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

Royal Decree-Law 4/2014, of March 7, on urgent measures for refinancing and restructuring corporate debt, substantially amends the Insolvency Act (particularly regarding the regulation of refinancing agreements and their court sanctioning, and other pre-insolvency institutions). It also modifies the exemption on mandatory takeover bids for rescue operations and extends for one more year (and broadens the scope of) the special regime for calculating loss based on impairment in cases of mandatory capital reduction and mandatory dissolution of companies.

These resolutions clarify the circumstances in which an appraisal certificate is required to create and amend mortgages following the reform of the Rules of Civil Law Procedure under Act 1/2013.

The Madrid and Barcelona Provincial Courts took different positions on the classification of a creditor’s credit in the insolvency of the joint and several guarantor: the former classed it as an insolvency credit; the latter classed it as a contingent claim.

1.                 BACKGROUND

Europe has struggled mightily during the last several years to triage a long series of critical blows to the economies of the 28 countries that comprise the European Union, as well as the collective viability of eurozone economies. Here we provide a snapshot of some recent developments regarding insolvency, restructuring, and related issues in the EU. 

In a much-awaited judgment, the UK Supreme Court has decided that the liability of a company in administration or liquidation to contribute to an under-funded pension fund following a Financial Support Direction or a Contribution Notice is a provable debt ranking equally with other unsecured creditors. Crucially, it is not an expense of the administration or liquidation which would cause it to rank ahead of all creditors (except fixed charge holders) and even the administrator's or liquidator's own remuneration.

Europe has struggled mightily during the last several years to triage a long series of critical blows to the economies of the 27 countries that comprise the European Union as well as the collective viability of eurozone economies. Here we provide a snapshot of some recent developments relating to insolvency and restructuring in the EU.

Section 503(b) of the Bankruptcy Code delineates categories of claims that are entitled to elevated priority as “administrative expenses.” Under section 503(b)(3)(D), administrative expenses include “actual, necessary expenses” incurred by a creditor, indenture trustee, equity holder, or unofficial committee “in making a substantial contribution” in a chapter 11 case.

The Bankruptcy Code treats insiders with increased scrutiny, from longer preference periods to rigorous equitable subordination principles, denial of chapter 7 trustee voting rights, disqualification in some cases of votes on a cram-down chapter 11 plan, and restrictions on postpetition key-employee compensation packages. The treatment of claims by insiders for prebankruptcy services is no exception to this general policy: section 502(b)(4) disallows insider claims for services to the extent the claim exceeds the "reasonable value" of such services.