The dissolution of a company in Spain as a result of losses, in particular in times of an economic crisis, requires certain procedures to be followed. The Corporate Enterprises Act (LSC) highlights different methods of dissolving a company depending on what type of company it is.
The mechanism for legal ratifcation of the refinancing agreement was reviewed under the Real Decree-Law. One of its amendments included extending the effects to non-participating creditors (without collateral) and clarifying its scope via vis-Ã -vis creditors (with collateral). This mechanism is making the conversion of credits into equity loans much more efficient in Spain.
The dissolution of any capital-based company in Spain which incur into losses has reduced the equity amount significantly. It would be beneficial for partners of the companies to either contribute to offset losses or to increase the capital of the company by contributing and receiving shares in the company. However, this implementation can face some challenges due to the varied type of losses.
The Royal Decree-Law incorporates tax measures designed to enhance the legal pre-bankruptcy framework for refinancing agreements. These measures seek to facilitate consensus between debtors and creditors, maximizing asset value and minimizing or deferring liabilities to prevent insolvency.
On March 8, 2014, Spain introduced Royal Decree-law 4/2014, known as the New Reform, to enhance the Spanish Insolvency Law. Acknowledging the inflexibility in pre-insolvency and insolvency systems, the reform aims to boost refinancing discussions. It achieves this by establishing a more secure pre-insolvency environment, safeguarding the debtor’s key assets against enforcement by unsecured creditors.
Royal Decree-Law 4/2014 revamps regulations on Insolvency Law’s refinancing agreements, broadening their potential content and clarifying rules for extending effects to non-signatory or dissenting creditors. This allows involvement of creditors with tangible securities in certain circumstances.
Property executions necessary for a business activity cease for up to four months from the debtor’s initial communication with the court regarding negotiations with creditors. This pause aims to facilitate successful agreements and prevent the accumulation of executions by uncooperative creditors.
On December 13, 2013, the Spanish Council of Ministers adopted the Royal Decree on the Development of the Determined Aspects of Law 5/2012, of July 6, 2012, on Mediation in …
The Entrepreneur Support Act (Law 14/2013), enacted on September 27, 2013, introduced the bankruptcy mediator role. Published in the Spanish Legal Bulletin (BOE), it also brought partial modifications to the Insolvency Act (Law 22/2003) on July 9, 2003.
Half of the newly invested funds in refinancing lack insolvency privilege, requiring timely payment. This percentage temporarily rises to 100% for enhanced protection.
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