In the Spanish legal system, exist the followings forms of security over immovable and movable property:

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1 The Legal 500 & The In-House Lawyer Comparative Legal Guide Spain: Restructuring & Insolvency Country Author: Jausas This country-specific Q&A provides an overview of the legal framework and key issues surrounding restructuring and insolvency in Spain. This Q&A is part of the global guide to Restructuring & Insolvency. For a full list of jurisdictional Q&As visit cturing-insolvency/ The Legal 500 Agustí Bou, Partner abou@jausaslegal.com The Legal What forms of security can be granted over immovable and movable property? What formalities are required and what is the impact if such formalities are not complied with? In the Spanish legal system, exist the followings forms of security over immovable and movable property: Mortgage property: It is regulated by article 1857 and subsequent of the Spanish Civil Code ( SCC ) and article 104 and subsequent of the Spanish Mortgage Act ( MA ). In order to establish a mortgage property it is required: The mortgage must guarantee a legal obligation (art SCC). The encumbered immovable property must be property of the debtor (it also exists the non-debtor mortgagor) (art SCC). The mortgagor has not restrictions about his free disposal of the immovable property. Or

2 he has the appropriate authorization (art SCC). It is mandatory to register the mortgage property in the Property Register. If the mortgage property is not registered, the mortgage will not exist (art SCC). Antichresis: It is regulated by article 1881of the SCC. This form of security implies that (i) the debtor or the owner of the immovable property has to make a profitable use of the asset and that (ii) the debtor has to allocate the obtained results to pay to the creditor. The results will be firstly destined to satisfy the interests and then the capital. In order to establish a chattel mortgage it is required: Signature in a public deed before Public Notary. If the antichresis is not registered, it will not produce effects against third parties. Chattel mortgage: It is regulated by the Law on Chattel Mortgages and Non-dispossessory Pledges ( CMNDP ). It is only possible to establish this type of mortgage over (i) commercial establishments, (ii) cars and others motor vehicles, tram and private carriage, (iii) aircraft, (iv) industrial machinery and (v) Intellectual and/or Industrial Property (art. 1 and 12 CMNDP). In order to establish a chattel mortgage the following requirements must be fulfilled: It must be signed in a public deed before Public Notary (art. 3 CMNDP). It is mandatory to register the chattel mortgage in the Moveable Property Registry (art. 3 CMNDP). If the chattel mortgage is not registered, the creditor shall not enjoy of his rights as a creditor. Non-dispossessory Pledges: It is only possible to establish this type of pledges over (i) pending fruits and harvests expected within the agricultural year in which the contract is concluded, (ii) individual fruits and the products of the misuse, (iii) animals, their offspring as well as their products, (iv) machines and tool, (v) merchandise and raw materials, (vi) objects of artistic and historic value, (vii) credits, license, concession, administrative subsidiaries and (viii) credit claim (art. 52, 53, 54 CMNDP). In order to establish a Non-dispossessory Pledges the following requirements must be fulfilled: It must be signed in a public deed before Public Notary (art. 3 CMNDP).

3 The pledge over bank transactions could be established by commercial policy. It is mandatory to register the chattel mortgage in the Moveable Property Registry (art. 3 CMNDP). If the chattel mortgage is not registered, the creditor shall not enjoy of his rights as a creditor. Pledges: It is regulated by article 1857 and subsequent of the Spanish Civil Code. It is only possible to establish this type of pledges over any asset subject to be possessed and commercialized. In order to establish a pledge the following requirements must be fulfilled: The pledge has to guarantee a legal obligation (art SCC). The encumbered object shall to be property of the debtor (it also exists the non-debtor mortgagor) (art SCC). The mortgagor has not restrictions with respect to the free disposal of the immovable property; or counts with the appropriate authorization (art SCC). It is not mandatory register the pledge in the Moveable property registry. If the pledge is not registered, it will not produce effects against third parties. The owner of the encumber object must deliver the possession to the creditor or a third party (art SCC). According to article 90 of the Spanish Insolvency Act ( SIA ) all the credits guaranteed by these securities shall be qualified as claims with special preference. However, it is necessary that these securities have been established fulfilling the mandatory provisions that are required by the correspondent specific Act. If the security does not respect the requisites established by the applicable Act, the credit will not be qualified with a special preference. As a consequence, the credit will not enjoy the benefits of this condition. 2. What practical issues do secured creditors face in enforcing their security (e.g. timing issues, requirement for court involvement)?

