{"id":4323,"date":"2015-05-19T08:00:32","date_gmt":"2015-05-19T08:00:32","guid":{"rendered":"http:\/\/www.asociacion-eurojuris.es\/en\/?p=4323"},"modified":"2020-04-11T07:22:40","modified_gmt":"2020-04-11T07:22:40","slug":"merry-go-round-of-amendments-to-the-spanish-insolvency-law","status":"publish","type":"post","link":"https:\/\/www.asociacion-eurojuris.es\/en\/merry-go-round-of-amendments-to-the-spanish-insolvency-law\/","title":{"rendered":"Merry-Go-Round of Amendments to the Spanish Insolvency Law"},"content":{"rendered":"<p style=\"text-align: justify;\">The Spanish insolvency arena is witnessing an unprecedented review of amendments to Spanish Law 22\/2003 on Insolvency Proceedings (the \u201c<span class=\"cursiva-azul\">Spanish Insolvency Law\u201d<\/span>) to solve technical problems and to facilitate the continuity of economically or operationally viable companies.<!--moreMerry-Go-Round of Amendments to the Spanish Insolvency Law--><\/p>\n<p style=\"text-align: justify;\">Throughout 2014 and (beginning) 2015, the following three partial reforms of the <a title=\"Insolvency Lawyers in Spain\" href=\"http:\/\/www.mariscal-abogados.com\/legal-expertise\/insolvency-lawyers-spain\/\">Spanish Insolvency Law<\/a> have been approved by means of Royal Decree-Laws (\u201cRDL\u201d): (i) RDL 4\/2014, of 7 March (\u201cRDL 4\/2014\u201d), (ii) RDL 11\/2014, of 5 September (\u201cRDL 11\/2014\u201d), and (iii) RDL 1\/2015, of 27 February (\u201cRDL 1\/2015\u201d).<\/p>\n<p style=\"text-align: justify;\">Royal Decree-Laws are specific regulations issued by the Spanish Government \u201cin cases of urgent need\u201d and come into force upon publication within the Spanish Official State Gazzette (\u201cBolet\u00edn Oficial del Estado\u201d). \u00a0Although Royal Decree-Laws have the status of law as of their publication they need to be validated by the Spanish Parliament within 1 month of publication.<\/p>\n<p style=\"text-align: justify;\">Whereby RDL 4\/2014 has already been validated by the Spanish Parliament (giving rise to Law 17\/2014, of 30 September), RDL 11\/2014 and RDL 1\/2015 are currently being processed as new draft bills (\u201cProyectos de Ley\u201d). \u00a0As such they are subject to new amendments submitted by the different political parties in the Spanish Parliament within the coming weeks or months.<\/p>\n<p style=\"text-align: justify;\">In a nutshell, the main aims of the referred Royal Decree-Laws are the following: (i) RDL 4\/2014 (now, Law 17\/2014, of 30 September) principally targets to enhance the deleveraging of viable Spanish companies and facilitating prepetition restructuring deals; (ii) RDL 11\/2014 extents the main principles of pre-insolvency refinancing agreements (introduced by RDL 4\/2014) to composition agreements and lays down certain rules regarding the sale of production units and company liquidation; and, (iii) RDL 1\/2015 seeks to facilitate a \u201csecond chance\u201d for individual creditors so that they may benefit now from the same \u201cfresh start\u201d as shareholders of insolvent companies that are wound-up and liquidated.<\/p>\n<p style=\"text-align: justify;\">Focusing on RDL 11\/2014, this reform pays special attention to the sale of productive units in the context of liquidation (once a composition agreement has been ruled out).<\/p>\n<p style=\"text-align: justify;\">Before RDL 11\/2014 entered into force, Article 149 of the Spanish Insolvency Law laid down that the transfer of a debtor\u2019s productive unit did not entail company successor liability (\u201csucesi\u00f3n de empresa\u201d), except for labour purposes.\u00a0 All employment contracts included within the productive unit were automatically transferred with the business to the acquirer (subject to certain exemptions).<\/p>\n<p style=\"text-align: justify;\">Such possibility enabled a potential acquirer of a productive unite to acquire a \u201crestructured\u201d company with the debtor\u2019s debts remaining in the hands of the insolvency proceedings and without the acquirer having to assume any liabilities or obligations (except those linked to the employment contracts included within the productive unit).<\/p>\n<p style=\"text-align: justify;\">Otherwise, should the sale of a debtor\u2019s productive unit finally not be possible due to lack of third party offers or due to non competitive offers, debtor\u2019s assets would be sold individually in public auction.