Restructuring & Insolvency Newsletter - October 2020 | Judgments

Contingent claims remain contingent until they have had exact and final quantification

Judgment by the Supreme Court (Chamber One), March 11, 2020

Besides the uncertain outcome of a lawsuit, the contingent nature of a claim also depends on the determination of its amount, since until the exact amount of the claim has been quantified it cannot be included as a final – rather than a contingent – claim on the list of creditors.

An administrative concession may be applied for as part of a productive unit if operations continue in the same premises (‘Vulcano’ Case)

Decision by Pontevedra Provincial Appellate Court, April 15, 2020

The transfer of administrative authorizations used for the business in the context of sales of productive units may include administrative concessions, which do not expire on commencement of the liquidation phase if they are transferred within a productive unit and the transferee continues operating the business in the same premises.

COVID-19 could be a reason for applying the 'rebus sic stantibus' clause to stay obligations under financing agreements (‘Celsa’ case)

Decision by Madrid Court of First Instance number 60, April 30, 2020

The impact on debtors of the crisis caused by the pandemic – an impact that is hard to predict when the parties sign financing agreements – gives reason for applying the rebus sic stantibus clause and allows interim measures to be adopted to stay debtors’ obligations and bar termination due to breach of the financing agreements.

Creditors who have appeared as parties have standing to appeal assessment judgment contrary to their interests

Judgment by the Supreme Court (Chamber One), May 21, 2020

Creditors who have appeared in the assessment section have standing to appeal against any assessment judgment that has not upheld all or some of the petitions of the insolvency practitioner and the public prosecutor's office – even if the latter have not lodged an appeal – although subject to the objective limit of the specific petitions submitted by the insolvency practitioner and by the public prosecutor’s office.

A judge cannot make up for or complete non-identification of the person affected by the fault-based assessment in the report by the public prosecutor’s office

Judgment by the Supreme Court (Chamber One), June 5, 2020

If the person affected by a fault-based assessment in the report by the public prosecutor’s office is not identified, the judge may rule on the existence of the grounds for the assessment, although not on the persons affected by it or on the findings relating to fault.

A claim stemming from a proceeding shifting tax liability has the same classification in an insolvency proceeding as the original claim for the liability that was shifted

Judgment by the Supreme Court (Chamber One), June 17, 2020

The shifting of tax liability is not a sanction, so the resulting claim cannot be fully subordinated and must instead keep the classification relating to the original claim for the shifted liability.

A presumption of principal residence in one state for the purpose of determining the COMI is not rebutted by ownership of only one property in a different state

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

The presumption according to which the center of the main interests (‘COMI’) of an individual not exercising an independent business or professional activity is their habitual residence is not rebutted simply by the fact that the only real estate owned by that individual is located outside the state of their habitual residence.

Exception to requirement to open assessment section due to existence of a less onerous alternative does not operate where it affects a weak class of creditors

Judgment by the Supreme Court (Chamber One), Friday, July 24, 2020

The assessment section of an insolvency proceeding has to be opened where a proposal for an arrangement contains an alternative consisting of a reduction below a third or an extension of the payment period below three years for a class of creditors that have weak rights qualitatively or quantitatively.

Court appointment of independent expert to supervise the search process for investors for the sale of productive unit in a pre-insolvency scenario

Decision by Barcelona Commercial Courts numbers 7 and 10, July 29, 2020

The appointed expert must ensure that the insolvency rules on transfers of productive units are observed and issue a report describing the activities performed. The appointment of this professional does not affect the debtor’s powers of management and disposition and, generally, if an insolvency order is ultimately issued on the debtor, the expert must be appointed as insolvency practitioner.