4 First of all, it shall be demonstrated that the credit complies with the mandatory provisions that the applicable Act requires to establish the security. Once the credit is qualified as a claim with special preference, in order to execute the encumbrance, the credit will have to follow the insolvency rules. It means that, if before the declaration of the insolvency proceeding ( DIP ) the creditor had initiated an execution, the creditor could only continue it, if the encumbered asset is declared as an asset which is not necessary to continue with the debtor s professional or business activity (art. 56 SIA). On the other hand, if the asset is declared as a necessary asset to continue the debtor s professional or business activity, the creditor shall wait to the approval of a composition or the liquidation phase is commenced. By contrast, if after the DIP the creditor has not initiated an execution, the creditor will be able to initiate an execution upon approval of a composition where the credit is not affected by it or once it has elapsed 1 year since the DIP without the liquidation phase was commenced. Perhaps, this execution will be developed in the same commercial court where is processing the Insolvency proceeding (art. 56 SIA). As a conclusion, a creditor with a preference claim has to bear the same timing (phases) as the others creditors. Nevertheless, these creditors will be satisfied by the liquidation of the encumbered asset either in the insolvency proceeding or in an execution proceeding. 3. What is the test for insolvency? Is there any obligation on directors or officers of the debtor to open insolvency procedures upon the debtor becoming distressed or insolvent? Are there any consequences for failure to do so? As a subjective premise, natural persona, legal persons and inheritance pending to be accepted are able to apply for the DIP (art. 1 SIA). On the other hand, as an objective premise, it is required that the debtor is insolvent and that the debtor will have this consideration when he is not able/ will not be able to fulfill (current or imminent insolvency) regular and punctually his enforceable

5 obligations (art.2 SIA). When the debtor is in this situation, directors or boards of directors must to apply for the DIP within the two months following the date of having known, or should have known his state of insolvency (art. 5 SIA). In addition, shareholders, partners, members or parties who are personally liable for the debtor are also entitled to apply for the DIP (art. 3 SIA). In case that the directors or boards of directors do not apply for the DIP, the insolvency proceeding could be qualified in the classification phase as tortious (art. 164 y 165 SIA). Consequently, the sentence of classification of the insolvency proceeding will determine the persons affected by the classification sentence. These persons could be condemned to the prohibition to administrate the assets of others for a period of two to fifteen years, as well as to act on behalf to any person during the same period (art SIA). Moreover, directors or boards directors could be condemned to pay totally o partially the credits that have not been satisfy by the liquidation of the assets (art SIA). 4. What insolvency procedures are available in the jurisdiction? Does management continue to operate the business and/or is the debtor subject to supervision? What roles do the court and other stakeholders play? How long does the process usually take to complete? The Spanish legal system regulates different insolvency procedures they are been classified according to the following parameters: Depending on the subject that applies for the DIP, the insolvency procedure shall considered as (art. 22 SIA): Voluntary: when the debtor submits the application for the DIP. Necessary: when who submits the application for the DIP is any creditor.

