Act 22/2003, of July 9 ("Spain's Insolvency Act"), has been recently amended to include a new chapter regulating the so-called "insolvency mediators" and the extrajudicial settlement of payments ("ESP") as a form of negotiating the debts of the entrepreneurs.

The reform has been introduced by Act 14/2013, of September 27, on entrepreneurs and their internationalization (hereinafter, the "

Act

Aim of the Reform

On March 8, 2014, Spain enacted urgent measures to govern refinancing and restructuring of corporate debt ("RDl 4/2014"), modifying several provisions of the Spanish Insolvency Act (the "Act"). The objective of the reform is to improve the legal framework that governs refinancing agreements to remove obstacles that have previously impeded the successful execution of restructuring and refinancing transactions. 

Principal Amendments

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On March 7, 2014 the Spanish Government approved the Royal Decree Law 4/2014 adopting urgent measures on business debt refinancing and restructuring ("Real Decreto-ley 4/2014, de 7 de marzo, por el que se adoptan medidas urgentes en material de refinanciación y reestructuración de deuda empresarial" or "RDL 4/2014"). The aim of this new regulation is the implementation of legal measures necessary to achieve the viable restructuring of debtors.

Introduction This paper sets out to present a concise description of the amendments to the rules governing Spanish pre-insolvency arrangements pursuant to new Royal Decree Act (Order in Council) 4/2014, of 7 March, adopting urgent measures in relation to refinancing and restructuring of corporate debt (“RDA 4/2014”), in force as from 9 March 2014. This new text has introduced a series of important changes, most of them via amendments to the Spanish Insolvency Act (“SIA”), aimed at easing and expediting preinsolvency debt refinancing and restructuring processes in Spain.

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.

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MADRID E-BULLETIN

RESTRUCTURING, TURNAROUND AND INSOLVENCY

REFORM OF SPANISH INSOLVENCY LEGISLATION

On Friday 7 March 2014 the Spanish Council of Ministers approved Royal Decree-Law 4/2014, of 7 March, which adopts urgent measures on the refinancing and restructuring of corporate debt. The above Royal Decree-Law introduces a series of significant reforms to the Spanish Insolvency Act 22/2003, of 9 July, (the "Insolvency Act"). The Royal Decree-Law has entered into force on 10 March 2014.

(Auto del Juzgado de lo Mercantil número 1 de San Sebastián, de 19 de noviembre de 2013).

Este auto afirma la competencia del Juzgado de lo mercantil de San Sebastián para declarar la apertura del concurso de la sociedad Fagormastercook SA con domicilio social en Wroclaw (Polonia). La concursada es filial de Fagor Electrodomésticos S. Coop., cuya solicitud de concurso había tenido entrada en el mismo juzgado, si bien en la fecha del auto estaba pendiente de declaración.

1. The sale of productive units of a company subject to insolvency proceedings has become common practice in the Commercial Courts, especially those of Catalonia, which have the express support of the Directorate General for Industry of the Regional Government of Catalonia.

This procedural solution allows companies to continue as a going concern, ensuring the maintenance of jobs and avoiding the destruction of the business landscape.

In 2011, the Spanish legislator introduced the court-sanctioned refinancing agreement (‘Spanish Scheme’) in the Spanish insolvency system. While the introduction of the Spanish Scheme has been praised for providing new tools for debtors to reorganise out-of-court while addressing the collective action problem, certain of its provisions have made this instrument too rigid and, thus, ineffective for tackling Spanish restructurings.