Vol 18 (2021) - Issue 3

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The Introduction of Pre-Pack Administrations in Spain

Synopsis
The Spanish regime for the sale of businesses subject to insolvency proceedings is, in general terms, complicated and full of formalities. Although these formalities protect creditors from sales at an undervalue, they also impact the speed at which such sales gain Court-approval, which often results in a number of sale opportunities being missed. As such, certain creditors may suffer where the quick-sale of the business as a going concern is projected to maximise returns.
Until the end of 2020, no pre-packaged sale (or 'pre-pack') had ever been Court-approved in Spain as the Recast Spanish Insolvency Law does not expressly regulate these sales. However, the Commercial Courts of Barcelona recently sanctioned the use of the preinsolvency period for a purpose other than negotiating with creditors: to prepare a pre-pack under the surveillance of a Court-appointed trustee or pre-pack administrator so that a binding offer on the business could be later approved within days of the insolvency opening.
In January 2021, the Commercial Courts of Barcelona approved a set of guidelines that determine the legal requirements for pre-packs. Courts in other regions, such as Malaga, have already replicated the Barcelona solution. Conversely, the Commercial Courts of Madrid, in their January 2021 guidelines, have sought to refine and speed up the already existing toolkit for the sale of businesses or business units but, unlike the Commercial Courts of Barcelona, have not considered introducing a Court-appointed trustee or pre-pack administrator prior to the insolvency opening.
It is expected that the transposition of the EU Directive on Preventive Restructuring Frameworks will formally introduce pre-packs and the appointment of a silent administrator in Spanish law and, therefore, settle the current debate in Spain.