Spain’s insolvency measures agreed by RDL 16/2020

We briefly summarise the main insolvency and corporate measures therein agreed:

Several procedural measures have been agreed for the judicial activity to return back to its ordinary activity

Amongst others, it includes the following:

• Days 11 to 31 of August 2020 (traditionally non business days due to judicial holidays) will be considered business days for legal proceedings (excluding bank holidays, Saturdays and Sundays).
• Procedural deadlines (that had been suspended) will be reset once the suspension of deadlines is lifted.

Renegotiating creditors’ agreements, out-of-court payment agreements and homologated refinancing agreements is promoted

• Debtors’ may file a proposal to amend them until March 2021, even if, in the case of refinancing agreements, a year has not elapsed since the homologation of the previous one.
• Creditors’ applications to declare the breach of such (prior) agreements will be deferred, giving the opportunity to the debtor to renegotiate them during the deferral.

Deferral of the opening of the liquidation phase

• Debtor’s obligation to promote the liquidation of the company (when it becomes aware it will not be able to comply with the payments agreed) is deferred until March 2021 provided that the debtor files a proposal to amend the creditors’ agreement.
• No order to open the liquidation phase will be issued until March 2021.

New super-privileged credits following a new or amended creditors’ agreement

• In the event of failure to comply with a creditors’ agreement approved or amended since March 2020 until March 2022, financing granted to the debtor or arising from personal or in rem securities granted by anyone (including those granted by a specially related person to the debtor) will be qualified as super-privileged credits, provided they were set out in the original or amended creditors’ agreement.

Deferral of the debtor’s obligation to file for insolvency until 31 December 2020 (even if it has filed pre-insolvency communications)

• During this time, the debtor's application for voluntary bankruptcy will be admitted with preference, even if it is filed after other mandatory insolvency petitions promoted by creditors.
• If the debtor communicates negotiations to reach a refinancing agreement, payment agreement or an anticipated creditors’ agreement before 30 September 2020, the debtor’s general regime of the Spanish Insolvency Act will be applied.

No subordination of the financing granted by specially related persons with the debtor in certain cases (in case of insolvency proceedings declared since March 2020 to March 2022)

• Financing granted since March 2020 by specially related persons will not be classified as subordinated but as ordinary credits.
• During this time, the same classification will be given to credits in which a specially related person is subrogated as a consequence of having satisfied an ordinary or privileged credit.

Certain judicial procedures will be processed faster and on a preferential basis

Important corporate measure: Suspension of the obligation of compulsory legal dissolution due to losses

• Losses of 2020 financial year will not be taken into account for the obligation of promoting the compulsory legal dissolution of the company due to losses.
• However, if the financial result for 2021 shows losses that reduce the equity to less than half of the share capital, the current legal regulation will apply, that is, directors must call a shareholders meeting (or any shareholder may request it) within two months since the end of the financial year in order to ask for the dissolution of the company, unless the share capital is increased or reduced sufficiently.

See our Coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.