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The main purpose of this new legislation is to broaden and make the legal tools more efficient to pave the way for the achievement of refinancing agreements and it makes changes to material  elements of the Insolvency Law. The key components of the reform are:

- New mechanisms aimed at encouraging refinancing agreements.

- Safe harbor protection against a future insolvency proceeding on the company for any bilateral or multilateral refinancing agreements improving the debtor’s financial position and solvency that might have had been reached between the company and one or more of its creditors.

-  Incentives for fresh money in the context of a refinancing agreement.

- New provisions on the court approval procedure for refinancing agreements (known informally as Spanish Schemes of Arrangement by comparison with the scheme under the 2006 UK Companies Act).

The new provisions on the Spanish court approval procedure have broadened the contents of the refinancing agreements that can be approved by a judge, such that a majority of creditors holding financial claims will be able to impose several measures –in addition to a deferral of claims- on a dissenting minority. Importantly, a new option has been included whereby with the judge’s authorization, various majorities of creditors may impose terms such as the conversion of debt into equity, the conversion of debt into participation loans, and for property to be given in payment, etc.

Additionally, subject to certain conditions, those effects may be applied to secured creditors that might have objected to the decision by the majority (an option that had been discussed but some courts had already applied).

- Broadened scope of the “preinsolvency proceeding” (article 5 bis of the Spanish Insolvency Law) to make it useful to cover the types of negotiations that the debtor may be carrying out with its creditors. The most groundbreaking new effect is that while the “preinsolvency proceeding” is in progress any court enforcement procedures against assets that are needed to continue the debtor’s business will be brought to a halt as may any other individual enforcements by creditors holding financial claims within whom negotiations have been commenced for the approval of a refinancing agreement.

This royal decree-law will enter into force the day after its publication in the Official State Gazette.