6 Depending on the complexity forecast of the insolvency proceeding (art SIA): Abbreviated: when the court considers, from the available information, that the insolvency proceeding does not have special complexity. It will not have special complexity when the following circumstances are met (i) if the submitted by the debtor includes less than 50 creditors, (ii) when the initial estimation of liabilities does not exceed 5 million and (iii) when the valuation of the assets and rights does not reach 5 million. Ordinary: When, from the information available, the insolvency proceeding could be complex and the requisites of the compulsory proceeding are not reached. Although the company has been involved in an insolvency proceeding, the business shall continue its activity, even during the liquidation phase. Nevertheless, during the common phase, directors or boards of directors will have limited rights of administration and disposal of the assets of the debtor. The business activity shall be supervised by the insolvency administrator ( IA ) (art. 33.1, 13º and 48.3 SIA). Once the liquidation phase is declared, the rights of administration and disposal of the assets of the debtor shall be intervened. Therefore, the unique subject that will be able to administrate and dispose the assets of the debtor will be the IA (art º, 48.3 and 145 SIA). In the course of the proceeding, the court shall ensure the compliance of the SIA during the proceeding in order to guarantee the creditor s rights. On the other hand, the stakeholders only will take a part in the proceeding, in case that the debtor submits a composition proposal (art. 99 and subsequent SIA), since the stakeholders will have to vote it. Finally, the duration of the process will depend on the court in which the action is brought and the complexity of the proceedings. However, on average, insolvency procedures last 3 years until finalization of the judicial proceedings. 5. How do creditors and other stakeholders rank on an insolvency

7 of a debtor? Do any stakeholders enjoy particular priority (e.g. employees, pension liabilities)? Could the claims of any class of creditor be subordinated (e.g. equitable subordination)? The SIA qualifies the credits according to the following classes: Credits against the estate: these are the credits that accrue after the DIP and which will be satisfied in accordance with their maturity. As an example: claims of the worker s salaries of the last 30 days of work prior to insolvency proceeding being declared or the court costs and expenses arising from assisting and representing the debtor will be classified as credits against the state (art.84.2.sia). Insolvency credits: these are the credits that accrue before the DIP. Credits with special preference: this type of credits are those that are granted by an immovable or movable property. These credits shall be satisfied in the liquidation of the encumbered asset. Only in the event that exists excess amounts after the credits with especial preference have been paid, this excess will be destined to pay others credits (art. 90 SIA). Credits with general preference: Article 91 of SIA establishes the cases when certain credits will have this consideration, for example the relevant amounts for tax and Social Security withholdings owned by the insolvent debtor in fulfilment of legal obligation. This credits will be satisfied once the credits against the estate are be paid. Subordinated credits: article 92 of the SIA establishes the cases when credits will be qualified as subordinated, for example, the credits whose ownership corresponds to a person with a special relation with the debtor or claims for fines and other monetary penalties. These credit only will be paid once all the credits will be satisfied. Ordinary credits: credits that cannot be classified according to the above criteria, will be classified as ordinary credits. 6. Can a debtor s pre-insolvency transactions be challenged? If so, by whom, when and on what grounds? What is the effect of a successful challenge and how are the rights of third parties

8 impacted? Article 71 of SIA regulates the reintegration action. This legal action aims to revoke acts that are detrimental to the aggregate assets of the debtor or the acts that distort the par condition creditorum performed by the debtor within the 2 years before the date of DIP. Once the insolvency proceeding is initiated, this detrimental acts, may be revoked, even though there may not have had with a fraudulent intention. The SIA determines some cases when the presumption of detriment accepts evidence to contrary and when the presumption is not rebuttable (art and 71.2 SIA). However, there are some acts that under no circumstances can be revoked, as the ordinary acts of the professional or business activity of the debtor performed under normal conditions (art SIA). The reintegration actions shall be processed by an insolvency procedural plea (art SIA) and it could be initiated in any phase of the insolvency proceeding. Regarding the legitimacy of the action, only the IA will be legitimized to file a reintegration actions. Nonetheless, the creditors that have required to IA in order to he file a revocation action, they will be entitled to exercise this action if the IA do not apply for it within the 2 month following the requirement (art SIA). As a consequence of the revocation of these acts, the appealed acts shall declared ineffectiveness and the involved party shall be condemned to return the service or goods which were thereof with their fruits and interests (art. 73 SIA). The returned good shall liquidate accordance to the liquidation plan. 7. What form of stay or moratorium applies in insolvency proceedings against the continuation of legal proceedings or the enforcement of creditors claims? Does that stay or moratorium have extraterritorial effect? In what circumstances may creditors benefit from any exceptions to such stay or

