Insolvency and Restructuring

• Financial situation analysis
• Independent business review (IBR)
• Monitoring, cash flow forecasting and optimisation. Advice on securing new financing: public funding and grants, working capital financing, bank financing, special situations funds, ABL funds
• Supporting the client in designing the restructuring plan
• Review of the debt refinancing plan: analysis of target debt, classes of debt, extension of bills of exchange, new guarantees, etc.
• Operational restructuring: interim management (CRO), strategic repositioning, working capital optimisation, cost restructuring plan
• Negotiations with financial institutions and suppliers
• Preparation of standstill agreements
• Notification of the commencement of negotiations with creditors (pre-insolvency application)
• Active participation in negotiations on restructuring plans
• Possibility of being appointed as Restructuring Experts
• Judicial approval of the restructuring plan

• Application for insolvency proceedings by the debtor or the creditor
• Monitoring of the entire insolvency proceedings
• Defence of the rights of financial creditors, employees or creditors of any other kind
• Directors’ liability: liability assessments
• Actions for restitution
• Assignments or purchases of claims
• Purchase of a company’s business unit
• Insolvency administration
• Handling of insolvency proceedings without an estate
• Second Chance: discharge of unsatisfied liabilities

Notification to the court of the start of negotiations (‘pre-insolvency’) (3 months from the date on which they take effect, to facilitate the negotiation of the plan)

• From the likelihood of insolvency to actual insolvency (2 years)
• Possible extension for a further 3 months

• Required if an extension of effects is envisaged
• Also if the judge deems it appropriate to safeguard creditors whose individual enforcement proceedings have been suspended
• At the request of the debtor or 50 per cent of the affected liabilities (exceptionally, 35%)

Selection of potentially affected creditors (excluding maintenance claims, claims arising from non-contractual liability or employment-related claims – except for senior management – and public claims, to a very limited extent).

• Notification to all creditors who may be affected (following selection).
• Formation of classes (secured creditors, public creditors, financial creditors, etc.) based on a common interest in accordance with objective criteria

Notice to all creditors who may be affected (subject to selection)

Formation of classes (secured creditors, public creditors, financial creditors, etc.) based on a common interest in accordance with objective criteria.

Negotiations between the debtor and creditors regarding its content and scope.

A favourable vote by 2/3 of the liabilities of each class, or 3/4 if the claims are secured, regardless of their amount.

Application for court approval, required if:

• Compulsory participation of creditors and/or partners or shareholders
• Protection against actions to set aside transactions
• Protection and priority for ‘fresh money’ (bridging finance and new financing)
• Termination of contracts in the interests of the restructuring

Possible challenge (or prior objection):

• Fixed-fee cases, depending on whether the parties are dissenting members of the class that approved the scheme, dissenting members of the class that rejected the scheme, or partners/shareholders
• Judgment dismissing the claim: not subject to appeal
• Judgment upholding the claim: effects limited to the appellant (no impact on others), subject to exceptions

Compliance with the restructuring plan.

The common phase begins with the declaration of insolvency proceedings; during this phase, the debtor’s assets are determined by means of an inventory of assets and rights, and the liabilities are determined by means of a list of creditors in which the claims are quantified and classified. Both the inventory and the list of creditors are drawn up by the insolvency administrators.

This is where the creditors’ arrangement is processed; for it to be approved, it requires both the creditors’ acceptance and court approval. The arrangement is one of the common ways in which insolvency proceedings can be resolved, and its terms usually include, amongst other possibilities, debt write-offs and deferrals.

This phase is initiated at any time at the request of the insolvent party, and the insolvency administrators may also request its initiation in the event of the cessation of professional or business activities. This phase will also be initiated if a proposal for an arrangement with creditors is not submitted or is not approved, or if, after the arrangement has been approved, it is breached. This phase represents the other standard route to the conclusion of the insolvency proceedings and involves realising the assets in order to pay the creditors from the proceeds.

This is a potential stage of insolvency proceedings designed to determine whether the debtor’s insolvency was caused or exacerbated by fraud or gross negligence; if so, the proceedings will be classified as ‘culpable’, and if not, as ‘fortuitous’. A ‘culpable’ classification has financial consequences for the parties concerned, as well as disqualification from managing assets and representing any person.

In the context of a business crisis, there are mechanisms that can be used to try to turn the situation around and overcome it without having to resort to insolvency proceedings, and our insolvency and restructuring lawyers can assist your company with these.

• Thus, comprehensive restructuring plans can be drawn up which may involve changes to assets, liabilities or equity, including transfers of assets, production units or the entire operating business, as well as any necessary operational changes, or a combination of these elements. Provided certain requirements are met, it is possible to obtain court approval for restructuring plans, which allows the effects of the plan to be extended to dissenting creditors and, in certain circumstances, even to shareholders, whilst providing protection against the plan’s termination in the event of insolvency proceedings.
• On certain occasions, when entering into negotiations with creditors, it is advisable for a debtor facing a business crisis to notify the court of the commencement of such negotiations, as this notification has significant effects, such as ensuring that, for a period of three months (which may be extended for a further three months), no enforcement proceedings may be initiated seeking the attachment of assets or rights necessary for the business or professional activity (or of other assets and rights where necessary to ensure the successful outcome of the negotiations), enforcement proceedings already underway will be suspended, and any application for compulsory insolvency proceedings filed by a creditor will not be accepted for processing.

• It constitutes a mechanism for the sale of companies in crisis and often represents the best way out of such a situation, as it allows business operations to continue and jobs to be preserved. It involves the sale of the company’s production unit at the very outset of insolvency proceedings, thereby avoiding the loss of value that any insolvency process entails.
• The recent insolvency reform that has been approved has formalised this arrangement, providing legal certainty for the carrying out of this type of transaction, which helps to preserve the business fabric and safeguard employment.