Restructuring & Insolvency Newsletter - March 2023 | Judgments

Public disclosure not required of appointment of expert in restructuring in the context of a pre-insolvency notice

Decision by Pontevedra Commercial Court No 3 on November 16, 2022

In the context of a pre-insolvency notice made on a confidential basis in which the debtor requests appointment of the expert in restructuring, Pontevedra Commercial Court took the view that the appointment does not have to be sent to the Public Insolvency Register to publicly disclose their identity.

Netting of post-insolvency claims in cases where insufficient assets available to creditors has been notified is limited

Decision by Barcelona Commercial Court No 7 on October 4, 2022

Post-insolvency claims not considered to be indispensable claims for liquidation in insolvency proceedings cannot be netted, as they are not enforceable as long as there is insufficient assets in the insolvency proceeding..

Insolvency-related grounds cannot be pleaded to render void a refinancing agreement on the basis of general civil legislation

Decision by Madrid Provincial Appellate Court on September 30, 2022

Claimants not entitled to challenge the sanctioning of a refinancing agreement cannot plead insolvency-related causes and grounds when applying for it to be rendered null and void under the general legislation on obligations and contracts.

Substantiation of fault-based classification on the basis of a tax penalty imposed on the debtor for fraudulent conduct

Decision by Barcelona Commercial Court No 3 on September 30, 2022

The debtor may be determined as a person affected by the classification on the basis of a tax practice which resulted in a tax penalty equal to more than half of its total liabilities.

Subordination of claim acquired from a specially-related party unless acquirer proves they did not know or could not have known about that fact

Judgment by Madrid Provincial Appellate Court on September 28, 2022

A transferee that had acquired the claim of a specially-related party within a two-year period before the insolvency order will also be classed as a specially-related party, unless they prove that they did not know or could not have known, by employing an average amount of diligence, that the debtor was specially-related to the transferor.

Pre-insolvency notice may head off directors’ liability for losses

Judgment by Salamanca Provincial Appellate Court on September 27, 2022

An effect of the pre-insolvency notice may be to head off the liability of the company’s directors for qualified losses, provided the notice is given for the purpose of preventing the debtor being wound up or an insolvency order. If the negotiations that triggered the pre-insolvency notice fail and the state of insolvency or the ground for winding up continues to exist, a petition will have to be made for an insolvency proceeding or for the winding up of the company, as required.

Challenging an inventory is not the right procedure to correct insufficient or incomplete description of a business unit

Judgment by Oviedo Provincial Appellate Court on September 26, 2022

If the description of the items in the debtor’s assets appearing in the inventory is incomplete or insufficient, the interested party may ask the insolvency practitioner to provide them with the omitted information, without any need to challenge the inventory of assets and rights for this reason.

Insolvent company under suspension does not have standing to bring proceedings with a possession content

Judgment by the Supreme Court (Chamber One) on September 14, 2022

In cases of suspension of the debtor’s possession rights, only the insolvency practitioner has standing to bring action with a possession content. The debtor may only appear as a party and act separately if the proceeding had been initiated by the insolvency practitioner.

Registration of transfer of an administrative concession in the context of an insolvency proceeding requires authorization to be obtained from the public authority where that authorization is mandatory

Decision by the Directorate-General for Legal Certainty and Attestation on July 14, 2022

Even though the transfer of rights under an administrative concession (mining rights) was made in the context of an insolvency proceeding, for its registration the obtaining of the relevant administrative authorization is needed - if it is required- and that authorization may be obtained following formalization of the transfer. 

Fault-based classification due to early repayment before their due dates of loans to specially-related parties

Judgment by Granada Provincial Appellate Court on July 4, 2022

Early repayment before their due dates of loans to specially-related parties qualifies as assets fraudulently leaving the assets available to creditors and is a ground for a fault-based classification of the insolvency.

Classification as claim in litigation requires existence of a “clear and honest dispute” over the existence of that claim

Judgment by Barcelona Provincial Appellate Court on June 23, 2022

To prevent misuse of unfounded reports of offenses or criminal complaints, it is necessary for both the insolvency practitioner and the insolvency judge to find the existence of a clear and honest debate over the reality and existence of the claim for the purposes of classifying it as a claim in litigation.

Transfer of lease agreement forming part of a business unit does not prevent a rent increase

Judgment by Madrid Provincial Appellate Court on June 21, 2022

A non-consented transfer or transfer by operation of the law of a lease agreement included in a business unit does not strip the lessor of their right to increase the rent for the transferee and new lessee.

Distinction between start date of time period for clawback action in insolvency proceedings and under civil law in relation to a mortgage

Judgment by Madrid Provincial Appellate Court on April 22, 2022

The point when the time period starts to run for exercising clawback action in insolvency proceedings is the date of formalization of the mortgage, whereas the date for clawback action under civil law is the date of its registration. The reason for this is that in the second case the injured party has to know the extent of the damage caused by the transaction. 

Commencement of liquidation phase makes it unnecessary to request termination of administrative contracts

Judgment by the Supreme Court (Chamber Three) on April 21, 2022

Once the liquidation phase has commenced administrative contracts are terminated by operation of the law, and therefore creditors will not have to apply to the insolvency practitioner to request termination of these types of contracts.