Restructuring & Insolvency Newsletter - December 2019
Restrictions for prior notice under article 5 bis of the Insolvency Law (‘pre-insolvency’ mechanism)
On September 10, 2019, Madrid Commercial Court number 6 delivered a decision arguing that it was necessary to examine whether the prior notice under article 5 bis of the Insolvency Law stemmed from steps taken to prepare or perform serious and effective negotiations.
The court concluded that in this particular case the notice was unfair and must be considered not to exist because its only aim was to stop a mortgage foreclosure proceeding. The pre-insolvency notice was not found by the court to be a serious, solution-seeking and reasonable attempt to secure a refinancing of the debtor’s liabilities because the main financial creditor, owning more than 90% of the liabilities, was not amenable to a refinancing arrangement because it had initiated a mortgage foreclosure.
Supreme Court restricts protection of public claims in 'fresh start'
The Supreme Court delivered a judgment adding important new elements to the requirements having to be met to obtain debt relief (“fresh start”).
This judgement tumbles the protection of public claims afforded by the “fresh start” mechanism; provides two options (able to be elected together) for debt relief: immediate discharge or deferred discharge under a payment plan; and also lefts the door open to a potential reduction (write-off) of claims in the payment plan, including public claims.
Garrigues wins Financial Times award for creating new legal standard shortening recovery period for non-performing loans
Garrigues has managed to bring together in a single joint initiative ten of the main servicers in the Spanish market –over €145,000 million in debt and managed assets– to create a legal standard allowing funds buying loan portfolios to shorten the recovery periods for those non-performing loans (NPLs), thanks to the work of Juan Verdugo and Iván Heredia, partner and senior associate, respectively, of our Restructuring and Insolvency Department. This initiative received the European award for legal innovation from the Financial Times.
Judgments of interest
- Requirements for subordination of claims notified out of time
- Definition of fraud concerning the provision of collateral
- Provision of collateral during performance period of the creditors’ arrangement does not alter classification of a claim in a subsequent liquidation
- DGRN interprets how article 155.4 LC should apply in the performance phase of the creditors’ arrangement
- Inclusion of NOLs in insolvent company's inventory
- Action for declaration of a claim in an insolvency proceeding is governed by Insolvency Regulation
- Breach of the creditors’ arrangement due to failure to pay the tax agency even though the latter failed to inform of its bank account
News and events
- Article on definition of productive unit in an insolvency context
- Garrigues contributes to new issue of journal Revista de Derecho Concursal y Paraconcursal
- Convention on legal mechanisms in the twenty-first century, organized by Superintendencia de Sociedades de Colombia
- New investors’ guide Distress transactions in Spain: A brief investor’s guide to financing, asset, share and debt deals
- Seminar on EU Early Restructuring Directive
- Article on clawback actions in insolvency proceedings and how they could affect family group restructurings
- Seminar on new perspectives for real estate collateral
Contacts
