The imminent approval of the draft bill amending the Insolvency Act will bring about a complete overhaul of the Spanish insolvency system, particularly with regard to pre-insolvency instruments. The purpose of the restructuring plans, which will replace refinancing agreements, may be to change the conditions or structure of the debtor’s assets and liabilities, or its equity. The plans may also involve the transfer of assets, business units or of the whole company.
The entry into force of the Reform will afford new debt restructuring opportunities giving a more prominent role to creditors, who will be able to benefit from pre-insolvency instruments providing greater speed and flexibility, and offering a greater scope, as they allow the possibility of cramming down all types of creditors (financial, commercial and even holders of public law credits that meet certain requirements) and shareholders of insolvent companies.
The reform will mean a paradigm shift for shareholders given that, if certain conditions are met, creditors may be able to impose a restructuring plan on them.
If companies face the risk of insolvency, their directors, acting with the duty of diligence required of them, must adopt measures to avoid that insolvency or mitigate any harmful consequences, encouraging, if applicable, the negotiation of a restructuring plan.
Our experts summarize in this legal update the main new developments of the draft bill for creditors, shareholders and directors.