On October 1, 2014, the Official Gazette of the Spanish State (“BOE”) published Act 17/2014, on urgent measures for refinancing and restructuring corporate debt (“Act 17/2014”). This act arises from Royal Decree-Law 4/2014, of March 73 (“Royal Decree-Law 4/2014”), which was approved by the Spanish Congress of Deputies and subsequently processed as a draft bill through the urgent procedure. During its parliamentary processing, several clarifying amendments were added to the text of the Royal Decree-Law, and the articles of the Insolvency Act were amended substantially in relation to the insolvency administration.
Below we explain the most relevant new developments of Act 17/2014 compared to the text approved under Royal Decree-Law 4/2014.
Notification of the commencement of negotiations (art. 5 bis of the Insolvency Act)
Act 17/2014 clarifies that the suspension of enforcements through the submission of the notification under art. 5 bis Insolvency Act also affects non-judicial enforcements.4 Therefore, judicial and non-judicial enforcements of assets or rights necessary for the continuity of the business or professional activity of the debtor cannot be commenced during the period between the submission of the notification to the court and the formalization of the refinancing agreement, the admission to procedure of the request for its approval, the adoption of an out-of-court agreement for payment, the obtaining of the majorities necessary for the admission to procedure of an early composition agreement proposal or the declaration of insolvency.
Approval of refinancing agreements (Fourth Additional Provision of the Insolvency Act)
Within the scope of the approval of refinancing agreements, Act 17/2014 amends four aspects of the Fourth Additional Provision of the Insolvency Act:5
- Creditors for labor claims are excluded from the concept of creditors of financial liabilities. This provision already placed creditors for commercial transactions and creditors of public law liabilities outside this group.
- It clarifies the system established for majorities in agreements with a syndication clause. It states that the vote in favor of 75% of the liabilities of the agreement (or any lower majority decided in the agreement) would be considered when calculating the majorities necessary for the approval and for the extension of its effects to dissenting creditors.
- Creditors that have signed the agreement are allowed to request its approval (this right was previously restricted to debtors).
- A period of 30 days is established for the judge to hand down a judgment on any opposition to the approval of the agreement.
Insolvency administration system
To guarantee that persons performing the role of the insolvency administration have the knowledge and experience necessary for carrying out their task, and to encourage and foster quality, diligence and agility in the performance of the duties entrusted to them, Act 17/2014 amends the regulation of the insolvency administration system in depth.
First, those acting as insolvency administrators must meet certain requirements to be established by regulations and which will refer to passing tests or courses on specific knowledge. They will also have to register in section four of the Public Insolvency Register, created for this purpose.
The procedure for designating the insolvency administration is also amended, establishing a correlative rotation system, which judges in large-scale insolvencies can change when they deem that an alternative profile exists that, due to their specialization or prior experience, is more in line with the characteristics of the insolvency. In the case of connected insolvencies, the judge can appoint to the extent possible a single insolvency administration with several delegated assistants.
Regarding this body’s duties, Act 17/2014 compiles those already attributed throughout the Insolvency Act in one article, differentiating between duties (i) of a procedural nature, (ii) of the debtor or its corporate bodies, (iii) of a labor nature, (iv) relating to creditors’ rights, (v) to report and evaluate, (vi) of the realization of value and liquidation, and (vii) of the clerk’s office.
The insolvency administration’s remuneration system has also been subject to reform. On the basis of the principle of efficiency, a levy is established (to be approved by regulations) depending on the number of creditors, the joinder of insolvencies and size of the insolvency, which will accrue as the mentioned duties are carried out, and which the judge may reduced if the insolvency administration does not fulfill its obligations, delays performance of them or produces deficient quality in its work