9 moratorium? The Judge of the insolvency proceeding has the jurisdiction in exclusive and exclusion. It implies that the Judge will have the competency to judge all the procedures that affect the estate of the debtor. Inclusive procedures that are developing in other countries if the applicable law established it (art.8 SIA). Regarding to the others initiated proceedings, the declaratory procedures and the arbitral proceedings where the debtor is a party, that there are in process at the moment of the insolvency proceeding being declared open, shall continue to be substantiated before the same court as that hearing such until their conclusion (art. 51 and 52 SIA). Likewise, the enforcement and coercive collection could continue until approval of the liquidate phase, administrative enforcement proceedings in which payment orders have been handed down and labor enforcements in which insolvent debtor s aggregate assets has been seized may continue, if prior to the date of the declaration opening the insolvency proceedings, but as long as the assets subject to seizure are not necessary to continue the debtor s activity (art. 55 SIA). And the execution proceeding that no affect necessary assets to continue the debtor s activity, they could be continues until its conclusion. On the other hand, when the execution proceeding affect necessary assets to continue the debtor s activity, the procedure shall be stayed. However, it could be restarted if (i) the encumbered asset is declared as an asset which is not necessary to continue with the debtor s professional or business activity (art. 56 SIA), or (ii) it is adopted a composition that no affect the creditor, (iii) or 1 years has passed since the DIP without the opening of the liquidate phase (art. 56 and 57 SIA). 8. What restructuring and rescue procedures are available in the jurisdiction, what are the entry requirements and how is a restructuring plan approved and implemented? Does management continue to operate the business and/or is the debtor subject to supervision? What roles do the court and other

10 stakeholders play? The SIA distinguishes between the pre insolvency restructuring agreement and the insolvency restructuring agreement. Firstly, as a pre insolvency restructuring agreement, the debtor in order to avoid the DIP, before to apply for it, he could try to get an agreement with all the creditors (art. 5 bis SIA). The attempt to get an agreement must be made during the period that has the debtor to apply for the DIP. However, the parties have 3 month to achieve it. In the course of the negotiation, the creditors will not be able to initiate to a new proceedings that could affect the debtor s estate. Likewise that the initiated proceedings will be stayed. In case that by this negotiation getting an agreement, it will be file to the court in order to be approved. Otherwise, the debtor will have to inform to the court that it has been impossible to get an agreement, entailing that the debtor or any creditor to apply for the DIP. It happen the same in case that the debtor will not accomplish with the agreement. Secondly, the SIA allows that the debtor agree a refinancing agreement with the banks before the DIP. This agreement is regulated in article 71 and the Additional provision nº4 of SIA. It has the same purpose, application and functioning than the agreement with all the debtors, the differences consist of the parties involved in it and that it requires more requirements than the agreement with all the creditors. Finally, as an insolvency restructuring agreement, the debtor or creditors could file a composition proposal during the insolvency proceeding (art. 100 and subsequent SIA). This proposal could be file jointly with the request for the DIP or in the composition phase. The debtor or any creditor could file the written proposal incorporating the following requirements (art. 99 and 100 SIA): It must to be signed by the debtor, or the creditors or their respective representatives with sufficient power of attorney. Contain acquaintances and moratoriums or both, as well as alternative proposals for all or some creditors. Include a payment scheme that details the resources foreseen for fulfilment. Once the composition proposal has been file, it will be notified to all the creditors

