Lawmakers Enact Spanish Insolvency Law

Royal Decree Law 4/2014, intended to promote efficiency in Spanish insolvency proceedings, is officially enacted with some important updates.

The Spanish legislature has finally enacted Royal Decree Law 4/2014 (the March Reform). Now known as Law 17/2014, of 30 September (the Act), the new law implements urgent measures regarding refinancing and restructuring of corporate debt. In addition to formally enacting the March Reform, the Spanish legislature included a few updates that are worth highlighting.

Pre-Insolvency Communication -

As we anticipated in our Client Alert1 dated 18 March 2014, under the March Reform it appeared that the enforcement moratorium attached to the so-called 5bis communication would not apply to out-of-court enforcement actions. However, the Act clarified that the moratorium applies to both court and out-of-court enforcement proceedings, regarding both assets and rights. Therefore, it is now clear that the 5bis communication blocks any sort of enforcement for a period of up to four months, provided that the relevant assets/rights are deemed necessary for the continuity of the debtor’s business activities. One question that remains open is who shall determine if the relevant assets/rights are necessary for the continuity of the debtor’s business activities.