First reversal of a non-consensual restructuring plan

Mercedes Ágreda reports on Prof. Alfaro Águila-Real’s blog on Ruling 179/20230, of 10 April, of the Provincial Court of Pontevedra, which revokes the order of approval of a non-consensual restructuring plan of the company Hiperxel, issued by the Commercial Court No. 3 of Pontevedra in December 2002. The court decision has not yet been published in CENDOJ and, therefore, has not reached our hands. However, through the aforementioned review, we know the main lines of argumentation, which we will now comment on:

The grounds for challenging, at the initiative of three creditors, the approval of the non-consensual restructuring plan, and the judicial response to them are as follows:

1) Anomalous or contrived creation of the classes. It seems that the company had created eight classes of creditors, four of them formed by a single creditor, and also separating creditors of the same rank, with the aim of obtaining a majority of classes in favour of the proposal. The Court rejects this motive on the basis of the literal wording of article 623 TRLC, reasoning that the classes have been formed taking into account the interests of each creditor, as required by the legal text; and the fact that some of them comprise a single creditor is due to the fact that this creditor will receive special treatment (article 623.2 mentions “or how the credits will be affected by the restructuring plan”).

Let us recall that Art. 623.1 imposes the existence of a common interest as the primary criterion for the creation of classes; and that Art. 623.2 considers that all creditors with the same insolvency rank have a common interest. However, Art. 623.3 allows creditors of the same rank to be separated into different classes when there are sufficient reasons – an open clause – to justify it.

It seems clear that creditors of the same rank may be classified in several classes; but what seems less clear is whether such alternative classes may also comprise creditors of different ranks (e.g. a class grouping some preferential creditors and some ordinary creditors). It seems that if a common interest of preferential and unsecured creditors could be justified, there should be no impediment to this, although it is recognised that it will be difficult to find such a common interest.

It should be noted that Article 623.1 establishes that the primary guiding criterion is the common interest, and nothing prevents, in theory, a privileged creditor from objectively sharing an interest with an ordinary creditor; and that Article 623.2 establishes that credits of equal rank are considered to share an interest; but it does not rule out that others of different rank also share the same interest. Moreover, 623.3 adds to this tolerance of miscellaneousness by allowing claims of the same rank to be separated into different classes, once again without prohibiting these different classes from containing, in turn, claims of different ranks.

In my personal opinion, if there is a strong community of interests among them all, nothing would prevent the heterogeneity of the classes. And if any creditor disagrees with such an existence, he can express his intention to challenge the possible homologation (and do so, if necessary). This would be supported by the reference in Articles 624 and 624a to a “single class” for secured claims and a “separate class” for public law claims; expressions that emphasise the exclusivity of the class for these groups of creditors, and which seem to operate as exceptions to the general rule that would allow claims of different nature to be combined.

Of course, it could be objected that the existence of creditors of different rank within the same class would produce a collision between the principle of parity of treatment within the class (art. 654.5º TRLC) with the principle of absolute priority, or Absolute Priority Rule (art. 655.2. 4º TRLC); but this would only happen if the restructuring plan is not consensual (as in the case in question); since if it were consensual, the fact that a junior creditor would receive interest in the event that another senior creditor has not been fully satisfied would not constitute grounds for challenging the plan.

In any event, the Court considers that, given that if the appeal for incorrect class formation is upheld, it would lead to the absolute nullity of the restructuring plan – and not only its nullity against the challenging creditors – (art. 661 TRLC), this ground must be cautiously weighed up and applied with caution, finding that, in the present case, the possible incorrectness in the formation of the classes is not sufficiently important for this ground to be upheld.

(2) Perimeter of effect. The Court also ruled on a different issue: the ‘scope of the restructuring plan’, also contested on the grounds of the exclusion of financial creditors guaranteed by the ICO. The Court rejects this ground, as it considers that the reason for the exclusion is the uncertainty about the effects of the restructuring plan on the validity of the guarantees. But what is remarkable is that the Court recognises that judicial control does not only extend to class control, but also to the scope of the restructuring plan – even if not legally provided for – given the intrinsic correlation between one and the other.

Once again, we will have to read the ruling carefully. Although it seems that the law does not provide for it, and that the correlation referred to does not necessarily lead to extending the control from the classes to the perimeter of affectation, it is also true that there are arguments in favour of such control: unaffected creditors are de facto an exceptional class outside the mandatory rules of restructuring; and if affected creditors are prohibited from challenging the plan on this ground, this would in practice create a real escape route for creditors who would receive, purely at the discretion of the proposer, very special treatment consisting of full payment of their claim regardless of their rank.

3) Treatment less favourable than another creditor of the same rank. As is well known, creditors within the same class must receive equal treatment, while creditors of a different class, but of the same rank, must receive equivalent treatment (which is not the same thing). In this case, creditors of the same rank located in different classes were subject to disparately disproportionate treatment, thereby contravening art. 655.2.3 TRLC, a reason that led to the appeal brought by the three dissenting creditors being upheld.

It is noteworthy, at this point, that the Provincial Court implicitly admitted that a certain disparity of treatment between creditors of the same rank located in different classes would be acceptable. In other words, it has not applied the literal wording of the infringed provision, which imposes absolute equivalence in the treatment between them; rather, it accepts a margin of inequality, provided that this is not “disproportionate”.

This ruling is a pioneer in the application of the TRLC and will be the subject of study and commentary both in the doctrine and in subsequent court decisions.

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