Corporate Restructuring Laws Under Stress. The Case of Spain

This paper offers some reflections on the effectiveness of the insolvency law measures adopted in Spain during the Covid crisis and on the provision of public funding during this crisis and the repayment of the corresponding claims. The analysis shows that the insolvency measures were inherently ill-suited for achieving the policy goal of preserving businesses, and that there was a good case for the provision of public funding. However, in the Spanish case this funding came too late, and there are now significant challenges associated with restructuring these funds where they were extended by way of loan or guarantee rather than as grant. With regard to the recovery of these funds, the paper concludes that there are no good reasons to insulate the State from the restructuring of debtors’ liabilities in the context of a crisis with the characteristics of the pandemic crisis. On the contrary, credit risk should also be transferred to the State—as to other creditors—, and the State will then have to assume the role of loss absorber of last resort.