Restructuring & Insolvency Newsletter - July 2024 | News
Judges of Barcelona unify principles on certain points of insolvency law
Commercial Courts of Barcelona reached a number of Agreements to unify principles in December 2023 on various areas of insolvency law including the no-asset bankruptcy for individuals, unpaid debt relief, the special proceeding for micro-companies, sale of business units and the pre-pack insolvency proceeding; being particularly notable the rules determined for this last tool given the loopholes of the Spanish regulation. The judges of Barcelona have therefore acted ahead of transposition of the proposal for a directive harmonizing certain aspects of insolvency law (notably the pre-pack rules). For further explanations, please, see the article entitled El prepack en la propuesta de Directiva de 7 de diciembre de 2022 elaborated by our partner Adrián Thery (The Prepack in the EU Proposal for a Directive of December 7 2022) (see our latest newsletter).
The Royal Decree-Law 5/2023, of June 28, 2023 amended the Spanish Insolvency Law in relation to the arrangement with creditors and to restructuring plans with the goal to be adapted to the new Law on Corporate Reorganizations.
With regards to the arrangement with creditors, it introduces the option of including any structural modification within its terms, without restricting its subject-matter to a merger, spinoff or transfer en bloc of assets and liabilities, as was the case before the reform came into force.
Additionally, regarding the affected creditors, the right to individual protection recognized in the new Law on Corporate Reorganizations has been removed where the corporate reorganization is set out in a proposal for an arrangement or in a restructuring plan.
The Ministry of Economy, Commerce and Business publishes the draft law on credit administrators and buyers to transpose the European Directive that promotes the development of NPLs
EU Directive 2021/2167, of November 24, 2021, was approved to promote the development of secondary markets for distressed loans (also known as “non-performing loans” or NPLs) and to establish safeguards in the assignment of these loans and its subsequent management by credit administrators (known as “servicers”). At the end of 2023, thirteen Member States of the European Union had already transposed EU Directive 2021/2167.
In May 2024, the first draft of the preliminary bill to transpose community regulations in Spain was made public. This is a very refined document, which surely benefits from the contributions made by different NPL market operators on the occasion of the first consultation period or public hearing in October 2022.
The draft advances the lines of the national regulation on aspects of the directive that had raised a lot of interest, such as the requirements that servicers must meet to receive and maintain funds from borrowers to send them to credit buyers, the conditions to request authorization and mandatory registration of these servicers in our country, or the operation in Spain of the passporting regime for servicers authorized by other Member States.
The draft also introduces some innovative proposals on the extension of codes of good practices for credit buyers, provisions that must be included in credit administration contracts (known as “servicing loan agreements” or “SLAs”) or, even, the extension of the entire sanctioning regime to credit institutions and financial credit establishments that sell NPLs, as well as their administrators or directors.
The term for granting guarantees by the Official Credit Institute (ICO) is extended and the conditions of sections I, II and III are modified
On May 2, 2024, the European Commission modified the Temporary Crisis and Transition Framework to extend some measures for six months to respond to crises related to Russia's aggression against Ukraine and the rise in energy prices. In particular, the European Union has decided to postpone the progressive elimination of quantitative barriers for the fishing, aquaculture and agricultural sectors.
After the modification of the Temporary Framework, a resolution of June 5, 2024 publishes the Agreement of the Council of Ministers of June 4 that modifies the terms and conditions of the line of financing guarantees granted to companies and self-employed workers (Royal Decree 6/2022, of March, known as “ICO guarantee line”).
In this way, the period by which the Ministry of Economy, Commerce and Business, acting through the Official Credit Institute (ICO), can grant guarantees is extended until December 31, 2024. Furthermore, the ICO is empowered to, within the scope of its powers, resolve practical incidents that arise in the execution of guarantees by financial entities, throughout the duration of the guaranteed operations. Finally, the new standard modifies the conditions of tranches I, II and III of guarantees to, among other aspects, specify that the financial entities that grant guaranteed operations must commit to maintaining, at least until December 31, 2024, the limits of the working capital lines granted to clients whose loans are guaranteed by the ICO.
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