Easier debt deals and sales for companies in insolvency

Automatic summary, not yet reviewed

1. It limits the special priority of secured credits to the real value of the security, calculated by subtracting from the asset's value the debts with higher priority and a 10 percent for enforcement costs.
2. It gives voting rights in the creditors' meeting to those who buy credits after the insolvency is declared, except for parties closely linked to the debtor, who become subordinated and lose their vote.
3. A plan can now impose debt reductions above 50 percent or payment deferrals over five years with 65 percent of ordinary debt, and can bind priority creditors with 60 or 75 percent majorities within their own class.
4. It makes it easier to sell business units of the insolvent company: the buyer takes over contracts and licenses and is not liable for prior debts, except in special cases such as Social Security or workers.
5. It creates an online portal on the BOE to help sell companies in liquidation, and a monitoring commission for refinancing practices.
6. Mortgage debtors can appeal when their objection to foreclosure is rejected on the grounds of an abusive contract clause.

Who it affects

• Companies in insolvency proceedings and their creditors: Their plans can include larger debt reductions and deferrals, and their security is valued at its real worth.
• Investors and buyers of insolvent companies: They can buy credits with voting rights and acquire business units free of prior debts.
• Workers of insolvent companies: Continuity of the business and jobs is favored.
• Public administrations and public service concession companies: They can file combined plan proposals and are excluded from payments in kind.
• Mortgage debtors in ongoing foreclosures: They get one extra month to appeal if their objection was rejected over abusive clauses.

Words worth knowing

Concurso de acreedores (insolvency proceeding)

A court process for a company or person that cannot pay its debts, which orders how creditors are paid or assets are liquidated.

Convenio concursal (creditors' agreement)

An agreement between the insolvent company and its creditors to cut debts (quita) or defer payments (espera) and avoid liquidation.

Quita (debt reduction)

The percentage of the debt the creditor forgives and will not collect.

Espera (payment deferral)

A postponement of debt payment to a future date.

Unidad productiva (business unit)

A set of assets, contracts and staff able to keep operating on its own, which can be sold as a whole.

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