Keys to the reform of the new Insolvency Law

What is the impact of the reform of the Insolvency Law on Spanish companies? What is new in the new reform of the Insolvency Law? The new Insolvency Law and the end of the pandemic aid has led Spanish companies to the need for restructuring. At Gentile Law, specialists in mercantile law and business advice, we tell you everything you need to know about the key aspects of the insolvency reform.

Therefore, at Gentile Law, specialists in insolvency law, we want to inform both clients and the business community about the new restructuring measures that many companies will be forced to take, especially those facing an uncertain economic environment and those that have been receiving public aid during the pandemic.

What is new in the Insolvency Law?

What are the main novelties of the insolvency reform? The new insolvency law aims to modernise the legal framework for the restructuring and liquidation of financially troubled companies. It promotes early restructuring and avoids liquidation. It also introduces new negotiation mechanisms and out-of-court payment agreements to facilitate voluntary debt restructuring. For more information on this topic, please see our article on legal developments in 2023 in Commercial Law.

These measures are intended to make it easier for companies with financial problems to restructure and avoid liquidation, which will result in the new insolvency administration regime having a more active role in the management of the company in crisis, with the aim of improving the viability of the company.

What are the advantages of the new insolvency law?

The changes in the Insolvency Law provide greater legal flexibility for companies to restructure and adapt to a changing business environment, so companies that cannot generate enough cash to pay their debts or maintain their economic activity, may have to consider restructuring as an option to ensure their survival.

At Gentile Law, insolvency and restructuring lawyers, we are prepared to assist companies with their restructuring needs and provide expert advice on navigating the legal framework of the new insolvency law.

What happens to private equity in the new Insolvency Law?

With the closure of public financing, private capital is expected to play a more relevant role in the market. The lawyers who are experts in advising companies point out that companies have been overfunded and that now the ball is in the banks` court, who must make decisions about the financial structure of these companies.

With interest rate hikes, it is expected that the restructuring market will be reactivated in the second half of the year, as companies will need to review their structures to ensure their sustainability and refinance their debts. In this context, private capital will have an investment opportunity in companies that require financing and restructuring.

It is important to note that although private capital can be an interesting alternative for companies in financial difficulties, it can also have a negative impact on the business structure. In this sense, it is necessary to regulate this type of financing and ensure that it is carried out responsibly and sustainably.

What is the objective of the reform of the new Insolvency Law?

It is true that there are similarities and differences between the current situation and the one in 2008. However, many experts agree that anticipation will be the key to facing the coming months. In this sense, the new Insolvency Law is a total change that promotes anticipation in decision-making and more comprehensive approaches in restructuring processes.

The Insolvency Law aims to encourage companies to make anticipatory decisions to avoid insolvency situations, and to tackle the crisis from a more comprehensive approach, which does not focus solely on the debt part, but also the operational and strategic aspects of companies.  It is important to note that it is necessary to put these new legal changes into practice for them to be effective.

Gentile Law, expert lawyers in the new Insolvency Law

As the entry into force of the new Insolvency Law in Spain and the end of public assistance generate an atmosphere of uncertainty in the market, At Gentile Law, as experts in the new Insolvency Law, we are ready to assist our clients navigate these difficult times.

Gentile Law, emphasizes the importance of anticipation and the search for integral and sustainable solutions to address the challenges currently facing the market. Collaboration between companies, investors, and regulatory authorities may be the key to ensuring stability and sustainable growth in the future.

In this regard, it is important to avoid repeating the mistakes of the past, such as focusing exclusively on financial debt, when in many cases more drastic solutions are required. The current economic situation is expected to worsen in the coming months, with a decrease in consumption demand and the purchase of housing affecting the economic situation of families. As for companies, their situation is considered regular, but a decrease in productive investment and job creation is expected in the coming months.

At Gentile Law, experts in mercantile law and advising Spanish and international companies, we understand the importance of adopting a proactive approach to these challenges, and we stand ready to provide our clients with the legal and strategic advice necessary to navigate this complex and evolving landscape. We are committed to working collaboratively with our clients to anticipate potential problems and to develop comprehensive and sustainable solutions that promote stability and growth.

How can the economic situation in Spain affect my business? What impact does the crisis have on my personal finances? What impact does the reform of the Spanish Insolvency Law have on Spanish companies? At Gentile Lawwe have solid experience in providing mercantile advice to both Spanish and international companies, startups, SMEs and family businesses.

Marta Batalla Eguidazu 

martabatalla@gentile.law

+34 91 435 45 19