Keys affecting corporate insolvency law

The continuous development of insolvency protection in Spain has taken a new step with the Royal Decree-Law 5/2023 designed to strengthen protection of partners and creditors in restructuring operations. This regulatory framework is aligned with European Union directives and seeks to provide greater legal certainty in an increasingly globalized environment.

The reform responded to the context in which, according to the latest data from the Board of Registrars, in 2023 More than 81% of bankruptcies in Spain lacked significant assets, reflecting the need for legal solutions to proactively and effectively restructure companies. In addition, this regulation encourages the implementation of instruments such as restructuring plans, which are gaining popularity, especially among SMEs and strategic sectors.

Alejandro IngramA partner at Abencys, a law firm specializing in restructuring, notes the following:“This regulation represents an important advance in the regulation of restructuring in Spain, offering a more detailed framework and greater legal certainty for both partners and creditors in a context of increasing transnationalisation.”.

Greater protection for partners and creditors

One of the goals of the rule was to strengthen the rights of partners and creditors restructuring.

For partners it was introduced the right to alienate which allows them to sell their shares or holdings and receive cash compensation in certain cases, such as a merger or division. This right applies to both shareholders who voted against the proposed amendment and non-voting shareholders.

In the case of cross-border transactions, partners affected by the change in law can also exercise this right of disposal and They have up to two months to demand better compensation in court.

For creditors, the former “right of opposition” is replaced. system of adequate guarantees. That is, if creditors believe that these guarantees are not sufficient to protect their rights, they can request an extension, although they must demonstrate that the restructuring may jeopardize the preservation of their rights.

In cross-border operationsthis warranty right is supplemented by the forum of judicial jurisdiction in the country of origin of the company for two years after the transaction. This allows creditors to make claims and protect their rights against any change in jurisdiction.

Additional requirements for the structural change project

Presentation of the structural modification project is a key stage in operations of this type. The document must contain a detailed proposal that defines the conditions of the constructive transformation that is planned to be carried out. Until now, its presentation was mandatory only in case mergers, divisions, transformations and global transfer of assets and liabilities. However, the new rule states that it must also be represented in transformation operations due to changes in social type.

In addition, the Law establishes that the Project must be included a number of additional elements.

The presentation of structural modification projects is strengthened in this regulation with new requirements aimed at ensuring greater transparency and security for all stakeholders. now, Must include:

• A certificate confirming compliance with tax and social security obligations, providing a solid foundation of trust for operations.
• Details of specific economic compensations sent to partners who exercise their right of disposal, ensuring that their interests are protected during the transaction.
• A full description of the guarantees offered by the lender to cover possible consequences arising from the transaction, strengthening legal security and financial viability.

The report of the independent experts must now look more deeply into the analysis related to compensations and guarantees, ensuring that the process meets the highest standards of transparency and fairness. These provisions not only strengthen the protection of those involved, but also speed up the process, facilitating a more orderly and efficient transition to restructuring operations.