Spain’s Insolvency Law safeguards creditors in instances of director misconduct or negligence during company insolvency, ensuring confidence in the legal framework’s protection for creditors.
This article delves into crucial aspects of insolvency and debt collection proceedings in Spain. It highlights the practical challenges faced by economic actors, emphasizing the decision-making process between liquidation and reaching agreements with creditors, which can be influenced by the type of creditor involved. The article also briefly touches on the limited effectiveness of insolvency proceedings in family debt cases.
In Spain, the Insolvency Law 22/2003 underwent recent reform with Royal Decree Law 3/2009 (March 27), responding to the global economic crisis. Originally enacted during economic prosperity, the law’s deficiencies over six years prompted modifications in the reform.
In recent years, Spain has witnessed a surge in leveraged buy-outs (LBOs), where a majority share of a target company is acquired using loans guaranteed by its assets or repaid through its cash flows. In some cases, the acquisition cost is deferred and paid by the target company itself, often through a merger with a special purpose vehicle created by the investor. This strategy shifts the burden of the acquisition cost to the target company.
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