The rule

Royal Decree Law 4/2014, intended to promote efficiency in Spanish insolvency proceedings, is officially enacted with some important updates.

The Spanish legislature has finally enacted Royal Decree Law 4/2014 (the March Reform). Now known as Law 17/2014, of 30 September (the Act), the new law implements urgent measures regarding refinancing and restructuring of corporate debt. In addition to formally enacting the March Reform, the Spanish legislature included a few updates that are worth highlighting.

Pre-Insolvency Communication

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

On Friday 5 September, the Spanish Council of Ministers approved Royal Decree Law 11/2014, of 5 September, regarding urgent measures on insolvency. The Royal Decree Law brings in a series of significant reforms to the Spanish Insolvency Act 22/2003, of 9 July (the "Insolvency Act"). The new Royal Decree Law entered into force on 7 September 2014.  

Pocas veces una legislación “moderna” (recordemos que el texto original de la Ley Concursal es de 2003) ha sido objeto de tanta modificación (en sus diez años de vigencia lleva más de 16 modificaciones). Lo que es seguro es que no será la última, de hecho en las próximas semanas verá la luz la Ley por la que se adoptan medidas urgentes en materia de refinanciación y reestructuración de deuda empresarial (procedente del Real Decreto-ley 4/2014, de 7 de marzo), un auténtico ejemplo de “reforma de la reforma”.

1. Introduction

On 7 September 2014, Royal Decree Act 11/2014 on urgent measures in insolvency matters (“RD 11/2014”) came into force, introducing important changes in the Spanish Insolvency Act (“SIA”), especially regarding incourt proceedings, whether within a composition or a liquidation stage. This piece of legislation followed Royal Decree 4/2014 (“RD 4/2014), which introduced equivalent measures for preinsolvency restructurings.

The Spanish Supreme Court has established the legalconcept of insolvency as an objective requirement forthe Declaration of Insolvency pursuant to Section 2.1 ofthe bankruptcy Act by virtue of the decision taken by the Court on April 1, 2014.

Financial institutions are not de facto directors of the insolvent company because they do not significantly affect the performance of the insolvent company’s activity, but only ensure that  certain costs do not affect the repayment of their loan.

The extension of the term for the delivery of works not authorized by the guarantor that had secured  the penalty for delay does not  harm it and, therefore, the guarantee is not  extinguished;  any increase in the  penalty agreed does not extinguish the guarantee,  but  cannot be enforceable on the guarantor that will be liable in the terms agreed in the initial  agreement. This decision discussed the effects  on the guarantee of  the novation of the  secured  obligation agreed without the guarantor’s knowledge.