The Royal Decree Law 4/2014 of 7 March significantly amends the Spanish Insolvency Law, ostensibly in favor of refinancing agreements.

With the approval of Royal Decree Law 4/2014 of 7 March on urgent measures regarding refinancing and restructurings of corporate debt (the New Reform) Spanish lawmakers have taken yet another step in their continuing efforts to improve the Spanish Insolvency Law. The New Reform principally aims to allow operationally viable companies to comprehensively transform their unsustainable financial burden into sustainable debt, whilst respecting the rights of creditors to maximize the recovery of their debt from these companies. In particular, bearing in mind that the vast majority of the Spanish insolvency proceedings end in liquidation, the ultimate goal of the New Reform is to eliminate the obstacles in the Spanish legal system that currently hamper the success of many pre-insolvency refinancing agreements and restructurings — obstacles that often force through unnecessary liquidations.

In a nutshell…

The New reform came into force on 9 March 20142 bringing drastic changes and, even, breaking with some fundamental Spanish law general principles. Given how Spanish courts have historically reached some controversial conclusions in response to reforms, needless to say this New Reform will generate plenty of discussion. We discuss the following 10 most important implications in more detail below.