11 together with a valuation report made by the IA. Then the court shall convene a shareholder meeting in order that the composition will be approved by the creditors and then by the court. If the composition is approved, the debtor quarterly will have to file a compliance report (art. 139 SIA). On the contrary, if the composition is not approved or breached, the debtor, the IA or any creditors shall apply for the opening of the liquidate phase (art. 140 SIA). 9. Can a restructuring proceeding release claims against nondebtor parties (e.g. guarantees granted by parent entities, claims against directors of the debtor), and, if so, in what circumstances? The SIA does not regulate any cases where the claims against non-debtor parties are released, as could be a bond or non-debtor mortgagor. In case of bonds, the SIA and SCC only establish that the guarantor shall enjoy the same befits as the debtor. Consequently, if the creditor accepts an acquaintances, moratoriums or both, the guarantor will enjoy them as well (art and 135 SIA and art SCC). Regarding the non-debtor mortgagor, the guaranteed credit will not be qualified as a credit with special privilege because the encumbered assets do not take a part of the debtor s estate. If the creditor wants to satisfy his credit, he shall initiate a separate executive proceeding of the insolvency proceeding. 10. Is it common for creditor committees to be formed in restructuring proceedings and what powers or responsibilities to they have? Are they permitted to retain advisers and, if so,

12 how are they funded? The SIA does not regulate the formation of a creditor committees. Existing contracts and assets / business sales The DIP cannot be a cause to terminate a contract (art SIA). The contract with pending obligations for both parties shall be in force after the DIP. Likewise, the contracts where at the moment of the DIP, one of the parties had entirely fulfilled his obligations while the obligations of the others party is pending, the debtor s credit shall be included in the aggregate assets or liabilities of the insolvency proceeding (art SIA). Even if there are causes to terminate the contract, the court could decide not to terminate the contract in interest of the insolvency proceeding (art and 61.3 SIA). On the other hand, the labor contracts and contracts with public administration are regulated by others specific rules (art. 64, 65, 66 and 67 SIA). The SIA only allows the set off if previously to the DIP, the credit fulfills the requirements that establish the article 1196 of SCC (art. 58 SIA): Both subject has to accomplish with the obligation and the parts mutually are debtorcreditor. Both debts consist of an amount of money, or if it consist of a consumable asset, it has to be of the same sort and quality. Both debts has to be matured, liquid and enforceable. Both debts are not retained. Regarding the retention right, once the insolvency proceeding is initiated, the exercise of retention on assets and the right of integration in the debtor s estate shall be suspended. If at the conclusion of the proceeding, such assets or rights have not been disposed of, they shall be immediately be returned to the holder of the retention right

13 whose claim has not been fully settled (art. 59 SIA). The assets that integrate the debtor s estate shall be liquidated according to the rules established by the liquidation plan. Notwithstanding, the assets that are considered as merchandise could be sold during all the development of the proceeding in the course of the regular business activity of the company (art. 148 and sequence SIA). If the IA wants to sale any other assets than merchandise assets outside the liquidate phase, it will be necessary to apply to court for an authorization (art. 43 SIA). Regarding the sale of the entire business, it could be done in any phase of the insolvency proceeding. However, in the liquidate plan shall contain the requirements that have to accomplished the offer to propose to sale the entire business. In any case, the proposal has to be in written and shall include viability plan (art. 100 and 146 bis SIA). All hoisting of the foreclosure has to be authorized by the creditors. However, in a Spanish insolvency proceedings the unique seizure that could be lifted are the tax foreclosure in case when the maintenance severely hinders continuity of the business activity (art SIA). According to the SCC (art and subsequent), it is allowed to credit bidding. Once the credit has been sold, the new creditor shall subrogate in the position that occupied the previous creditor. As for the pre-packaged sales, the Spanish legal system does not regulate pre-packaged sales. Liabilities of directors and others As we have indicated in question number 3, when the debtor is insolvent (when he considers that is not able/ will not be able to fulfill regular and punctually his enforceable obligations art.2 SIA) directors or boards of directors must apply for the DIP within the two months following the date of having known, or should have known his state of insolvency (art. 5 SIA). Furthermore, shareholders, partners, members or parties who are personally liable for the debtors are also entitled to apply for the DIP (art. 3 SIA).

14 In case that the directors or boards of directors do not apply for the DIP could be qualified, in the qualification phase, as a tortious (art. 164 y 165 SIA). Consequently, the sentence of classification of the insolvency proceeding will determine the persons affected by the classification. These persons could be condemned to the prohibition to administrate the assets of others for a period of two to fifteen years, as well as to act on behalf to any person during the same period (art SIA). Moreover, directors or boards of directors could be condemned to pay totally o partially the credits that have not been satisfied by the liquidation of the assets (art SIA). 11. Do restructuring or insolvency proceedings have the effect of releasing directors and other stakeholders from liability for previous actions and decisions? The restructuring or insolvency proceedings do not release directors and other stakeholders from liabilities for previous actions and decisions. Moreover, the SIA regulates that when a directors or stakeholders, before the DIP, have done acts with malice and serious fault that generated or aggravated the insolvency, the procedure could be qualified as tortious (art. 163 SIA). If these subjects are eventually declared affected by the sentence of qualification, they could be condemned to the prohibition to administrate the assets of others for a period of two to fifteen years, as well as to act on behalf to any person during the same period (art SIA), the loss of any right recognized in the procedure, to return the assets of the debtor, or may have received from the aggregate assets, as well as compensating the damage and losses caused. Furthermore, directors or boards of directors could be condemned to pay totally o partially the credits that have not been satisfy by the liquidation of the assets 8art SIA). In addition, during the insolvency proceeding, the IA is entitled to apply for initiating a labiality action against directors or boards of directors (art. 48 SIA). The result of this sentence is suitable with consequences of the tortious DIP.

15 Will a local court recognise concurrent foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition? Has the UNCITRAL Model Law on Cross Border Insolvency been adopted or is it under consideration in your country? 12.

16 The Spanish legal system recognizes sentences that come from others countries. However, the proceeding to recognize foreign sentences is different according with the origin country. Sentences that come from UE countries: The Regulation (EU) 2015/848 of the European Parliament and of the Council, of 20 May 2015, on insolvency proceedings ( RIP ) establishes in the articles 19, 20 and 32 that any judgment initiating insolvency proceedings handed down by a court of a member state which has jurisdiction according with article 3 of the Regulation, shall be recognized in all other member states from the moment that it becomes effective in the State of the opening of proceedings. In addition, these judgements shall, with no further formalities, produce the same effects in any other member state as under the law of the state of the opening of proceedings, unless this Regulation provides otherwise and as long as no proceedings referred to in article 3.2 of RIP (When the interest center of the debtor is situated within the territory of a member state, the courts of another member state shall have jurisdiction to open insolvency proceedings against that debtor only if it possesses an establishment within the territory of that other member state) are opened in that other member state. Any restriction of creditors' rights, in particular a stay or discharge, shall produce effects vis-à-vis assets situated within the territory of another member state only in case of those creditors who have given their consent. Furthermore, the resolution concerning of insolvency proceedings, and compositions approved by that court, also shall be recognized with no further formalities. Sentences that come from to member states : First of all, it is necessary to check if the countries involved in the sentence are part to a convention. Secondly, in case that the affected countries did not agree a convention, it will be necessary the application of the rule of the reciprocity. By this rule, if the affected country recognizes the other s country national sentences, the counterparty will recognize the foreign sentences in reciprocity. Finally, if the affected countries do not accomplish the previous requirements, this sentence will be subject to the proceeding of the exequatur in order to be recognized. This proceeding is regulated in art of the Spanish Civil procedure Act and article 220 of SIA. The proceeding of exequatur, consists of a procedure in which the interested person has to file an application to recognition a sentence to the commercial court, that is to say, the judge competent to know the sentence related to the insolvency proceedings. The court will notify Crown Prosecute services and the affected persons in the country where they are established, in order to inform them that there is a subject interested in executing the sentence. At last, the judge shall decide recognize or not the sentence. This

17 resolution is subjected to be appealed to Provincial Court. Lastly, RIP has been implemented in Spain, as we have indicated in the proceeding of recognition of sentence between UE s countries. The CNUDM has been also implemented in Spain and as consequently, some Acts have been amended in order to be suited to it, for example the Spanish Arbitration Act. 13. Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction? Foreign debtors could apply for the DIP or a restructuring proceeding in another Member State, if they demonstrate that the interest center s debtor is situated within the territory of a given Member State. The courts of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if it possesses an establishment within the territory of that other Member State, according to article 3.2 of RIP. This proceeding will be considered as a secondary insolvency proceeding (art. 34 and sequence of RIP). On the other hand, foreign debtors could be recognized in a restructuring or insolvency proceedings as a credit claim in favor of the insolvency company. In this case, IA will have to execute all the necessary action in order to recover this credit. 14. How are groups of companies treated on the restructuring or insolvency of one of more members of that group? Is there scope for cooperation between office holders? Regarding the restructuring proceedings, in the refinancing agreement with banks and other financial entities regulated in article 71 and Additional Provision 4º of SIA, the credits that has any company of the group against others of the same group, will be individualized. However, these debts will not be computed as a liabilities of the insolvency proceeding.

18 Regarding the treatment of group of companies in a insolvency proceeding, first of all, article of SIA establishes that if the insolvency company is a member of a group of companies, it will have to be indicated in the petition of the DIP and it will be necessary to attach the consolidated annual accounts, the management reports of the last 3 financial years and the audit report issued with regard to those accounts shall also be attached, as well as a report stating the operations performed with other companies of the group during the same period (art SIA). The SIA allows to apply the DIP of group of companies for the whole group. Furthermore, it is allowed that one or some of the members of the group of companies, individually apply for the DIP. However, if the parent company is declared insolvent, the insolvency proceeding of the subsidiaries companies shall be grouped in the same proceeding of the parent company (art. 25 bis SIA). In addition, it is possible forming a group of subsidiaries which will be added to the insolvency proceeding that has more liabilities (art bis SIA). Finally, article 93 of SIA considers subsidiaries companies as persons specially related to the insolvency debtor. It implies that the credits between the companies of the group could be qualified as a subordinated claims. 15. Is it a debtor or creditor friendly jurisdiction? According to our experience in insolvency proceedings in Spain, at the initial phase the, court usually tries to benefit the debtor in order to get over the insolvency. However, once the procedure advances and the liquidation phase is initiated, the court seeks to facilitate and accelerate the liquidation of the assets in order to satisfy totally o partially the credits. 16. Do sociopolitical factors give additional influence to certain stakeholders in restructurings or insolvencies in the jurisdiction

19 (e.g. pressure around employees or pensions)? What role does the state play in relation to a distressed business (e.g. availability of state support)? We consider that there are no social political factors which influence the restructuring or insolvency proceedings. However, when a company which is relevant for the economy applies for an insolvency proceeding, the court and all the stakeholders involved in the procedure tend to be more permissive (i.e. the timings can be extended, the promotion to achieve an agreement (financial, restructuring or trading of production unit). 17. What are the greatest barriers to efficient and effective restructurings and insolvencies in the jurisdiction? Are there any proposals for reform to counter any such barriers? Previously, the regulation of the insolvency proceeding was focused in the liquidation of the assets. Nonetheless, with the last legal amendment of SIA (Act 9/2015 Amendment of Insolvency Act) it was introduced a number of pre-insolvency mechanisms in order to achieve a solution to the situation of insolvency in advance and avoid that the insolvent company applies for the DIP as the agreement of the article 5 bis of SIA and refinancing agreement of art. 71 and the Additional provision nº4 of SIA. However, nowadays there are relevant legal problems regarding the purchase of the production unit, since the buyer not only has to assume the Social Security and labor debts of the worker that will still work for the company once it is acquired, but also he will have to assume, additionally, all the Social Security and labor debts of the rest of the workforce. Despite having caused detrimental effects to the purchase of production units in Spain, the legislation will not be amended in the near future.