The Judgment of the Supreme Court of November 21, 2016 (rapporteur Ignacio Sancho Gargallo) addresses several matters while resolving the ability of a rescissory bankruptcy action to deprive an effective structural modification such as the división of companies. Therefore, reading this resolution becomes an interesting legal excursion through the domains of corporate law and bankruptcy law.

The insolvency administrator of a spin-off company files a bankruptcy insolvency incident in which he exercised the bankruptcy rescission action against the transfer of assets that led to the spin-off. As will be remembered, the división, or split, is the universal transfer of an economic unit of the spun-off company to the beneficiary company in exchange for shares or social participations of the beneficiary company payable to the partners of the spun-off company. In the case of the spin-off, the potential asset depletion that may occur is more severe than in cases of segregation, since in the latter case it is the segregated company itself that receives the equivalent of the value of the transferred equity in the form of titles representing the capital of the beneficiary company.

The split continues the legal regime of the merger, and therefore its registration registration shields it against any action of challenge other than that of its nullity based on the infringement of the procedure provided for in art. 47.1 of Law 3/2009 on Structural Modifications of Capital Companies (LME). For this reason, the insolvency administrator argued that what was challenged – in fact – was not the split, but the transfer effects of the same as they affected certain properties transferred by the company spun off to the beneficiary company.

The insolvency administrator is obliged to ensure the integrity of the active mass of the bankruptcy, and for this purpose he will be obliged to exercise the rescission actions and other challenges that may arise, in trusteeship of the rights of the creditors. Although the judgment does not extend to this, it seems that the creditors did not formulate in a timely manner the right to oppose the merger granted by the LME; and for this reason, there are no procedural obstacles that can sustain the challenge of the split once registered in the Mercantile Registry. It could be considered that, in this particular case, the creditors waived their right to oppose the spin-off until the spin-off company had adequately guaranteed the collection of their credit (Article 44.3 LME); and that – therefore – their credit rights enjoyed the due protection prior to the exercise of the bankruptcy rescission.

The acting insolvency administrator does not contest the division agreement, but the transfer effects derived from it. However, the Supreme Court establishes that it is impossible to dissociate the legal business from its effects, given that these are not a consequence of that, nor a sort of reflex or collateral effect, but that the split consists essentially in the transfer of assets from the company spun off to the beneficiary company, and therefore said translation is – in itself – the same split that is incontestable, except for the cause expressly provided for in art. 47.1 SML that enables the annulment action to be exercised (articles 47.2 and 47.3 SML).

However, before reaching this conclusion the Supreme Court stops its analysis in the figure of the termination, and addresses both the distinction between the rescission of obligations and the termination of legal business, as well as the distinctive notes existing between the action pauliana (Article 1111 CC) and the bankruptcy rescission action.

(a) Rescission of an obligation and termination of the integrity of the legal business.

The general regime of the rescission established in the Civil Code admits both the rescission of legal business (Article 1,291 CC), and of singular obligations (Articles 1073 CC and 1292 CC). The consequences of both rescissions can not be the same, since otherwise the distinction between the two categories would not be justified. If the consequence of the rescission of contracts is the reciprocal return of things with their fruits, and the price with their interests (Article 1,295 CC); The consequence of the rescission of the obligations must be the unilateral refund of the specific service terminated.

The Bankruptcy Law, on the other hand, refers to “acts” as an object of rescission (Article 71.1 LC), and difference between refinancing agreements that may be subject to termination, of “business, acts and payments, any be the nature and form in which they were realized “(article 7.1 bis.1 LC), for what seems to exist a legal differentiation between the two concepts. The rescission consequences must, therefore, be different for each category, the termination of the act will suppose the restitution of the benefit object of the act, and the rescission of the integrity of the legal business, the restitution of what each party would have received. However, the letter of art. 73 LC provokes certain ambiguity when it refers to “that the judgment that estimates the action will declare the ineffectiveness of the impugned act and will condemn the restitution of benefits”; although it speaks of an impugned act, it uses the plural to refer to the benefits, which could be interpreted as the mandate of mutual restitution of the benefits proper to the rescission of a bilateral legal transaction.

