Insolvency reforms under the RD Act 4/2014 regarding the status of real security

This paper sets out to make some considerations on the position of creditors holding real security (security in rem) within para-insolvency and insolvency refinancing procedures introduced or modified by Royal Decree Act (Order in Council) 4/2012 adopting urgent measures on business debt refinancing and restructuring. I will avoid the new scope of the avoidance of preinsolvency transactions under arts. 71 bis and 72 of the Spanish Insolvency Act (IA), which will be the subject of a subsequent paper. Nor will the calculation of the «value of (real) security» be discussed here.Non-commencement and stay of enforcements during the «notice of negotiations» under art. 5 bis IA

There is little difference with unsecured creditors.

1. Until the entry into force of the RD Act, secured creditors could proceed with enforcement on ordinary terms as long as insolvency proceedings had not been opened and remaining conditions under art. 56 IA were met. Neither notice of the commencement of negotiations to reach a refinancing agreement or an early composition with creditors, nor an application for appointment of an insolvency mediator for the purpose of attempting an administered out-of-court settlement with the creditors, entailed a stay in the enforcement of security. In fact, one might think that such is still the rule after the reform, because art.5 bis (4)(III) is careful to clarify that «(t)he provisions of the preceding two paragraphs shall not prevent secured creditors from exercising actions in rem against the property and rights over which the security rests»…