Future claims and receivables commonly form part of a full security package in the Spanish lending market. Common types of claims and receivables used as security include:
- Debts and other rights to the payment of money;
- Rights to require (in project financing, for example) performance of a non-financial obligation; and
- Rights to claim under insurances; and
- Cash deposited with banks
Formalities are simple. If granted as a pledge, the security must be executed as a public deed. If secured as a chattel mortgage, the security must be registered.
However, there has been much controversy over treatment – within an insolvency scenario – of any such security over future claims and receivables. Although regulated in article 90.1.6º of the Spanish Insolvency Act, treatment of such a common security under the Spanish insolvency rules. Although a special privilege was recognised to such secured creditors, construction of the insolvency rules by the Spanish courts has resulted, for years, in a real headache for creditors who – in most cases – were unable to benefit from the privilege ranking of such credits due to the law ambiguous wording.
It has taken 13 years from the enactment of the Spanish Insolvency Act and two law amendments by the Spanish parliament to eventually clarify and homogenise treatment of such concrete within insolvency proceedings. Article 90.1.6º was redrafted on 2015 – with legal effects from the 22th of October of 2015. By such amendment, the Spanish Insolvency Law now expressly admits that credits secured by future claims and receivables benefit from a privilege position within the insolvency proceedings provided that:
“underlying claims and receivables granted as security arise from agreements or contracts entered into by the debtor before the insolvency proceedings starts”
The brand new Spanish law approach to security over future receivables has been confirmed by the Spanish Supreme Court and is therefore binding to all minor courts.
Although specific and detail analysis shall be rendered to every specific case, security granted over future claims and receivables are no undoubtedly safe against insolvency, provided of course that formalities are complied.
It is also safe to say – as confirmed by the Spanish Supreme Court – that such privilege shall be understood as well as applicable to security over future claims and receivables granted before October 2015.