Corporate restructuring, at its most straightforward, is a negotiation with creditors to realign debt obligations with the business's actual repayment capacity. When that business operates across multiple countries, carries financing from foreign banks, or has subsidiaries in other jurisdictions, the process acquires a dimension that Spanish professional practice rarely addresses with the depth it deserves. Nearly all commentary on restructuring in Spain assumes a purely domestic scenario: a Spanish group, Spanish banks, assets in Spain. The reality of many mid-sized companies — with customers in Germany, financing from a British bank, or a subsidiary in Portugal — is fundamentally different.
This article analyses cross-border corporate restructuring from the Spanish legal framework, with particular attention to the Consolidated Insolvency Act (TRLC, Royal Legislative Decree 1/2020), the reform introduced by Law 16/2022, and the EU Insolvency Regulation (Regulation 2015/848).
Why the Cross-Border Dimension Changes Everything
A purely domestic restructuring is complex. A cross-border one is complex across multiple simultaneous dimensions that interact with each other.
Multiple jurisdictions. Assets, creditors and group companies may be subject to different laws. A German bank that has financed a Spanish company through a loan governed by English law can invoke contractual remedies — acceleration, enforcement against security — whose compatibility with the Spanish restructuring plan is not automatic. Legal advice must simultaneously cover Spanish insolvency law, the applicable contract law, and local enforcement rules.
International creditor committees. Anglo-Saxon debt funds and Nordic or German banks negotiate under standards substantially different from Spanish lenders. They operate with formalised creditor committees, independent financial advisers (restructuring advisers), and timelines that include due diligence phases, proposal rounds and closing documentation (lock-up agreements, restructuring support agreements). Ignoring these protocols — or trying to run the process exclusively under Spanish parameters — typically leads to deadlock and loss of creditor confidence.
Currency risk and multi-currency liquidity. If the company has sterling revenues, euro-denominated debt and dollar costs, the viability plan must model foreign exchange implications. Projections presented to the Spanish court or to an independent expert must include sensitivity analysis on currency variables, especially in three-to-five-year plans.
Regulatory complexity. Notifications to sector regulators (CNMV for listed companies, ECB or Bank of Spain for financial institutions), employee information obligations under Directive 2002/14/EC, and the management of environmental or contractual commitments with foreign partners add compliance layers requiring precise coordination.
The Spanish Legal Framework: TRLC and the 2022 Reform
Spain was slow to transpose Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks. Transposition arrived with Law 16/2022 of 5 September, which comprehensively reformed the Consolidated Insolvency Act (Royal Legislative Decree 1/2020) and created a new restructuring plan regime with its own substantive character, distinct from formal insolvency proceedings.
Restructuring plans (Arts. 583-703 TRLC). The centrepiece of the reform is the restructuring plan — a negotiated instrument allowing the debtor to propose restructuring measures to creditors (haircuts, payment deferrals, debt-to-equity conversion, security modifications) without needing to file for insolvency. The plan may affect only certain creditors (there is no obligation to include all of them) and, once judicially confirmed, binds even dissenting creditors within a class that voted in favour.
Creditor classes and cram-down (Art. 639 TRLC). The plan groups creditors into classes according to the nature of their claims and enforcement rights. To bind a dissenting class (cross-class cram-down), the plan must: (i) receive the affirmative vote of at least one class of creditors who would receive something in a hypothetical liquidation; (ii) satisfy the best-interest-of-creditors test — no creditor may be worse off than in liquidation; and (iii) meet the inter-class fairness criterion (absolute priority rule with exceptions). This mechanism, drawn from US Chapter 11 and adapted to the Directive, is what allows a plan to be imposed even on debt funds blocking the majority within their own class.
Notification of negotiations (Art. 583 TRLC). Before the plan is finalised, the debtor may notify the commercial court that it has opened negotiations with creditors. This notification has significant legal effects: it suspends the obligation to file for insolvency for three months (extendable, with the possibility of extension to six), stays individual enforcement actions over assets necessary for business continuity, and preserves existing contracts against early termination clauses triggered by insolvency-related events.
Judicial confirmation (Arts. 638-641 TRLC). The negotiated plan must be confirmed by the competent commercial court. The judge verifies compliance with formal and substantive requirements — legality, absence of fraud, compliance with the best-interest test — without substituting the parties’ economic judgement. Confirmation converts the plan into an enforceable title and, crucially for cross-border processes, gives it the force needed to seek recognition in other EU Member States.