The High Court invokes its previous Judgment 629/2012 that deals with the bankruptcy rescission of acts of disposition that entail a detriment to the active mass, which can not be equated with the rescission of the entire legal business, with the following words:

The appellant confuses the effects derived from the rescission of a bilateral business, with the effects of the rescission of the unilateral act that involves the payment or fulfillment of one of the considerations of the business. What was the subject of the rescission action was not the contract or business but the act of payment of the beneficiary of the repair and technical assistance service.

The forecast contained in section 3 of art. 73 LC (“The right to the benefit that results in favor of any of the defendants as a result of the rescission will be considered a credit against the estate, which must be satisfied simultaneously with the reintegration of the assets and rights subject to the terminated act, unless the judgment finds bad faith in the creditor, in which case it will be considered a subordinated insolvency loan “), invoked by the appellant as infringed, it presupposes that, pursuant to section 1, which regulates the effects of the termination of the contested act, condemned “to the restitution of the services object of that one, with its fruits and interests”.

If the bilateral contract had been terminated, in that case, its supervening inefficiency would have brought with it this effect of restitution of both benefits, but the termination of an act of unilateral disposition, such as payment, does not entail the ineffectiveness of the business from which it was born. the payment obligation that is intended to be satisfied with the challenged act. Hence, the termination affects only the payment, arising for the recipient of the money paid the obligation to return it, with interest, without losing his right to credit, which is prior to the opening of the contest is considered bankruptcy and it must be recognized by the relevant channel. And, consequently, since Art. 73.3 LC, there is also no bad faith in the recipient of the payment for the purpose of subordinating his credit.

For the reasons stated in this Judgment, it will be in the interest of the estate to rescind the harmful act and not the entire legal transaction. Although in both cases the third party must be reimbursed in the form of a credit, in the case of rescission of the legal transaction, said credit will be charged to the active estate, but in the event of a specific termination of the detrimental act in the form of a right of ordinary bankruptcy credit, if the legal business took place prior to the declaration of insolvency, the credit will be bankrupt, and – as the Judgment points out – it must be recognized by the appropriate mean.

And if the Bankruptcy Administration agrees to exercise rescission actions on singular acts harmful to the estate, and not on the entire legal business in which they are framed; the party against whom the reintegration action is directed should exercise the appropriate counterclaim requesting that, in case the rescission action is considered, the integrity of the legal transaction is declared by the court rescinded, with which the reciprocal reintegration will be considered credit against the estate, unless the Court judges the existence of bad faith, in which case the credit must be classified as a subordinated credit.

(b) Termination effects before third parties

The aforementioned sentence makes a doctrinal statement on the difference of the rescission effects derived, respectively, from the Paulian action – which has limited inter partes effects – and from the insolvency reintegration actions – that have erga omnes effects.

Indeed, the effects of the Pauline action consist in the access of the creditor who invokes it to the assets that left unduly the debtor’s assets; but not in the reintegration of those to the patrimony of the debtor; Therefore, no other creditor can benefit from the restitution of the assets that must never be withdrawn. However, the rescission actions have full effectiveness before third parties, because the assets that unduly left the assets of the insolvent, will be reinstated to this – converted into active assets – for the benefit of all creditors.

In light of this important distinction, the Supreme Court suggests that if the Insolvency Administration had brought a Paulista action, instead of a reintegration action, the insolvency proceedings would have had access to the real estate that went into fraud by creditors of the company’s assets. bankrupt since its effects are not reintegrative – which would mean the dissociation between the split and its translatory effect – but simply enable the creditor (the active mass) to access assets that respond to the fulfillment of the obligations of the insolvent party (Article 1911 DC).

In such a way that the bankruptcy rescission of the split can not be urged without wanting to be ineffective.

On the contrary, as we will see in greater detail, it would be possible that, if the split had been made to illegally defraud the right of credit of some existing creditors then, they could exercise an action to claim the satisfaction of their credits with the goods transferred with the split, without having to cancel the split.

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