Amid the current market uncertainties, distressed asset sales are likely to rise. International investors are looking for efficient solutions, preferably ones that reflect solutions in their home jurisdictions. One popular mechanism is the use of pre-pack sales. A pre-pack sale manages the adverse impact of insolvency proceedings on the distressed company’s business, while reducing the time and cost of such proceedings, and offering greater asset realisation to be distributed among creditors.

The implementation, just over a year ago, of Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on Preventive Restructuring Frameworks, has meant a real Copernican shift in Spanish insolvency law. In particular in the field of pre-bankruptcy law, as it has established a new model based on Chapter 11 of the US Bankruptcy Act in substantive law and UK Schemes of Arrangement in procedural law.

At the end of 2021, the Spanish government approved draft reforms of the Spanish insolvency laws that transposes Directive (EU) 2019/1023 of 20 June 2019 on preventive restructuring frameworks into Spanish law.

The reform will bring about a comprehensive change in insolvency proceedings in Spain. So what are these changes and what effect will these have in practice?

Restructuring Plans

As previewed in our prior post, Poland’s simplified restructuring proceeding (uproszczone postępowanie restrukturyzacyjne) is now in effect. The enabling legislation – with only minor changes from the description in our prior post affecting such restructurings – was finally adopted on 19 June 2020, signed into law on 23 June 2020 and took effect the same day.

Poland’s Parliament (the Sejm, the lower House of Parliament) is close to passage of an extraordinary debtor restructuring relief law as part of its fourth COVID-19 crisis legislation.

The measure, referred to as Shield Law 4.0 (Tarcza 4.0) would:

The coronavirus pandemic poses new risks and challenges for business at a scale unknown before. In order to assist businesses, the Polish government has announced that a PLN 212 bn ($53bn) stimulus package will be put in place. For a summary see our previous post. Start up of the aid package will take time, and the shape of further aid to come is as yet unknown.

In this article, we focus on working capital and consider ways a business can seek to weather the storm and preserve all-important liquidity through this challenging period.

Practical Tips

Given the unprecedented challenges presented by COVID-19 globally, what can senior management do in order to manage and mitigate the risk to the company's financial health?

One of the many questions asked by our clients is: “Does Polish law recognise the concept of ‘piercing the corporate veil?’” Is it possible to disregard the separate legal personality of a company or corporation and make shareholders liable for the debts of the company? This question has been asked since the introduction of the market economy in Poland (in 1989) and there is still no clear answer.

The EU directive 2012/30/EU proposed in November 2016 (“Proposed Directive”) aims to avoid the adverse effects of insolvency on companies through a more flexible regime of restructuring.

On Dec. 18, Spain’s High Court said it would investigate claims of mismanagement by Abengoa creditors’ against the former chairman and the former CEO of the engineering and energy firm struggling with serious financial problems. In its ruling, the High Court asked Felipe Benjumea, the former chairman whose father founded the company, to post a bond of 11.5 million euros ($12.5 million) to cover potential liabilities within 24 hours.