First decisions on the court-sanction of refinancing agreements and extension of effects to dissenting entities under the new text of the Fourth Additional Provision, and analysis of the concept of disproportionate sacrifice when there is opposition to the agreement

Madrid Commercial Court No. 6 order of October 7, 2013: acquirer of a production unit subrogated in employment liabilities because the shareholders and directors had established the company specifically to acquire the insolvent company ("Marco Aldany Case")

The court did not rule out liability for employment obligations because the partners - directors of the insolvent company wished to acquire the production unit through a company created specifically to acquire it.

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.

En aplicación del art. 6.3 Cc, se declaran nulas prendas sobre acciones otorgadas por una sociedad en garantía de préstamos para adquirir acciones de la propia sociedad porque vulneran la prohibición de asistencia financiera. No existe obligación de restitución porque la prenda fue concedida con carácter unilateral y gratuito.

A composition agreement was approved involving the merger of some of group’s companies and with different alternatives, one of which is specifically designed for financial institutions, but open to all creditors, proposing a partial capitalization of the insolvency credits and the payment of the resulting credits through the realization of certain assets and the free cash flow generated by the company in the coming eight years.

On March 18, 2014, the Bank of Spain gave credit institutions consistent criteria to apply the provisions of Circular 4/2004 to restructuring transactions resulting from the refinancing agreements regulated under the Insolvency Act, complying with the stipulations of Additional Provision One of Royal Decree Law 4/2014, which assigned the drafting of those criteria to the Bank of Spain.

Act 14/2013, of September 27, 2013, favoring entrepreneurs and their internationalization (the “Act”), introduces a wide range of reforms on insolvency, corporate, tax and labor matters. Regarding insolvencies, it takes a more flexible approach to the quorum of financial creditors required for court-sanctioned refinancing agreements and it regulates out-of-court agree-ments for payment as mechanisms for out-of-court negotiation with creditors.

REFINANCING AGREEMENTS

El TS clarifica la calificación concursal de los contratos de permuta de tipos de interés y los califica como créditos concursales por no cumplir con el requisito del sinalagma funcional que se predica de las obligaciones recíprocas.

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, on urgent measures for refinancing and restructuring corporate debt: amends the Insolvency Act and the exemption on mandatory takeover bids for rescue operations, and extends the special regime for calculating losses due tue impairment