Just six months after the last reform of the Law on Insolvency (Royal Decree-Law No. 4/2014 of 7 March) the Council of Ministers has promulgated a new amendment of the law with a view to facilitating, as far as possible, the continuity of financially viable businesses that become involved in insolvency proceedings.

These changes have been introduced by way of Royal Decree-Law No. 11/2014 of 5 September 2014 (the “Royal Decree-Law”).

As a consequence of the current situation of economic crisis and the sudden braking in construction, we observe that every day we are finding ourselves with fresh news of negotiations with financial institutions, and applications for declarations of bankruptcy from creditors.

Supreme Court Judgment dated 10 March 2016 (STS 151/2016)

The judgment of the Supreme Court analyses the objective scope of extension of the liability for obligations and debts for which, as appropriate, the director of a company should be liable and, more specifically, the scope of "the corporate obligations subsequent to the occurrence of the legal ground for dissolution".

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.

Judgment of the Supreme Court, Chamber One, Number 134/2016, 04 March

The new amendments carried out in the BankruptcyProceedings Act by virtue of the Royal Decree 4/2014,dated March 7, aims to introduce a viable restructuringof corporate debt, trying to streamline BankruptcyProceedings and prevailing primacy of will.

A ruling by the Supreme Court in Spain says Spanish banks that held deposits for property that was never built are to be held to account. Around 100,000 people in the UK are thought to have paid big sums towards such properties in Spain but these were lost when several developers went bust in the wake of 2008’s financial crisis. Estimates for how much British buyers could claim are around £4bn.

The recently-approved Royal Decree Law 4/2014 (RDL), dated March 7 and published March 8 in the Official State Gazette (BOE), has the main goal of addressing measures to ensure the feasible restructuring of corporate debt, encouraging a relief of financial burdens for companies which, despite high debt levels, are still feasible from an operational viewpoint.

At the end of 2021, the Spanish government approved draft reforms of the Spanish insolvency laws that transposes Directive (EU) 2019/1023 of 20 June 2019 on preventive restructuring frameworks into Spanish law.

The reform will bring about a comprehensive change in insolvency proceedings in Spain. So what are these changes and what effect will these have in practice?

Restructuring Plans

The EU directive 2012/30/EU proposed in November 2016 (“Proposed Directive”) aims to avoid the adverse effects of insolvency on companies through a more flexible regime of restructuring.