Mercantile Courts of Catalonia’s Conclusions Clarify Aspects of Production Unit Sales

Proceedings from the courts’ seminar address some material uncertainties, but ambiguities — especially over Social Security — remain.

Catalonian Mercantile Courts recently held a seminar and reached a common understanding (the Conclusions) regarding, among other topics, current controversial insolvency issues related to the sale of production units. Notably, the seminar proceedings expressly state that the Conclusions do not pretend to impose on the Catalonian Mercantile Courts any specific doctrine. However, the courts have articulated their intent to respect the Conclusions — provided the Conclusions apply in the relevant case. Furthermore, the proceedings aim to present insolvency receivers with a reasonable legal solution to issues related to the stated sale of production units.

Background -

As we anticipated in our previous Client Alert regarding the latest reform to the Spanish Insolvency Law, the sales of production units (somewhat similar to pre-packs in the UK) are currently gaining momentum within insolvency proceedings (whether within the liquidation phase or not). Such sales are probably the most effective way to maximize the debtor’s assets' proceeds of sale. However, the regulation of the sale of production units under Spanish Insolvency Law is scant and the regulatory procedure remains unclear, in particular, as to whether the subrogation of Social Security claims is mandatory or not. As the court rulings on this matter have been contradictory and the consequences may be quite material, we had been expecting a clarification in this regard. The rules detailed in the Conclusion, as described below, provide some of that clarification.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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