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Royal Decree-Law 4/2014 of 7th March introduced important changes to the Spanish Insolvency Act, principally orientated to facilitate company debt restructuring operations and particularly to transforming debt into capital of the company in financial crisis.


(a)    During the term set forth for the negotiation of debt restructuring, article 5 Bis of the Insolvency Act now allows the suspension of judicial  enforcements on assets, which are necessary for the continuity of the business activity of the debtor. This affects procedures for the enforcement of  credits guaranteed by mortgages on assets and rights.

(b)    Refinancing agreements (article 71.2 Bis) shall not be cancellable provided that they do not entail a reduction in the rights of creditors who do not  intervene in such agreements.

(c)    Article 56 is modified, in order to limit the number of cases of suspension of enforcement on assets subject to guarantees in rem. Only assets,  which are necessary for the continuity of the business or professional activity of the debtor, shall be affected. Financing asset acquisitions via agreements allowing the debtor to keep the asset in order to continue functioning shall also be permitted.

(d)    The law grants the classification of credit against the aggregate insolvency assets to those credits arising as a consequence of refinancing  agreements or agreements made by the debtor or especially related persons to the debtor involving the inflow of fresh cash. Share capital  increases are excluded. This classification is temporary and may be granted during 2 years following the entry into force of this Royal Decree-Law.

(e)    The commercial court approval of refinancing agreements shall require said agreements to have been signed by creditors who represent at least a  majority of 51% of the general financial liabilities of the debtor, this percentage not including creditors of regular commercial operations and public  creditors (previously 75% of credits held by financial liabilities was required).

(f)     Those who become partners / shareholders pursuant to debt capitalisation operations by way of a refinancing operation shall not be considered as  persons especially related to the debtor, and therefore, their credit shall not be considered subordinated.

(g)    The effects of a refinancing agreement may be extended in the pre-insolvency phase to those creditors with a guarantee in rem.

(h)    The majority needed to transform debt into share capital of the insolvent debtor company shall be lowered.

(i)     The Corporate Tax Act is modified to the effect that discharge of debts and stay of payments procedures derived from the Insolvency Act shall be  allocated to the tax base so that financial expenses derived from the debt may be registered.

(j)     Exemption from tax on capital transfers and documented legal acts corresponding to public deeds concerning the discharge of debts and stay of  payments procedures, loan reductions, credits and other obligations in order to facilitate refinancing or payment agreements.


The amendment is aimed at reinforcing the effects of article 5 Bis, which are related to the pre-insolvency stages, temporarily suspending the right to bring executable actions by creditors holders of guarantees in rem on the assets of the company in financial crisis.

It also means facilitating refinancing operations prior to a declaration of insolvency, protecting creditors who decide to support the company in financial crisis and reducing the quorum necessary for the approval of refinancing agreements.

However, the amendment also poses problems regarding the limitation to the rights of credit with guarantees in rem, which become subordinated to the creditors’ agreement. Moreover, those assets considered to be “necessary” for the continuity of the business activity of the insolvent company have not been clearly defined and need to be specified by case law.

For more information, please contact:

Eduardo VILÁ:

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