Restructuring expert (Art. 674 TRLC). The court may appoint a restructuring expert at the request of the debtor or creditors. Their functions include facilitating negotiations, issuing a report on the plan and, in certain cases, supporting the debtor in obtaining interim financing. The appointed expert must meet independence requirements from the parties.
The EU Insolvency Regulation (Regulation 2015/848)
Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings is the key instrument for cross-border coordination within the European space.
COMI determination. The Regulation assigns jurisdiction to open main proceedings to the court of the Member State where the debtor has its Centre of Main Interests (COMI). COMI is presumed, unless proved otherwise, to be at the registered office. However, this presumption is rebuttable: if the group’s effective management, centralised treasury function or principal contracts are managed from another jurisdiction, the actual COMI may be — and creditors may argue it is — in that other country. In multinational groups, COMI determination is a strategic decision with enormous consequences for applicable law and competent court.
Main and secondary proceedings. Proceedings opened in the COMI state are main proceedings with universal scope: they extend to all the debtor’s assets in any Member State. Secondary proceedings, opened in states where the debtor has an establishment, have territorial scope limited to assets in that state. Coordination between main and secondary proceedings requires active cooperation between the office-holders appointed in each jurisdiction — something Regulation 2015/848 expressly promotes in Articles 56 to 60.
Automatic recognition within the EU. Decisions issued by the main proceedings court are automatically recognised in all Member States without any additional procedure (Art. 19). A restructuring plan confirmed by a Spanish commercial court has effect in Germany, France or Italy without exequatur proceedings. This is a fundamental advantage of operating within the European space: cross-border enforcement requires no additional litigation in each country.
Post-Brexit position. The United Kingdom ceased to be a Member State for purposes of Regulation 2015/848 from 1 January 2021. A Spanish restructuring plan has no automatic recognition in the United Kingdom, and vice versa. Where there are significant British creditors or material assets in the UK, the process must consider the possibility of parallel proceedings — for example, a Scheme of Arrangement or a Restructuring Plan under the Insolvency Act 1986 and the Corporate Insolvency and Governance Act 2020 — or at minimum obtain English law advice on the enforceability of the Spanish plan in that jurisdiction.
The Viability Plan: What Courts and Creditors Require
The restructuring plan must be accompanied by a viability plan that provides the economic underpinning for the proposed measures. This document is not an academic exercise: it is the piece on which creditors decide and the judge assesses whether the plan has a reasonable basis.
Minimum required content. A viability plan for a cross-border process must include: (i) analysis of the company’s current situation — insolvency or likelihood of insolvency — broken down by business line and geography; (ii) financial projections for three to five years (income statement, balance sheet, cash flow) in base, optimistic and pessimistic scenarios; (iii) creditor recovery analysis under the plan versus the liquidation scenario; (iv) description of the operational measures underpinning the projections (disposals, right-sizing, product mix changes); and (v) for international groups, consolidated projections with detail by legal entity.
Creditor recovery analysis. This analysis — known in Anglo-Saxon practice as a waterfall analysis or liquidation analysis — is determinative for the best-interest test. It must quantify, with conservative and documented assumptions, how much each creditor class would receive if the company were liquidated today. If the plan offers each class at least as much as they would receive in liquidation, it satisfies the basic fairness test.
Independent expert. The TRLC and advanced judicial practice require the viability plan to be validated by an independent expert — typically an auditor or financial advisory firm with proven restructuring experience — who issues an opinion on the reasonableness of the assumptions and the coherence of the financial model. International institutional creditors typically also require their own financial advisers, meaning the process may involve several parallel reports that must be reconciled during negotiation.
Negotiating with International Creditors
Negotiating with foreign banks or debt funds differs substantially from negotiating with Spanish financial institutions in methodology, documentation and expectations.
Standstill agreements. The first negotiating instrument is typically a standstill agreement: creditors commit not to enforce their security or accelerate maturities for a defined period — typically 60 to 180 days — while the debtor prepares the plan and negotiates its terms. In return, the debtor typically commits to providing regular financial information, to making no payments to creditors outside the agreement, and sometimes to granting additional security.