<\/p>\n<p style=\"text-align: justify;\">Given the above, it was not clear if Social Security debts would fall under company successor liability, existing hereto different criteria by Spanish case law.\u00a0 These debts could be understood to be of labour nature due to the fact that they are linked to wages. \u00a0In practice, Social Security authorities were challenging all those judicial resolutions that excluded Social Security debts of the transferred productive unit giving rise to legal uncertainty.<\/p>\n<p style=\"text-align: justify;\">In this context, RDL 11\/2014 has come to address this discussion.\u00a0 It expressly lays down the acquirer\u2019s exemption from liability for debts in case of sale of productive units, clearly excepting Social Security debts of the company in insolvency (in addition to those of labour nature).\u00a0 Hence these Social Security debts become part of the liabilities to be assumed by the potential acquirer.<\/p>\n<p style=\"text-align: justify;\">Insolvency practitioners (lawyers, companies and judges, among others) have expressed their concerns with this measure since it may backfire on future sales of debtor\u2019s productive units within liquidation phase.<\/p>\n<p style=\"text-align: justify;\">This measure not only hampers sale of productive units, but it also makes such sales almost unfeasible (clearly destroying employment) given the burden (in economic terms) it imposes on the potential acquirer.<\/p>\n<p style=\"text-align: justify;\">Spanish insolvency practice has evidenced that the sale of productive units is not only feasible, but also the best alternative to the subsidiary solution of an individual sale of debtor\u2019s assets in public auction (prior termination of employment agreements).\u00a0 Such direct transfer will enable the continuity of debtor\u2019s productive activity in hands of a new owner and the maintenance of all or part of the work force.\u00a0 In sum sale of productive units supports economic activity triggering future tax charges and social security contributions.<\/p>\n<p style=\"text-align: justify;\">Sale of productive units has been widely used in past years.\u00a0 Recent examples of the sale of production units can be found in the cases of Cubigel, Cacaolat, Sati and Dogi, whose businesses were transferred during the course of their respective insolvency proceedings.<\/p>\n<p style=\"text-align: justify;\">As stated above, RDL 11\/2014 (together with RDL 1\/2015) is currently being processed as draft bill, and several amendments to the final text have been submitted by the different political parties in the Spanish Parliament.\u00a0 It is yet to see the final drafting of the new draft bill to be approved and the consequences triggered by the measure implemented within future sales of productive units.<\/p>\n<p><strong>Karl H. Lincke<\/strong><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Three partial reforms of the Spanish Insolvency Law have already been approved by means of Royal Decree-Laws dated on March 2014, September 2014 and February 2015. The three main purposes sought are: enhancement of prepetition restructuring deals; extension of pre-insolvency refinancing agreements to composition agreements and offer  a second chance for individual creditors.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1064],"tags":[],"class_list":["post-4323","post","type-post","status-publish","format-standard","hentry","category-pubications"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Amendements to the Spanish Insolvency Law<\/title>\n<meta name=\"description\" content=\"The amendements to the Spanish Insolvency Law seek to facilitate restructurings and avoid the insolvency of companies.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/www.mariscal-abogados.com\/merry-go-round-of-amendments-to-the-spanish-insolvency-law\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Amendements to the Spanish Insolvency Law\" \/>\n<meta property=\"og:description\" content=\"The amendements to the Spanish Insolvency Law seek to facilitate restructurings and avoid the insolvency of companies.\" \/>\n<meta property=\"og:url\" content=\"http:\/\/www.mariscal-abogados.com\/merry-go-round-of-amendments-to-the-spanish-insolvency-law\/\" \/>\n<meta property=\"og:site_name\" content=\"Eurojuris Espa\u00f1a\" \/>\n<meta property=\"article:published_time\" content=\"2015-05-19T08:00:32+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-04-11T07:22:40+00:00\" \/>\n<meta name=\"author\" content=\"Mariscal &amp; 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