The reform of the Spanish Insolvency Act
On 26 September 2022, the reform of the Spanish Insolvency Act implementing the EU Restructuring Directive entered into force.
The reform represents a major overhaul in the Spanish restructuring framework and a considerable upgrade to the previous restructuring toolkit, bringing it closer to a US Chapter 11 or an English scheme of arrangement with the introduction of concepts such as:
- class formation;
- the possibility of cross-class cramdown of existing shareholders and secured creditors;
- the absolute priority rule;
- the reverse rule;
- the "best interests of creditors" test; and
- the rejection of executory contracts.
This paradigm shift is accompanied by a number of ambitious measures aimed at enhancing the rescue culture and preventing debtors from attempting to detail restructuring proceedings with opportunistic actions. These measures include enabling creditors to present a restructuring plan or to stay an insolvency petition filed by a debtor.
See complete chapter at: Investing in Distressed Debt in Europe. The TMA Handbook for Practitioners, Second Edition. Globe Law and Business, 2023.