Help for indebted companies to refinance and avoid liquidation

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1. The law allows that, when a company tells the court it is negotiating a refinancing agreement, enforcement actions on assets needed for its business are suspended, if at least 51% of financial creditors support the talks. Public law claims are excluded.
2. It creates a special regime declaring refinancing agreements non-rescindible (they cannot be voided later) if they meet certain requirements, such as support from creditors representing at least three fifths of liabilities and a viability plan.
3. It regulates court approval (homologation) of refinancing agreements: a judge can validate the agreement and extend its effects to creditors who did not sign it, with majorities ranging from 51% to 75% of financial liabilities, plus special rules for creditors with real guarantees.
4. It reforms the insolvency administration: there will be a single administrator, registered in a new section of the Public Insolvency Registry, and their pay will follow a fee schedule that rewards quality and efficiency.
5. For two years, new cash inflows received by the company, including those from the debtor itself or related parties, will count as claims against the insolvency estate, which encourages new financing.
6. It adds tax benefits: debt-to-equity conversions are not taxed under Corporate Income Taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings. in certain cases, write-offs and deferrals are recognized gradually, and deeds containing write-offs are exempt from the Transfer Tax.

Who it affects

• Viable but heavily indebted companies: They can negotiate refinancing agreements with court protection and without enforcement on essential assets.
• Financial creditors (banks and other entities): They take part in the agreements and can be affected even if they do not sign, if the judge approves the agreement.
• Insolvency administrators: They must register in the Public Insolvency Registry and will be paid under a fee schedule that values work quality.
• Shareholders of debtor companies: If they refuse without reasonable cause to convert debt into capital, they can be found liable for the insolvency.
• Highly indebted SMEs and self-employed workers: The Government will promote a code of good practices to restructure their debt with credit institutions.

Words worth knowing

Refinanciación (refinancing)

Renegotiating debts to change terms, interest or amounts so they are easier to pay.

Quita (write-off)

Forgiveness of part of the debt: the creditor collects less than what was owed.

Espera (deferral)

Postponing debt payment to a later date.

Rescindible (rescindable)

That can be voided or undone by a judge; here the goal is that agreements cannot be voided.

Crédito contra la masa (claim against the estate)

A debt paid with priority during insolvency proceedings, which makes lending new money to the company more attractive.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries