Bank finance and regulation. Multi-jurisdictional survey. Spain. Enforcement of security interests in banking transactions

Transcription

1 Bank finance and regulation Multi-jurisdictional survey Spain Enforcement of security interests in banking transactions Xavier Foz, Javier Díaz-Gálvez, Manuela Serrano and Ana Colorado Roca Junyent Part I Types of security 1. What are the most common types of security in banking transactions in your jurisdiction (eg, standard security package)? Please provide a brief characteristic of each type of security. The standard security package in banking transactions in Spain is composed of mortgages on real estate and pledges on securities, receivables and credit rights arising from bank accounts. There is no need to say that each security package must be tailored according to the nature of the financing and the particular circumstances of the debtor and its assets. Mortgages Mortgages are the most typical in rem security rights in Spain. They grant an exclusive right to the creditor in order to have its credit satisfied against the value of the assets with preference over any other creditor. Although mortgages in banking transactions usually secure monetary obligations, they may also secure fulfilment of non-monetary obligations such as negative pledge covenants. Classic mortgages are created on real estate assets. Such mortgages do not imply the transfer of the possession of the assets before the potential enforcement of the security. Under the current Spanish laws, it is possible to create more sophisticated mortgage structures like conditional mortgages, floating mortgages and reverse mortgages. As regards formal requirements, mortgages on real estate must be granted in a public deed and registered with the Land Registry. The granting of mortgages involves notary fees and registry fees, as well as a stamp duty amounting to one per cent of the secured amount, which may result in a significant cost. On the other hand, a mortgage may also be created on movable assets that may be precisely identified, such as mercantile establishments, motor vehicles, planes, machinery, or industrial property. Such chattel mortgages, the actual use of which is 1

2 very limited, must also be granted in a public deed and registered in this case with the Movable Assets Registry. There is also a specific kind of mortgage created on boats. Pledges The pledge is created on movable assets and in its ordinary form ( possessory pledge ) it implies the transfer of the possession in favour of the creditor or a third party. In the event of default, the creditor may sell the pledged asset to have its credit paid, benefiting from a preference right over such asset with respect to the other creditors. The pledge may be set up to secure any kind of obligations. Apart from the effective transfer of the possession, the granting of a possessory pledge must be in a public deed in order to have effects vis-à-vis third parties (erga omnes). No registration is required and thus the only costs are the notary fees in the event of granting such public deed. The usual assets granted as security in banking transactions by means of possessory pledges are shares, securities, receivables and credit rights. Furthermore, there is also the possibility to set up a pledge on movable assets that does not entail the transfer of possession and that thus permits the debtor to continue assigning the secured asset to the industrial process. Non-possessory pledges may be created on assets listed in the Law 16/1954 of Chattel Mortgage and Non-Possessory Pledge, which are namely machinery, stock goods and raw materials. This non-possessory pledge requires being granted in a public deed and registered with the Movable Assets Registry. It should be noted that some Autonomous Communities have passed laws establishing specific regulations for pledges granted in their territory or on assets located therein, which for instance allow the creditor to retain property of the pledged asset upon the enforcement of the security as payment for its credit. Financial guarantees Financial guarantees are quite recently a new kind of security that may be created on financial instruments and cash deposited in bank accounts, which intend to secure financial obligations. This form of security was introduced by Legislative Royal Decree 5/2005, which in turn implemented the EU Directive 2002/47/EC of the European Parliament and of the Council. No formality is required for its validity other than a written agreement between the parties. Nonetheless, this security is registered with the relevant accounting registry. The particularity of the financial guarantees is that the creditor may dispose of the assets granted as security, having to return to the debtor equivalent assets on the maturity date of the secured obligations. Other specifics of the financial guarantees are the possibility to agree the set-off or assignment of the asset to discharge the secured obligations and the need to contribute additional collateral to maintain the equilibrium between the value of the instruments granted as security and the secured obligation. 2

3 In addition, it should be noted that the beneficiary of such guarantees benefits from a privileged regime in the event of insolvency of the debtor. 2. In relation to the following types of assets, please provide the types of security that can be created or granted in your jurisdiction and give details of any registration required: (a) Real estate: Security taken on real estate is set up by means of a mortgage. Apart from the general requirement set forth in the Spanish Civil Code, the valid creation of a mortgage requires the mortgage to be granted in a public deed and registered with the Land Registry. There is another form of security on real estate called antichresis, which consists of the assignment by the debtor of the revenue from a property to the creditor as security for a debt. This security has a very limited use in banking transactions. (b) Charging assets (inventory, stocks etc): A non-possessory pledge may be created on stock goods and raw materials. This pledge must comply with the two following requirements: (i) the pledge must be granted in a public deed; and (ii) the pledge must be registered with the Movable Assets Registry. Failure to register this pledge will deprive the creditor from its rights under the Chattel Mortgage and Non-Possessory Law. (c) Movables: Chattels may be the subject matter either of a possessory pledge or a non-possessory pledge (in latter case, provided that such chattels may be identified by particular features such as trademark and production number, model or other analogous means). A possessory pledge does not require registration but it is advisable to grant it in a public deed to oppose the pledge vis à vis third parties. On the other hand, a nonpossessory pledge must be granted in a public deed and registered with the Movable Assets Registry. Movables are also captured as a security when a mortgage is created on the mercantile establishment. (d) Shares: Shares (acciones) of a Spanish public limited liability company (sociedad anónima or S.A. ) and quota shares (participaciones) of a private limited liability company (sociedad limitada or SL ) may be pledged. A pledge on shares is usually granted in a public deed. In the event of registered shares, the pledge is registered with the registry-book of registered shares, whereas in the case of book-entry shares (including listed shares) the pledge is stated in the relevant book-entry registry. 3

4 As regards quota shares, the pledge must be granted in a public deed and it is notified to the company for its registration in the shareholders registry book. (e) Rights under contracts (receivables): Credit rights (including future credit rights) may be pledged. There is the possibility to set up either a possessory pledge or a non-possessory pledge thereon. The possessory pledge does not require registration. Nonetheless, it must be notified to the debtor and must be granted in a public document evidencing its date so that the pledge may have effects vis-à-vis third parties. The non-possessory pledge must be granted in a public deed and it must be registered with the Movable Assets Registry to become effective. Such non-possessory pledge may only be used to pledge credit rights which are not securities or are not considered as financial instruments under Legislative Royal Decree 5/2005. (f) Bank accounts: A pledge on the credit rights arising from a bank account may be created. The subject matter of this pledge is the right to claim the balance of the bank account and not the money itself. Formalities and registration requirements are the same as that of the pledge on rights under contracts (please section (e) above). (g) Financial instruments: (eg, securities): Securities may be pledged by means of a possessory pledge or through the financial guarantees. In the event of possessory pledges, if securities are represented by titles, the security is pledged through such title (some financial instruments may be pledged by means of a security endorsement). As to securities represented by book-entries, the pledge is registered with the relevant book-entry registry. Requirements are similar to those applicable to the pledge of shares (please see section (d) above). The financial guarantees regulations established by Legislative Royal Decree 5/2005 are applicable to the transfer as security of or the pledges created on financial instruments and cash deposits in bank accounts when one of the parties is a credit entity and the other one is a legal entity (thus it is not applicable to individuals). Financial guarantees only require being established in a written agreement. No formalities or registrations are required, but the contribution of the financial instrument must be recorded in writing. (h) Intellectual property: Industrial property rights (covering either industrial property rights or intellectual property rights according to the Spanish law distinction) may be mortgaged. Such mortgage must be granted in a public deed and registered with the Movable Assets Registry to be effective. 4

5 (i) Plant and machinery: Machinery, instruments or tools which are used by their owner for the performance and development of its industry and which are directly used to satisfy the needs of its activity may be mortgaged. As regards the plant, Law 16/1954 of Chattel Mortgage and Non-Possessory Pledge sets forth the possibility of creating a mortgage on the mercantile establishment. The concept of mercantile establishment includes the fixed or permanent facilities, the lease rights (as the case may be), the industrial property and the machinery, furniture and tools (provided that these are assigned to the industrial exploitation) and, if agreed, it may be extended to the stock goods and raw materials. In any case, the referred mortgages must be set up in a public deed and registered with the Movable Assets Registry to be effective. (j) Other assets: Motor vehicles, trains and planes may be mortgaged by means of a chattel mortgage. The requirements are also that the mortgage be set forth in a public deed and registered with the Movable Assets Registry. Boats may be the subject matter of a mortgage regulated by a specific legislation and registered in the Commercial Registry to be effective. 3. Can a trustee or security agent be used in your jurisdiction, or must security be granted in favour of all lenders? Is the parallel debt clause concept recognised in your jurisdiction? The Spanish Law does not recognise either the concept of trust or of security agent. Therefore, the security must be granted in favour of all lenders. However, a certain degree of creativity has been developed in Spain to avoid this restriction. The most-used schemes are collective security arrangements agreed between each of the lenders by virtue of which one of the financial entities (usually the agent bank) is appointed to manage the security for the benefit of the rest of the lenders and also to enforce such security in their representation. Nonetheless, each of the lenders will continue to become entitled to the security if any of them wants to enforce or manage its own part of the financing, the title of the security thereby not being vested in favour of the agent. Another alternative is the implementation of a collective security agreement by virtue of which the parties undertake to enforce their rights jointly or based on the unanimity rule. The concept of parallel debt clause is not regulated under Spanish laws. 4. Please explain the latest amendments to the law governing secured transactions in your jurisdiction. Are there any amendments which will be introduced in the near future (within one to two years) which may have an impact on the legal framework of secured transactions? 5

6 Law 41/2007 on Regulation of the Mortgage Market introduced, amongst other amendments, some degree of flexibility in the regulation of mortgages on real estate, chattel mortgages and non-possessory pledges. With regard to mortgages on real estate, such Law recognised the figure of the floating mortgage in Spain, which may secure for a maximum amount present or future obligations which are not fully determined at the time of the inception of the security. Floating mortgages may only be used by financial entities and public administrations (in latter case, to secure tax credits or from the Social Security). As to chattel mortgages and non-possessory pledges, the aforementioned Law deems null and void any covenant preventing the creation of such securities on assets already mortgaged or pledged, allowing second and subsequent rank securities. In addition, as exposed in section 2 above, it permits the creation of non-possessory pledges on present and future credit rights. Most recently, Legislative Royal Decree 3/2009 established some provisions aimed at promoting refinancing processes in the current context of crisis. One of the new measures introduced deals with the implications of the contribution of additional securities to the financial entities by the debtor that refinances its debt and it is explained in further detail in section 5 of Part II below. For the time being, no other amendments addressing changes in the Spanish law governing secured transactions are envisaged for the near future. Part II enforcement of security 1. Please explain briefly general rules of enforcement of security indicated in answer to the Question 1 in Part I above (excluding rules in a bankruptcy or insolvency proceeding -see Question 3 below). In your answer please explain whether specific security may be enforced only through judicial proceedings or whether extra-judicial methods are also available. Furthermore, please provide estimate of costs (if they create significant obstacle in enforcement, including applicable taxes and any other duties/costs) and timing for enforcing such security. Please also explain degree of difficulty (eg, burdensome formalities, whether enforcement requires actions of a state body) in enforcing security. Also please explain whether taking security by an entity from other jurisdiction influences possibility of establishing security and its enforcement In accordance with Law 1/2000 of Civil Procedure (hereinafter referred to as CLP ), securities that constitute an executive title 1 can be enforced through the 1 Section 517. Executive action. Executive titles. 1. Executive actions will have to be grounded in a title which entails executive enforcement. 2.Only the following titles entail executive enforcement: 2.1. Firm and definitive condemnation judgments Arbitral awards or resolutions Judicial resolutions that approve or recognize agreements reached in a legal procedure, accompanied, should it be necessary to reflect their exact contents, of testimony of the proceedings. 6

7 executive procedure foreseen therein. If they do not constitute an executive title they will have to be enforced through an ordinary civil procedure. The two basic advantages of the executive procedure are its agility and that the debtor has limited causes of opposition. If the creditor has to follow an ordinary civil procedure, it will be handled as any contradictory ordinary proceeding (with the delay this entails) and an executive procedure will not be initiated until a judgment is rendered (the executive procedure would then be of enforcement of the said judgment). The executive procedure initiates with the filing of the claim that will have to be accompanied, among others, with the original of the executive title. If the claim complies with all legal requirements, the competent Judge (usually that of the domicile of the debtor) will render a writ of enforcement that is not appealable, notwithstanding the opposition to the enforcement that we analyze below. The writ of enforcement must contain, among others, the following information: (i) the judicial executive actions that must be ordered as of that moment, including, if it is possible, the seizure of specific properties and (ii) the contents of the requirement for payment that shall be made to the debtor, in the cases where such requirement is legally foreseen. Once the writ of enforcement is notified to the debtor, the latter has ten working days to oppose to it. The causes of opposition are numerus clausus, ie, the debtor may only oppose by arguing: (i) payment that he can evidence through documents; (ii) set-off of a liquid credit arising from an executive title; (iii) extra-petition; (iv) arrangement with creditors that he can evidence through documents; and (v) transactional agreement, but only if it is reflected in a public document. Notwithstanding the above, the debtor may also oppose by arguing the following legal formal defects: (i) the debtor lacks the character or representation by virtue of which he 2.4. First copy of public deeds; or if it is a second copy that it is issued by virtue of a court order and having all possible prejudiced parties been cited, or their legal successors, or if it is issued with the acceptance of all the intervening parties Commercial agreement policies signed by all the parties and by a public notary, accompanied by a certification issued by the public notary verifying the identity between the policy and his books of register and their date Duly issued register or bearer certificates that represent expired obligations and the coupons of those titles, also expired, if the coupons coincide with the titles and the latter with the check-books. The protest of falsification of the title formulated in the action of confrontation will not impede, if the latter results conform, that the enforcement writ is rendered, without prejudice of the future opposition to the enforcement that can be raised by the debtor on the merits of the falsity of the title Non-expired certificates issued by the entities in charge of the accountancy registers of the book-entry securities referred to in the Securities Market Law, but only if they are accompanied by the public deed of representation of the securities or, should it be the case, of their issue, when such public deed is necessary in accordance with legal provisions. Once the enforcement is initiated and the writ of enforcement is rendered, the certificates referred to above will not expire The Court order that establishes the maximum claimable amount as indemnification, rendered in cases of non-appearance of the accused party or absolutory judgment or adjournment of criminal procedures initiated due to actions covered by the Obligatory Civil Liability Insurance derived from the use and circulation of motor vehicles Any other judicial resolutions or documents that by virtue of this law, or any other law, entail enforcement. 7

8 is sued; (ii) the lack of capacity or representation of the creditor or because he has not verified the character or representation that are the grounds for the claim; (iii) radical nullity of the writ of enforcement because the executive title does not comply with all legal requirements. In the event that the executive title is a pledge or a mortgage, the causes of opposition are even more restrictive. Once the opposition is filed and the parties have been heard, the Court will render an order: (i) admitting the opposition, in which case the enforcement will be stopped and the seizures and measures adopted will be cancelled, reintegrating the debtor to his position before the enforcement was initiated; or (ii) rejecting the opposition, declaring that the enforcement must continue. This resolution can be appealed. However, the appeal will not stop the foreclosure process, should the opposition have been rejected. On the other hand, should the opposition have been admitted, the appealing executor may request for the seizures to be maintained while the appeal is handled. Nevertheless, he must give a sufficient guarantee to respond for the damages and prejudices that may be caused to the debtor, should the appeal be rejected. If the enforcement continues, the Court will hand over directly to the executor those seized assets that are: (i) liquid money; (ii) balance in bank accounts; (iii) convertible foreign currency (prior to its conversion); and (iv) any other asset whose nominal value coincides with its market value or that, even though lower, the executor accepts for its nominal value. All those assets not included in the previous list will have to be valued and sold off judicially through a specialised individual or entity or by public auction Spanish legislation foresees the possibility of an extra-judicial enforcement in the event of real estate or chattel mortgage and pledge. Nevertheless, the parties have to specifically foresee this possibility in the contract binding them, which has to be an executive title. If these requirements are fulfilled, the enforcement can be handled extra-judicially by a notary public The exact cost of an executive procedure can not be determined since it depends on the amount that is claimed. Nevertheless, please note that as an example an executive procedure with opposition in which EUR 100,000 are claimed would entail Lawyer s fees of EUR 10,500 plus VAT (approximately), plus Court Agent fees of EUR 1,400 plus VAT (approximately) It is difficult to determine the timing of an executive procedure, since it will depend on many factors, among them, the pressure of work of the Court. However, as a guide, it may be estimated that a mortgage foreclosure (including the selling off of the property) can be handled in approximately 9 months In principle any title that is recognised as an executive title under the CPL (in the event of foreign executive titles, International Treaties ratified by Spain will also have to be considered) may be enforced through the executive procedure with no special added problems. 2. Please explain briefly specific features (if any) of enforcement of security established over the types of assets referred to in section 2 of Part 1. The general procedure to enforce securities follows the steps described in the previous section (all securities that are executive titles will be enforced through the aforementioned executive procedure and should they not be executive titles, an 8

9 ordinary civil procedure will have to be initiated). Notwithstanding this, in some specific cases said procedure undergoes certain alterations. For instance, in the event that the seized assets are listed shares, they will have to be sold off in accordance with the rules of the corresponding stock market. If they are nonlisted shares, they will have to be sold off in accordance with the provisions of the company s by-laws and commercial regulations regarding share selling and especially considering the pre-emption rights. Likewise, mortgage foreclosure and action for enforcement of a pledge have some special aspects. For example, in the event of mortgage foreclosure, once the debtor is required to pay by the Court, the creditor may request that the administration or temporary possession of the real estate or the mortgaged good is granted to him. In the event of financial guarantees, the Legislative Royal Decree 5/2005 permits the creditor to appropriate the financial instruments granted as security (if agreed) or to sell them without following the judicial proceedings or the extra-judicial methods described in the preceding section. If the security relates to cash deposited in bank accounts, the creditor may also use the balance of such accounts to discharge the debt or set-off such amount against other credits owed to the debtor. 3. How does a commencement of a bankruptcy or insolvency proceeding influence the rights of the security holder to enforce its rights? In bankruptcy or insolvency proceedings, what are the suspect periods, is claw-back possible, and what other types of rights (tax debts, employees, etc) have preference over security granted? Please explain briefly specific features (if any) of enforcement of security established over following types of assets referred to in section 2 of Part 1 in a bankruptcy or insolvency proceeding? The rights of the securities holders in bankruptcy proceedings have a special regulation under the Insolvency Law. It is necessary to distinguish between different cases in order to explain how these kinds of rights work. Consequently, we must distinguish between securities granted on goods which are not necessary for the development of the corporate purpose, and securities granted on goods which are needed for the mentioned development. On the one hand, regarding the first group of securities (the ones which are granted on goods which are not needed for the development of the corporate purpose) the Insolvency Law permits the securities holders to continue an enforcement commenced before the bankruptcy declaration. In addition, it is regulated that this holder is even able to commence a new enforcement once the bankruptcy proceeding is declared by the Court. So, in this case, securities holders rights are not affected by the bankruptcy proceeding. On the other hand, regarding the second group of securities (the ones which are constituted on goods which are necessary for the development of the corporate purpose) the Insolvency Law establishes that they will not be able to commence their enforcement once the bankruptcy proceeding is declared. Moreover, if the security holder commences an enforcement before the bankruptcy proceeding declaration, this enforcement proceeding will be suspended. However, these securities holders are able to continue or to commence an enforcement when the liquidation phase is not initiated or a creditors settlement is not approved within a year after the bankruptcy proceeding 9

10 declaration. In this case, the only Court which has jurisdiction in order to enforce these rights is the Mercantile Court. Finally, in the case of financial instruments, Legislative Royal Decree 5/2005 sets forth the following specific regime regarding financial guarantees in the event of the declaration of bankruptcy: The commencement of bankruptcy or administrative liquidation proceedings may not be grounds for declaring null and void or rescinding a financial guarantee agreement or the very provision of a guarantee, provided that the resolution of said commencement is subsequent to the formalisation of the guarantee agreement or to the provision of the guarantee, or that said formalisation or provision has occurred within a certain time period prior to the commencement of the proceedings or to the adoption of a resolution or of any other measures or the concurrence of other events within the course of said proceedings. Also, it is necessary to make special mention of the fact that these financial guarantees are qualified as privileged credit in a bankruptcy proceeding. This means that they are preference credits to be paid by the debtor. Finally, regarding the requirements of the claw back actions, our bankruptcy legislation establishes that the concurrence of three requirements is necessary: (i) (ii) (iii) the existence of an act carried out by the debtor or an agreement signed by the debtor and another party; that this act or agreement must have been carried out within a period of two years prior to the date of the declaration of bankruptcy; that the act or agreement must imply a decrease in the assets of the debtor and the decrease of the guarantees of the recovery for creditors; This claw back action is set forth in Article 71 of the Insolvency Law, which lists the acts where there is a presumption of patrimonial damage: (i) (ii) Acts that cause patrimonial damage (presumption iures et de iure ): Acts carried out by the debtor within a period of two years prior to the declaration of bankruptcy which were harmful to itself; Acts that are considered to cause patrimonial damage (presumption iuris tantum ): (a) (b) disposal acts or agreements made by the debtor in favour of a person specially related to the bankrupted company; Security rights created in favour of previous obligations or new obligations that replace such previous ones. In other cases not provided for in the preceding paragraphs, the injury must be proved. There are some exceptions: (i) (ii) Acts which form part of the development of the corporate purpose; Acts covered by special laws; and 10

11 (iii) securities granted in favour of public credits or FOGASA (a public fund for the protection of employees salaries). These claw back actions may only be brought by the judicial administrators (receivers) or by a creditor who has previously notified the receivers of a specific act that can be susceptible to being rescinded through a claw back action and which did not obtain an answer within 15 days. The effects of the claw back action are the termination of the relevant act or agreement and the restitution of all the parties obligations to their initial situation. 4. Are there any specific features or problems of enforcement proceedings if the security is granted to a trustee or security agent or the parallel debt structured is issued? In accordance with the CPL, a Court can only render an enforcement writ in favour of: (i) the claimant who appears as creditor in the executive title, or (ii) the claimant who can demonstrate to be the successor of the person that appears as creditor in the executive title, having to file with the Court the public documents that evidence such succession. If the third party is in any of the said situations, it will be able to enforce the security through an executive procedure. Should it not be in any of the mentioned situations, it will have to initiate an ordinary civil procedure. If enforcement of the security is carried out by the trustee or the security agent, acting as agent for the rest of financial entities, it may be necessary to prove that such trustee or agent has full legal capacity and is duly and expressly empowered for such purpose by means of a power of attorney granted in its favour by each of the other creditors. As mentioned in section 4 of Part I above, the parallel debt structure is not recognised under the Spanish law. 5. Please explain the latest amendments to the law governing secured transactions in your jurisdiction in relation to a bankruptcy or insolvency proceeding. Are there any amendments which will be introduced in the near future (one to two years) which might have impact on the legal framework of the enforcement of secured transactions in the light of insolvency law? Please also explain recent practical developments regarding secured transactions in your jurisdiction in relation to insolvency law. In view of the economic crisis, the Royal Decree-Law 3/2009 has been passed with the aim to facilitate the refinancing of companies that may be suffering financial difficulties. Such Royal-Decree Law has added a new additional provision to the Insolvency Law relating to refinancing agreements, which states that agreements reached by the debtor by virtue of which his obligations are amended (inter alia, by extending the maturity date) shall be considered to be refinancing agreements. Nevertheless, the most important aspect of this reform, is that in the event of bankruptcy, the commercial acts and payments undertaken and the securities created to perform refinancing agreements shall not be subject to the rescission set forth in Article 71.1 of the Insolvency Law, provided that they meet all the following requirements: 11

12 (i) (ii) (iii) that the agreement is signed by creditors whose credits account for at least three fifths of the debtor s liabilities on the date the refinancing agreement is adopted; that the agreement is verified by an independent expert appointed by the Commercial Registry of the registered address of the debtor in compliance with the procedures laid down in the Commercial Registry Regulations. The expert s report shall contain a technical opinion on the suitability of the information provided by the debtor, on the reasonable and feasible nature of the plan, and on the size of the securities in conformity with regular market conditions at the time of signing the agreement; that the agreement is raised to public status, which shall be accompanied by all the documents evidencing its content and fulfilment of the preceding requirements; Regarding future legislative developments, a Commission has started working on a potential reform of the Insolvency Law aiming, inter alia, at introducing an abbreviated procedure and regulating over-security of transactions involving individuals. We expect that a preliminary report is issued by such Commission in nine months time. 12

13 SUMMARY The standard security package in banking transactions in Spain is composed of mortgages on real estate and pledges on securities, receivables and credit rights arising from bank accounts. There is no need to say that each security package must be tailored according to the nature of the financing and the particular circumstances of the debtor and its assets. Mortgages on real estate are the most typical in rem security rights in Spain. They grant an exclusive right to the creditor in order to have its credit satisfied against the value of the assets with preference over any other creditor. Chattel mortgages may also be created on movable assets that may be precisely identified. Pledges are set up on movable assets (inter alia, shares, securities, receivables, credits rights arising from bank accounts, stock goods) and may be possessory or nonpossessory depending on whether the possession on the relevant asset is transferred to the creditor or not. As a general rule, mortgages and non-possessory pledges must be granted in a public deed and registered with the Land Registry (in the case of mortgages on real estate) or with the Movable Assets Registry (for chattel mortgages and non-possessory pledges). Possessory pledges are also usually granted in a public deed to become effective visà-vis third parties and when created on shares are recorded in the relevant registrybook. Financial guarantees are quite recently a new kind of security that may be created on financial instruments and cash deposited in bank accounts, which intend to secure financial obligations and which are implemented by means of the transfer of the financial instrument or the creation of a pledge thereon. No formality is required for its validity other than a written agreement between the parties. Nonetheless, this security is registered with the relevant accounting registry. Financial guarantees allow the creditor to set-off or assign the financial instrument to discharge the secured obligations. Recent legislative developments in Spain to the laws governing secured transactions have recognised the figure of the floating mortgage and have permitted to create nonpossessory pledges on present and future credit rights. As regards to the enforcement of security, the Spanish Civil Procedure Law sets forth a so-called executive procedure to enforce securities that are considered as executive titles under such Law. Otherwise, enforcement of securities would follow the ordinary civil procedure. The two basic advantages of the executive procedure are its agility and that the debtor has limited causes of opposition. If the creditor has to follow an ordinary civil procedure, it will be handled as any contradictory ordinary proceeding (with the delay this entails) and an executive procedure will not be initiated until a judgment is rendered (the executive procedure would then be of enforcement of the said judgment). As a result of the enforcement procedure, the Court will hand over directly to the creditor enforcing the security any cash and will sell off judicially the rest of assets through a specialised individual or entity or by public auction. There may also be an 13

14 extra-judicial enforcement by a notary public in the event of real estate or chattel mortgage and pledge if this possibility is agreed between the parties. The declaration of bankruptcy impairs to commence or suspends the existing enforcement of assets which are necessary for the development of the corporate purpose of the debtor. However, creditors may seek enforcement when the liquidation phase is not initiated or a creditors settlement is not approved within a year after the bankruptcy proceeding declaration. Enforcement of financial guarantees is not affected by such declaration of bankruptcy. Claw back actions under the Insolvency Law affect in general acts carried out by the debtor within a period of two years prior to the declaration of bankruptcy which were harmful to the debtor s assets, and to other specific acts in the absence of proof to the contrary. Finally, it should be mentioned that a new regulation has been passed recently aiming to facilitate the refinancing of companies which are in financial difficulties. One of the highlights of this regulation is an amendment to the Insolvency Law which excludes from the claw back actions the creation of securities and other acts carried out to perform a refinancing agreement signed by creditors representing at least 3/5 of the debtor s liabilities. 14