A Spanish security Law approach for U.K. (and other foreign) lenders – practical aspects of structuring, negotiating and closing the deal

The purpose of this article is to assist foreign lenders (and their counsel) in the process of considering, negotiating and perfecting security interest in Spain (i.e. security over assets located in Spain and over which, according to Spanish Law, a Spanish Law security may be created). After some experience advising foreign lenders in configuring their security interest in Spain we have noticed that: (i) some concepts and formalities under Spanish (and mainly continental) law are not correctly understood and (ii) the issues that appear as problematic in all transactions in which we have been involved are in broad terms the same, or result from the application or interpretation of the same principles.
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As the reader may be aware of, the Spanish territory is divided into regions or Autonomous Communities («Comunidades Autónomas») which have the authority to rule and to enact regional laws, and where appropriate, to set the tone for their interpretation. Some of these regional jurisdictions may impose further/different requirements for granting securities, than those set forth in Spanish Law. We will herein focus only in the main dispositions of the Spanish Civil Code and dispositions applicable to the majority of Autonomous Communities, which we trust should be sufficient guidance for a foreign institution to have a picture of these securities and their mainstream regulations. However, upon granting securities in Spain local counsel is paramount to avoid issues with regional or local laws that may also apply.