Major reforms in areas of insolvency and refinancing agreements
The Spanish Parliament passed a law on 19 September aimed at supporting entrepreneurs and the internationalisation of their businesses (Ley de apoyo a los emprendedores y su internacionalización, “LAEI”). The law brings in very significant changes to the Spanish Insolvency Act (Ley Concursal, “LC”) that affect refinancing agreements, among other aspects. The biggest changes are:
Substantial reduction in the backing from creditors required for court approval of refinancing agreements.
The LAEI makes a major change to the rules on court approval for refinancing agreements that meet the requirements laid down in the LC, in its fourth additional provision. Until now, agreements that met certain material requirements and of form and which had the backing of a minimum of 75% of financial creditors could cram down dissenting financial creditors (those not holding security) in terms of repayment schedules or debt maturities. Following the latest reform, the percentage of claims represented by financial institutions that have to support a refinancing agreement for it to be sanctioned by the courts is slashed to 55%, which gives it a great deal more practical application. It is worth recalling that the Spanish rules on court approval do not require, as in under jurisdictions (English Schemes of Arrangement and Chapter 11 bankruptcies in New York State), that agreements are signed by a minimum number of creditors, in addition to these minimum percentages.
This new rule will come into force on the day following publication of the LAEI in Spain’s Official Gazette (BOE).