Our firm has extensive experience in dealing with cross-border pre-insolvency and insolvency proceedings. Our lawyers are qualified to practice in various foreign law systems, being the Spanish jurisdiction one of them.

Advice to creditors:

• Defence creditor’s right on the recognition of his credits.
• Enforcement of guarantees.
• To ensure assets located in Spanish jurisdiction. (debt-collection proceedings).

Advice to debtors:

• Pre - bankruptcy agreements.
• Advicing on the liquidation process.
• Conducting negotiations with overseas creditors.

REFINANCING AGREEMENT (REFINANCIACIÓN)

Rescue (Convenio). The objective is to restructure the debt to allow the debtor to continue operating. If the debtor has requested to be rescued, an arrangement with its ordinary creditors must be reached and approved by the creditor at a creditors’ meeting, and by the court.

VOLUNTARY INSOLVENCY PROCEEDING (CONCURSO VOLUNTARIO)

According to the Spanish Legal System, in a voluntary insolvency proceeding, directors remain in their positions and the company continues to manage its assets, until the moment that the liquidation phase becomes open. However, they need the authorization form the administrador concursal (equivalent to Trustees In Bankruptcy in the UK) for any act related to their economic activity.

COMPULSORY INSOLVENCY PROCEEDING (CONCURSO NECESARIO)

Accordingly to Spanish insolvency regulations, a company must apply for insolvency within two months of the date on which it becomes aware, or should have become aware, that it is insolvent.

The directors may be responsible for the company’s debts if they were aware of the financial situation of the company but did not promote insolvency proceedings.

However, it should be noted that, due to the Covid-19 pandemic, the Spanish Government has approved exceptional measures to address the coronavirus crisis.

Following the said exceptional measures, a company which it becomes aware of its Insolvent situation, has not the obligation to promote its insolvency proceeding until 31 December 2021.

BREXIT: CROSS-BORDER INSOLVENCY PROCEEDINGS.

On 31 December 2020, the European Regulation on Insolvency Proceedings (EIR) ceased to apply in United Kingdom (UK), and the UK-European Union (EU) Trade and Cooperation Agreement (TCA) came into effect.

The TCA made no provisions for cooperation and recognition in cross-border insolvency proceedings. Thus, albeit technically there is no “No Deal Brexit”, we could say that the TCA means “No Deal” in all issues relating to insolvency proceedings.

Below, we analyse the landscape after Brexit.

The Recast Insolvency Regulation (EU) 2015/848 allocates jurisdiction, as the appropriate forum to open main Insolvency proceedings, where a debtor´s centre of main interests is, within an EU Member State, and provides automatic recognition of those proceedings by the courts of another EU Member State.

Proceedings started up to 31 December 2020

Pursuant to Insolvency Amendment Regulations 2019, the EIR continue to apply to insolvency proceedings opened before 31 December 2020. This means that the UK will continue to recognise insolvency proceedings commenced in any EU Member State, and it will receive reciprocal recognition of UK Insolvency proceedings where the main proceeding was started before 1 January 2021.

Proceedings started after 1 January 2021

Insolvency proceedings opened after 1 January 2021 will require an application to the Court of each EU Member State. The recognition process will therefore depend on the national law of such EU Member State. This represents a significant change in the way that proceedings with cross border interests are governed.

UK INSOLVENCY PROCEEDINGS: RECOGNITION AND ENFORCEMENT IN SPAIN AFTER 1 JANUARY 2021.

In order to obtain the recognition of UK insolvency proceeding started after 31.12.2020 in Spain (SP), an application to the Spanish courts must be made in the appropriate local jurisdiction within SP.

Certain rules to bear in mind are set down in Section 742 of the Recast Spanish Insolvency act.

Most notably:

• The jurisdiction of the court or authority that has opened the foreign Insolvency proceedings must be based on Centre of Main Interests (COMI) criteria.
• The judgment opening the foreign insolvency proceedings must not be contrary to Spanish public policy.

Once the UK insolvency proceeding is recognised by the Spanish Court, the insolvency officeholder can apply for measures to preserve assets located within SP.