Intercreditor dynamics: senior and mezzanine debt. In financing structures with differentiated tranches, intercreditor negotiation is as important as negotiation with the debtor. Senior lenders (typically with real security) have a stronger negotiating position than mezzanine lenders (subordinated, with security over shares or unsecured). The plan must manage this tension carefully: excessive concessions to senior debt at the expense of mezzanine can generate judicial challenges to the plan for breach of absolute priority.
Foreign bank procedures. Large German, French or Nordic banks typically act through their workout divisions, which operate under strict internal protocols: a credit committee that must approve any modification to loan terms, longer response times than Spanish banks, and requirements for documentation in English. The process must build in these timescales and avoid generating procedural deadlines — in particular, the plan voting timetable — that are incompatible with foreign creditors’ internal approval cycles.
Language and forum. Plan documents, the restructuring proposal and negotiations should be available in English for English-speaking creditors or those operating under English law. It is not uncommon for standstill agreements or debtor-in-possession financing documents in a cross-border process to be drafted in English even though the formal Spanish plan is in Spanish. Jurisdiction clauses in existing financing contracts must be analysed carefully: if they submit disputes to English courts or London arbitration, confirmation of the Spanish plan may create recognition friction.
Tax Implications of Restructuring
The tax dimension is frequently underestimated in the initial phases of a restructuring, with consequences that can undermine plan viability.
Debt forgiveness income (Art. 11 LIS). When a creditor forgives part of the debt — whether through a direct haircut or through conversion into equity at a value below the nominal debt amount — the debtor generates an accounting gain that, as a general rule, is taxable under Corporate Income Tax. Law 27/2014 of 27 November on Corporate Income Tax regulates in Article 11.13 the deferral of this income in certain restructuring scenarios, allowing forgiveness income to be brought into the tax base on a deferred basis as the debtor applies historically accumulated tax losses (bases imponibles negativas, BIN). The precise articulation of this mechanism requires coordination between the restructuring plan and tax planning.
Tax loss carryforwards (BIN). Distressed companies typically have accumulated significant tax losses. Spanish corporate tax law limits BIN utilisation to 70% of positive taxable income in each year (25% for taxable bases above EUR 20 million). In a restructuring plan that generates forgiveness income while simultaneously allowing the business to return to profitability, managing the BIN utilisation schedule is a first-order financial planning element that must appear in the viability plan financial model.
Transfer pricing rules in group reorganisations. When the restructuring involves group reorganisation — mergers, spin-offs, inter-company asset transfers, conversion of intercompany debt into equity — transfer pricing implications must be analysed. OECD guidelines and the Spanish Tax Agency (AEAT) require transactions between related parties to be conducted at market value, which in a financial distress scenario — where asset market values may be depressed — can create unexpected tax friction. The AEAT has increased scrutiny of this type of transaction in recent years.
VAT on asset transfers. Asset transfers within the plan — for example, the sale of a business line or real estate to reduce debt — may generate VAT obligations that must be factored into the plan structure. In Spain, the transfer of an autonomous economic unit may fall outside the scope of VAT (Art. 7.1 LIVA) if the elements necessary to continue the activity are transferred, avoiding the financial cost of VAT on large transactions.
Director Duties During Distress
One of the most critical — and least understood — dimensions of corporate restructuring is the liability framework for directors during the period of financial difficulty.
Duty of care and loyalty in crisis situations (Art. 236 LSC). Article 236 of the Spanish Companies Act (Ley de Sociedades de Capital) establishes director liability for acts or omissions contrary to law or the company’s articles, or that breach the duties inherent in the role. In situations of imminent or actual insolvency, this duty intensifies: directors must act primarily in the interests of creditors — not merely shareholders — in line with the zone-of-insolvency doctrine. This shift in fiduciary duty, reflected in Spanish case law and reinforced by Directive 2019/1023, requires directors to carefully document their decisions throughout the crisis period.
Wrongful trading equivalent. The Insolvency Act allows the insolvency administrators — if formal proceedings are eventually declared — to bring insolvency liability actions (Arts. 456-473 TRLC) against directors who, knowing the state of insolvency, aggravated the company’s patrimonial situation through acts contrary to creditor interests. There is no literal equivalent of English wrongful trading in Spain, but the insolvency liability regime operates analogously: directors who continue generating losses or conducting unfavourable transactions once the insolvency position is known face personal liability for the insolvency deficit.
