Insolvency Proceedings: Key Resources

JUDICIAL UNPAID DEBTS REGISTER:

We have compiled here the most important information to help you follow the steps to wind up a company in Spain, or to help it through a period of financial difficulty.

Supreme Court, Fourth Chamber (Employment), Judgment 772/2019 of 12 November 2019, Appeal No. 2693/2017

DRAFT REFORM OF THE INSOLVENCY ACT 2020:

Draft Royal Legislative Decree approving the consolidated text of the Insolvency Act.

PRE-INSOLVENCY PROCEEDINGS

Resolutions of the Commercial Court Judges and Court Clerks of Catalonia, seminar of 3 July 2014, on: III. Resolutions on the notification under Article 5bis following Royal Decree-Law 4/2014 — Pre-insolvency proceedings.

EMPLOYMENT MEASURES IN INSOLVENCY PROCEEDINGS

Resolutions of the Commercial Court Judges and Court Clerks of Catalonia, seminar of 3 July 2014, on: IV. Resolutions relating to employment disputes within insolvency proceedings: The Collective Dismissal Procedure (ERE) or collective dismissal of employees

THE INSOLVENCY ARRANGEMENT:

Estate claims (créditos contra la masa):

The fees of the lawyer and court representative who file the insolvency petition do qualify as estate claims. The amount may, however, be subject to moderation:

Supreme Court Judgment 11-02-13

Supreme Court Judgment 18-07-14

Order of payment priority:

Supreme Court, First Chamber (Civil), Judgment 4/2020 of 8 January 2020, Appeal No. 694/2017: The amount payable by FOGASA (the Spanish Wage Guarantee Fund) is applied first to post-insolvency estate wage claims and to those arising in the 30 days prior to the insolvency filing.

LIQUIDATION:

Article 155.4

4. The disposal at any stage of the insolvency proceedings of assets and rights subject to specially privileged claims shall be carried out by auction, unless, at the request of the insolvency administrator or the specially privileged creditor within the framework of a composition agreement, the court authorises a direct sale or transfer in payment or for the payment of the privileged creditor or a person designated by them, provided that the special privilege is thereby fully satisfied, or, where applicable, the remainder of the claim is recognised within the insolvency proceedings with the appropriate ranking.

If the disposal is carried out outside the composition agreement, the offeror must pay a price exceeding the minimum agreed and on a cash basis, unless the debtor and the specially privileged creditor expressly accept a lower price, provided that such disposals are effected at market value in accordance with an up-to-date official valuation by an accredited entity in the case of immovable property, and a valuation by a specialist entity in the case of movable property.

The judicial authorisation and its conditions shall be announced with the same publicity applicable to the auction of the encumbered asset or right, and if, within the ten days following the last announcement, a better offer is submitted, the court shall open a bidding process among all offerors and shall determine the security deposit to be provided.

Law 38/2011 amending the Insolvency Act partially modified Article 155-4 to allow the requirement for an auction as the method of disposing of assets subject to a security interest — at any stage of insolvency proceedings — to be waived by judicial decision. The judge may now authorise not only a direct sale, but also a transfer in satisfaction of debt or in payment to the secured creditor or to a person designated by that creditor. This amendment also prompted a corresponding change to Article 100.3 of the Insolvency Act regarding the content of a creditors' arrangement, as an exception to the general prohibition against proposals that involve the assignment of assets and rights to creditors in satisfaction or part-satisfaction of their claims.

The conditions for its application are: authorisation by the insolvency judge; either full satisfaction of the secured claim or recognition of any remaining balance as an insolvency claim with the appropriate ranking; and public announcement of the judicial authorisation and its terms with the same publicity required for an auction of the asset, in case a higher bidder comes forward. The correct answer is therefore the first option: a direct sale or assignment in satisfaction or part-satisfaction of debt to the secured creditor or to a person designated by that creditor is permissible, provided the conditions set out in the provision are met and at any stage of the insolvency proceedings.

A direct sale or assignment in satisfaction of debt is not limited to the arrangement phase — although it is also available in that phase (cf. Art. 100.3 of the Insolvency Act: Under no circumstances may a proposed arrangement consist of the assignment of assets and rights to creditors in satisfaction or part-satisfaction of their claims, except in the case provided for in Article 155.4) — but may take place at any stage of the proceedings. It is also available whether or not an arrangement is in place; however, in the latter case, in addition to the other conditions, the offeror must pay a price above the agreed minimum and in cash, unless the insolvent debtor and the specially secured creditor expressly consent to a lower price, provided that such disposals are carried out at market value as assessed by an up-to-date official valuation from an accredited body, in the case of immovable property. These obligations do not apply to the present case, however, since — as the question states — the insolvency proceedings are in the liquidation phase, not the arrangement phase.