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Experts in refinancing agreements

Royal Decree 3/2009 on urgent measures concerning tax, finance and other areas affected by the financial crisis promoting business activity amends, among others, the July 9 2003 Law on Insolvency, and introduces a special regime of refinancing agreements that are protected against rescission and avoidance actions under the Law.

Due to limited practical experience there is not much expertise on this regime. In order to enjoy the special protected regime, there are certain requirements and formalities. The most controversial is the independent expert appointed by the Mercantile Register, which provides its opinion on certain issues.

There are several issues to be considered about the appointment and scope of work of the expert. First, its independence with respect to the parties of the refinancing agreement (especially the debtor), and its qualification as an financial consultant (or even auditor). Parties that negotiate the refinancing agreement cannot propose an expert, and its election is on the basis of the "prudent discretion of the Mercantile Registrator".

Second, the application has to be filed by a representative of the company with general powers (duly registered in the Mercantile Registry). Third, it is mandatory to attach a business plan to the application requesting the expert. Fourth, in the application the debtor must declare that it is feasible to obtain, during the period, the backing of 60% of the creditors.

Fifth, in order to elaborate the application, it might be useful to:

  • describe briefly the combined operations to be carried on in the refinancing agreement and the exact destination of funds, their maturity and economic terms;
  • mention the security package; and
  • attach the term sheet and, if possible, the drafting of the refinancing contracts.

Sixth, the expert must provide its final opinion within one month of appointment. Finally, it is critical to comply with the above requirements and formalities, so the refinancing agreement enjoys this special protection.

Amado Giménez Bono

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