The obligation to file for insolvency (Art. 5 TRLC). A director who, aware of the insolvency position, fails to petition for insolvency within the two-month period incurs a presumption of culpable insolvency, with consequent personal liability for the insolvency shortfall. Opening negotiations under Article 583 TRLC suspends this period, but does not eliminate it: if negotiations fail without a confirmed plan, the obligation revives and the period runs from when the failure is known or should have been known.
Practical recommendations. Directors of financially distressed companies should: (i) document board decisions and their rationale through formal minutes; (ii) obtain independent legal advice on their obligations; (iii) not prioritise shareholder payments over creditor claims; and (iv) activate the restructuring process sufficiently early, before liquidity is exhausted and negotiating options close.
Case Study: Spanish Group with German and British Creditors
The following is an anonymised case based on real experience with mid-sized groups.
Initial situation. Spanish industrial group with three operating companies in Spain and a sales subsidiary in Portugal. Total financial debt of EUR 45 million across three tranches: (i) a syndicated loan of EUR 28 million with a German bank as agent and a British bank as minority participant, governed by English law with a London arbitration clause; (ii) factoring and receivables financing lines with two Spanish financial institutions totalling EUR 12 million; and (iii) EUR 5 million of subordinated financing from a Swiss family office, with a pledge over the shares of the Portuguese subsidiary.
An 18-month sales decline had generated accumulated losses that consumed net equity. Projected EBITDA for the current year was positive but insufficient to service existing debt. The German and British banks had activated the material adverse change clause in the loan agreement and were threatening acceleration.
Process structure. In the first phase — the initial 60 days — an independent financial analysis confirmed the viability of the underlying business and quantified sustainable debt at EUR 25 million (55% of total debt). A 120-day standstill was negotiated with the German and British banks, who agreed not to enforce their security in exchange for monthly financial reporting and suspension of principal payments. The Spanish institutions joined the standstill within the first 30 days.
In the negotiation phase — months 3 to 12 — the viability plan was developed with five-year projections by entity and consolidated, including sensitivity analysis on margins and exchange rates (part of revenues were denominated in sterling). The plan proposed a 40% haircut on the principal of the syndicated loan and the Swiss subordinated credit, a three-year payment deferral on remaining principal, and capitalisation of overdue unpaid interest into a long-maturity subordinated debt instrument. The factoring lines were maintained intact given their operational character.
Negotiation with the German bank required three credit committee rounds, with presentations in English and German. The Swiss family office, with a smaller position but direct security over the Portuguese subsidiary, negotiated separately agreed terms that were incorporated into the plan as a separate class.
Confirmation. The plan was filed with the commercial court under Article 639 TRLC. Affected classes voted with the required majorities, with the sole exception of the Swiss subordinated credit class, which voted against. The court confirmed the plan applying the cross-class cram-down mechanism, having verified that the liquidation analysis demonstrated that the Swiss family office would receive more under the plan than in a liquidation scenario.
Outcome. The plan reduced net financial debt from EUR 45 to EUR 25 million (a 44% reduction), eliminated the immediate insolvency risk and preserved 320 jobs. The group returned to positive cash generation in the second year after confirmation. The full process, from standstill commencement to judicial confirmation, took 18 months.
The BMC Integrated Approach
A cross-border restructuring of moderate to high complexity requires the coordination of disciplines that rarely coexist in a single firm or adviser: insolvency law, corporate finance, restructuring tax and corporate governance.
At BMC, the process is managed by an integrated team combining three complementary capabilities. Raúl Herrera García, BMC’s Of Counsel in Insolvency Law, contributes procedural expertise in restructuring plans and insolvency proceedings, including negotiation with creditor committees and coordination with the court. The Corporate Finance team develops the viability plan, liquidation analysis and financial model underpinning the creditor proposal, with the capability to work in English and German with international creditors. The Tax practice designs the fiscal structure of the plan — treatment of debt forgiveness, BIN optimisation, transfer pricing in group reorganisations — so that tax efficiency is built into the restructuring plan itself.
This coordination reduces the risk that legally sound solutions generate unexpected tax consequences, or that solid financial models are challenged on procedural grounds.
If your company is facing financial distress with creditors or assets outside Spain, or is considering initiating a preventive process before liquidity is exhausted, contact our restructuring team for a confidential initial conversation.
