two provincial courts had taken opposing positions with regard to the concept of group (the criterion has now been unified and “group” is understood as it is defined in section 42 of the Commercial Code). The Madrid Provincial Court pointed out that changes to law show that, before and after the reform, the concept of group in the Insolvency Act was as provided in section 42 of the Commercial Code (i.e., including only vertical groups and not horizontal or co-ordinated groups). However, the Barcelona Provincial Court pointed out that before the reform, it had ruled that the concept of group was to be understood “in keeping with the basis and the intent of the law, superseding legal notions established for other purposes (such as mere accounting standards), and admitting, when categorising credits, both vertical and horizontal groups,” although that criterion had to be revised following the entry into force of Act 38/2011, which refers, for all intents and purposes, to the concept of group defined in section 42 of the Commercial Code.

According to the Madrid Provincial Court, both before and after Act 38/2011, the concept of group for insolvency purposes is as defined in section 42 of the Commercial Code, which does not include (a) horizontal groups, or (b) vertical groups with no parent company controlled by individuals. In the case at issue, no company controlled another, so the creditor is not a specially related person of the debtor and its credit is not subordinate in the debtor’s insolvency.

According to the Barcelona Provincial Court, before Act 38/2011, the Insolvency Act did not define the concept of group and the subordination of credits held by specially related persons under section 93.2.3 of the Insolvency Act applied to companies in the same vertical or horizontal group. With Additional Provision 6 of the Insolvency Act (applicable to insolvency proceedings under way since January 1, 2012), for the purposes of the Insolvency Act, a corporate group will be held to be the vertical group defined in section 42.1 of the Commercial Code. In this case, the credit is not subordinated because there is no group (vertical or horizontal), as two independent companies manage a shared company equally.