Key Points

• Court considers the impact of the Spanish Insolvency Act on guarantees governed by English law
• Court holds that the liability under the guarantee was not extinguished

The Facts

The change provides clarity regarding the pledges over credit rights, restoring pledges as effective and efficient security interests.

DECISION OF THE GENERAL DIRECTORATE ON REGISTRIES AND NOTARIAL ACTIVITIES DATED OCTOBER 6, 2015: NO PUBLIC DEED REQUIREMENT FOR REGISTERING PROPERTY JUDICIALLY AWARDED IN AN INSOLVENCY PROCEEDING

El pasado 18 de junio entró en vigor la Ley 11/2015 de recuperación y resolución de entidades de crédito y empresas de servicios de inversión (la "Ley 11/2015"), que deroga y refunde la antigua Ley 9/2012, de 14 de noviembre, de reestructuración y resolución de entidades de crédito (la "Ley 9/2012").  

The remaining credit after the cancelation of its guarantee through an assignment in lieu of payment (dación en pago) in favor of a creditor with a lower-ranking guarantee is an ordinary credit and cannot be subject to a new classification

It used to be the case that mortgage creditors could rest easy knowing they held a mortgage, and that they would be repaid with the proceeds of the sale of the mortgaged asset, even in the event of an insolvency.

Claims secured with an in rem guarantee continue to accrue default interest charged to the encumbered asset and are classified as privileged.

The lender’s credit in respect of the joint-and-several guarantor declared insolvent is contingent unless existence of p

Rescission of an extension to a mortgage granted by the insolvent company securing a preexisting debt of a company of its group

Spanish Royal Decree-Law 4/2014, passed on March 7 2014, has considerably changed the rules for the court-sanctioning of so-called Spanish schemes of arrangement. Amongst those changes, the reform has lowered the majorities required to achieve a Spanish scheme. Currently, a majority of at least 51% of the financial liabilities held by all creditors at the time of the refinancing agreement (acuerdo de refinanciación) approval, will suffice to request the insolvency judge to sanction the agreement, so it is considered ringfenced and protected from any challenge for rescission.