Numerous operationally solvent companies also face excessive financial debt that burdens their outcomes and leaves them without recourse against creditors. In many cases, this leads to liquidation.
Frequently, the companies that are truly solvent from an operational point of view (capable of generating benefits during ordinary business) have turned out to be unsustainable from a financial point of view.
To address this situation, two alternatives exist: a company can either
- Liquidate entirely, or
- Restructure itself financially to make the remaining debt more bearable and allow maintenance of economic engagements.
Thus, the Royal Decree-Law 4/2014, from March 7, presents a framework for interpreting urgent measures concerning the refinancing and restructuring of entrepreneurial debt (Spanish Official Bulletin (BOE) of 08-03-2014). This Royal Decree-Law came into force on March 9, 2014, and its goal is to accelerate and make the processes of refinancing and restructuring flexible. The Royal Decree-Law 4/2014 attempts to guarantee the survival of companies that have accumulated excessive financial burden but are still operationally solvent. This is due to an organized and balanced system of agreements with creditors and a larger range of refinancing formulas.
This Royal Decree-Law includes a complete and new regulation of the refinancing agreements of the Insolvency Law that are subject to judicial approval, extending the possible content (no longer limited to an expectation agreement) and making clearer the rules concerning the extension of their effects to non-signatory or dissident creditors. Therefore, in certain circumstances, it will be possible to reach creditors who have real guarantees.
For more information on the restructuring of entrepreneurial debt in Spain,
