Order 228/2025 issued by Commercial Court No. 9 of Madrid on the judicial approval of Restructuring Plans in accordance with the Consolidated Text of the Insolvency Law (TRLC) interprets various points that are still subject to debate.
Contents of the Restructuring Plan.
The ruling deals with the structure of the Restructuring Plan (633 TRLC), which must contain:
- Identification of the debtor: Company details such as the company name, legal form and registered office.
- Identification of the restructuring expert: Identity of the appointed expert, clearly specifying their functions.
- Financial situation of the debtor: Analysis of the debtor’s financial situation, setting out the causes of the insolvency.
- Details of assets and liabilities: List of assets and liabilities existing at the time the plan is formalised.
- Identification of affected creditors: Creditors who will be affected, individually or grouped into classes.
- Outstanding contracts with reciprocal obligations: Contracts with outstanding obligations that will be terminated or modified.
- Impact on shareholders’ rights: How the plan will affect shareholders’ rights.
- Justification for unaffected creditors: Objective justification for excluded creditors.
- Operational and financial restructuring measures: Measures to restore the debtor’s viability.
- Conditions for the success of the plan: Technical documentation supporting the viability of the debtor.
- Impact on employees: Planned labour measures, such as workforce adjustments or contractual changes.
- Compliance with public obligations: If the plan affects public credit, compliance with tax and social security obligations must be proven.
Judicial control in the case of ‘consensual plans’ and ‘non-consensual plans’
The Order distinguishes between consensual and non-consensual plans.
In the case of a consensual plan (638 TRLC), the formal and substantive requirements must be verified. However, this control should not delve excessively into complex economic assessments that would fall within the scope of subsequent challenges, unless there are clear breaches.
In relation to non-consensual plans (639 TRLC), the judge must verify whether the plan has been approved by at least a simple majority of classes, necessarily including special or general privileged claims, or by at least one class that could reasonably expect payments after a possible liquidation (‘in the money’). It is important to have an independent expert report that values the company as a going concern, thus facilitating judicial analysis.
The ‘stress test’
When objections are raised by dissenting creditors, the ‘stress test’ consists of determining whether, even if changes were made to the classification or composition of the classes of creditors, the approval of the plan would remain valid and in accordance with the law.
It is necessary to ensure the accuracy of the vote count and the effective representation of the interests at stake. In practice, this examination is usually supported by a report issued by an independent expert or auditor, especially when the amounts and structure of the claims are complex.
The scope of the plan
It is essential that the scope of the creditors affected be justified in a well-founded manner.
Such justification must comply with the regulatory criteria of the Consolidated Insolvency Law (TRLC). Among these objective reasons, the classification of the credit according to its legal nature—privileged, ordinary, subordinated or contingent—is particularly important, as this determines its specific treatment within the plan.
It is also important to consider the economic impact that certain credits could have on the financial sustainability of the plan, excluding, for example, those credits whose financial impact is minimal and whose inclusion could unnecessarily complicate the procedure. In addition, the direct relationship of the credit with the core operations of the business is an important factor, prioritising strategic and essential credits over secondary or less relevant ones for business continuity. Furthermore, the volume and structural complexity of certain credits may require specific treatment, seeking to simplify their management to facilitate the overall effectiveness of the plan. At the same time, public credits tend to receive preferential treatment due to the legal obligations that their inclusion implies for the company. Likewise, the willingness or negotiating power of certain creditors may also influence the decision to include their loans, especially when this favours obtaining the majorities necessary to approve the plan.
Finally, any inclusion or exclusion must strictly comply with the criteria of proportionality, ensuring in all cases equal treatment between creditors and thus avoiding any type of unjustified harm to the interests of any specific class of creditors.
Classes of creditors
Creditors shall be classified into different objective classes that identify homogeneous interests and comparable legal situations vis-à-vis the debtor. Creditors are often grouped separately according to the nature of the guarantees established in their favour, distinguishing between holders of real guarantees and those who only have personal guarantees or no guarantees at all.
Similarly, the legal position of each creditor derived from the legal privilege they hold—special, general, ordinary or subordinate privilege—is another accepted criterion for distinguishing classes of creditors. Criteria related to the economic nature of the credit are also used, separating, for example, commercial creditors from financial creditors, or distinguishing those with labour or public credits. In addition, there may be different groups according to the degree of enforceability or certainty of their claims, separating claims that are immediately enforceable, those that are due in the future, and contingent or disputed claims. Finally, another admissible criterion is the degree of corporate relationship with the debtor, thus allowing creditors who have a special relationship with the debtor to be grouped separately from those who are independent.
A technical report is essential to avoid situations of unequal treatment between creditors that could give rise to challenges and the eventual annulment of the plan.
Interim financing
Finally, the court ruling analyses interim financing and new financing. It must be ensured that, in the event of subsequent insolvency: (i) interim financing will not be rescindable, in accordance with Articles 665 and 667 TRLC; and (ii) that such interim loans may be classified as claims against the estate (50%) (Article 242 TRLC) and claims with special privilege (50%) (Article 280 TRLC). Interim financing must be explicitly included in the court-approved restructuring plan.