Three years after the insolvency reform, restructuring plans have become established as the primary tool for preserving economically viable companies, shifting insolvency proceedings toward a role more closely linked to liquidation and the sale of productive units.
The reform appears to be fulfilling its objective of facilitating early solutions to companies in situations of financial difficulties. However, the introduction into our legal system of instruments inspired by Anglo-Saxon models is requiring a process of adaptation to the Spanish legal and economic reality. In this context, judicial practice—given the absence of a consolidated doctrine from the Supreme Court—is playing a decisive role, sometimes resulting in divergent interpretations among different Provincial Courts.
1. Judicial Control over Viability: Beyond Formal Review
Initially, judicial control over restructuring plans was limited to a formal verification of legal requirements. However, recent practice reveals a shift toward a more substantive and demanding analysis of the plan’s actual viability.
Courts have begun to refuse the approval of plans that do not offer a reasonable prospect of avoiding insolvency proceedings and ensuring business continuity. An illustrative example is Judgment 166/2025 of Commercial Court No. 5 of Madrid (the Avanza Food case), which denied approval on the grounds that the viability of the business plan was not sufficiently substantiated, the burden imposed on creditors was disproportionate, and the absolute priority rule had been breached.
This move toward more substantive judicial scrutiny reflects an increasingly visible concern in practice: preventing restructuring plans from being used merely as mechanisms to delay an inevitable liquidation.
2. The Absolute Priority Rule and Gifting
Another area of debate concerns the limits of the absolute priority rule, particularly with the emergence of gifting, an Anglo-Saxon concept whereby a class of higher-ranking creditors voluntarily transfers part of the value to which it is entitled to a lower-ranking class, even when an intermediate class receives no value.
The key issue is whether this practice violates the absolute priority rule, which prevents a lower-ranking class from receiving value if a dissenting higher-ranking class has not been paid in full. The Judgment of the Provincial Court of Las Palmas of 14 March 2025 (The Naviera Armas case) upheld the relevant transaction, considering it an act of generosity by senior creditors over value legitimately attributable to them, rather than a redistribution imposed by the plan. It also emphasized that the challenging creditors were out of the money, meaning they had no economic entitlement based on the plan’s valuation.
Accordingly, the view is gaining ground that gifting does not necessarily constitute a breach of the absolute priority rule, provided certain conditions are met: namely, that the intermediate class is demonstrably out of the money and that the arrangement is transparent within the plan.
3. Participating Loans: Classification of the Claim
One of the most debated issues concerns the insolvency classification of participating loans. Determining whether they are ordinary or subordinated affects the class in which they are included and, consequently, their voting weight in restructuring plans.
Currently, two opposing lines of case law coexist. On one hand, the Provincial Court of Madrid (Judgment 265/2025, 9 September) holds that subordination only applies where expressly agreed in the contract. On the other hand, the Provincial Court of Barcelona and Commercial Court No. 1 of A Coruña (Order 474/2025, Serviocio case) consider subordination to be inherent to the nature of participating loans, and therefore they must always be classified as subordinated.
This divergence makes a strategic analysis of the judicial forum essential, as the chosen interpretation may be decisive for the viability of a restructuring plan.
If your company is facing a restructuring process or is involved as a creditor affected by a plan, we invite you to contact Plana Ventura Garcés. Our team has the experience and strategic approach required to assess each situation and guide you with confidence in this new restructuring framework.
