Selection of the main judgments on restructuring and insolvency matters.

Silent administrator role allowed in pre-pack sale of business unit

Decision by Barcelona Commercial Court No 7 on October 30, 2020

The sale of a business unit was authorized in the decision approving the liquidation plan because a binding offer to purchase the business unit had been submitted with the petition for an insolvency order. The individual chosen as independent expert for the sale negotiations was later appointed insolvency receiver. When the insolvency order had been issued, the period determined for observations and allegations in relation to the sale was shorter than the statutory period, because the favorable report by the insolvency receiver confirmed the transparency of the prior sale process carried out under his supervision.

Admission for consideration of application for amendment of arrangement under COVID-19 legislation

Decision by Barcelona Commercial Court No 5 on October 14, 2020

The court admitted for consideration an application for amendment of an arrangement with creditors in the fulfillment period submitted by the debtor in June 2020 and accompanied by a payment plan, a viability plan and an updated list of creditors. Although an application for a declaration of breach of the arrangement submitted earlier by a creditor was served on the debtor, that application cannot be admitted for consideration until February 2021, so the application for amendment filed by the debtor was given priority.

Purchaser of productive unit not liable for prior debts even if its shareholder and sole director is also general manager of insolvent company

Decision by Madrid Commercial Court No 5 on October 09, 2020

Any privileged information that the purchasing company may have favors the creditors, because they know more about the debtor’s situation, the value of its assets and its business. It cannot be considered that the purchaser is a specially related person to the debtor because the purchaser was not a shareholder or director at the debtor.

Interpretation of Recast Insolvency Law in relation to debt relief for public claims

Decision by Madrid Commercial Court No 13 on October 06, 2020

The new rules on debt relief for public claims fell outside the lawmaker’s authority. The court held that the Supreme Court's case law still applies according to which, and regardless of which debt relief regime for unpaid liabilities is taken -either immediate relief or a payment plan-, that debt relief covers public claims that are not classed as preferred or post insolvency claims.

Insolvency proceedings must end if debtor has sufficient liquidity to pay all past-due liabilities

Decision by Madrid Commercial Court No 12 on November 4, 2020

Insolvency proceedings were declared concluded due to disappearance of the state of insolvency because the insolvent debtor had sufficient liquidity to pay all past-due liabilities.

Reduction of VAT paid on irrecoverable claim should be allowed even if the claim has not been notified in the insolvency proceedings on the debtor

Judgment by the Court of Justice of the European Union on June 11, 2020

To be entitled to the reduction of VAT paid in respect of an irrecoverable claim the taxable person only has to be able to prove that their claim against the debtor is definitely irrecoverable. It cannot be required additionally for the taxable person to have notified the claim in the insolvency proceedings conducted against the debtor.

Creditor’s disagreement with valuation of its claim in a proposal for a rearrangement does not mean the proposal cannot be admitted for consideration

Decision by Barcelona Commercial Court No 2 on September 23, 2020

The court does not have to refuse admission for consideration of a proposal for amendment of the arrangement because a creditor does not agree with the valuation of their claim in it. That creditor is nevertheless entitled to make the submissions it sees fit in the period for objections to the proposed rearrangement or to vote against it.

Pre-deductibility of post-insolvency claims in the event of insufficient assets available to creditors

Judgment by the Supreme Court (Chamber One) on September 15, 2020

After insufficient assets available to creditors has been notified by the insolvency receiver, the only claims that are pre-deductible with respect to other post insolvency claims are any claims arising after such notification that are necessary to finish the liquidation process.

Ownership of a single property in another member state does not overturn presumption that the COMI is where debtor has principal residence

Judgment by the Court of Justice of the European Union (CJEU) on July 16, 2020

The presumption that the center of main interest (COMI) of a debtor that does not conduct a business is the debtor’s principal residence does not disappear because the only property that the debtor owns is located outside the member state where he resides.