The Supreme Court of Spain has recognized it its Judgment dated September 5th, 2012, the lack of consent in a work contract on which one of the parties applied for the bankruptcy proceedings 10 days after such contract was entered by both parties.

The parties entered into a contract for execution of work by virtue of which the company that few days later applied for the insolvency proceedings, was committed to carry out the works of a building under construction.

Once the bankruptcy proceeding was started, each party issued a claim within the insolvency proceeding.

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.

The Company Court of Alicante, Nº 1, made, in its judgment dated July 20th, 2012, a useful analysis on the different decisions part of the case law in regards to the recognition of pledgesof future receivables and their classification as privileged credit in cases of bankruptcy proceedings, being a very commonly practiced consideration.

The Provincial Court of Zaragoza has ruled on an appeal lodged by the General Treasury of Social Security against a Mercantile Court decision approving a liquidation plan that considered the transfer of the insolvent company as a productive unit and exonerated the buyer from social security debts.

The legal issue to consider was whether the magistrate of the Mercantile Court had the power to declare the buyer of an insolvent company exempt from paying the social security debts acquired prior to said transfer, as it did.

In this appeal, the court analyzes the extent of the consequential damages and future loss of profits that correspond to the lessor of a business premise on the occasion of the unilateral termination by the lessee, caused by the failure to obtain the mandatory licenses for the supermarket business of such premise.

The Law 9/2015 includes the following novelties:

1.   In Regard to the Insolvency Agreement

Law 9/2015 presents a series of novelties regarding the insolvency agreement, such as:

The insolvency administrators (hereinafter, “the Plaintiff”) of the company Santa Teresa Materiales de Construcción S.L. (hereinafter “the Company”) sought the declaration of invalidity of the transaction undertaken by the Banco Santander S.A. (hereinafter, “the Bank”) classified by the Plaintiff as debt offset.

Insolvency Statistics

2014 was the first year in which the number of insolvency proceedings filed by Spanish companies fell each month since 2004, the year when the last bankruptcy reforms were enacted. Last year, a total of 6,508 insolvency proceedings were initiated in Spain, a reduction of 26.2% when compared to 2013, which was a record year when 8,823 cases were filed.  As a result, in 2014, the streak of consecutive years of increase in the number of insolvency filings ended.

On March 21st, 2012 the Spanish High Court rendered its Judgment in which stated that credits for supplies accrued before a company has been stated in bankruptcy, have to be paid as preferential credits, this means that they shall have priority over the rest of the credits, in those cases in which the Court who is dealing with the bankruptcy proceedings had ordered the supplier to continue with the respective supply in the interest of the bankrupt company.

One of the blocks of Royal Decree-Law 1/2015, dated 27 February (hereinafter, the “RDL”) envisages the implementation of urgent measures  to reduce the financial burden, introducing amendments mainly in the Insolvency Act, in Royal Decree-Law 6/2012, dated 9 March, concerning urgent measures to protect mortgage debtors without resources, and in Law 1/2013, dated 14 May, concerning measures to strengthen the protection of mortgage debtors, the restructuring of debt and low-income lease.