Apart from other aspects regulated in the Directive, the main focus of this note is to analyse (i) the requirement or not of the individual consent of creditors to a share capital increase through credit compensation (to be adopted as a restructuring plan for a debtor company with solvency difficulties) and (ii) the role played by shareholders in such operations.
Individual consent of creditors in a share capital increase through credit compensation
In accordance with our current legislation, the share capital increase through credit compensation, in addition to the approval of the company itself (expressed through a resolution of the general meeting with the corresponding qualified majority), requires the consent of the creditor holding the credit to be capitalised. It is true that by virtue of the additional provision 4.3.3 of the Insolvency Law, and as part of the effects produced by the judicial homologation of the refinancing agreement reached under such an additional provision, to the creditors who have not signed the refinancing agreement or who have shown their disagreement (with the particularities referring to the credits that enjoy a real guarantee or not, and which are not the object of this note), they may be required to convert their credits into shares of the debtor, although they are not imposed strictly but are allowed to opt for (i) the conversion of their debt into capital or (ii) a deduction equivalent to the amount of the nominal value of the shares which they would be entitled to subscribe or assume and, where applicable, of the corresponding share premium. In addition, if there is no express statement, it is understood that the dissenting creditor opts for the deduction.
However, in view of the foregoing, the Directive provides that a restructuring plan involving a share capital increase through credit compensation will be approved by the affected parties provided that the majority determined by each of the Member States is reached (not exceeding 75% of the amount of credits or interests in each category or, where appropriate, of the number of affected parties). Thus, the Directive does not require the individual consent of the creditor, but the collective consent of all categories seems sufficient. Consequently, irrespective of whether the plan has the consent of the affected parties (article 9.6 of the Directive) or does not have such approval (article 11 of the Directive), affected dissenting creditors may be required to convert their credits into capital.
Role reserved to shareholders of debtor companies in a share capital increase through credit compensation
In accordance with our current regulations, the share capital increase through credit compensation requires approval by the general meeting (with the corresponding legal and statutory majorities). Although it is true that article 165.2 of the Insolvency Law attempts to encourage a shareholder not to block the operation of capitalisation of credits (providing that any eventual subsequent bankruptcy of the company will be presumed guilty when the shareholders have refused without reasonable cause to capitalise credits or issue securities or convertible instruments and this would have frustrated the attainment of the refinancing agreement), it does not prevent it. In other words, in our current corporate law, the consent of the shareholder in the approval of the restructuring plan is unavoidable.
However, the Directive breaks with this principle and, with regards to the requirement or not of the majority consent of the shareholders in the approval of restructuring plans involving a share capital increase through credit compensation, it sets out three possible scenarios (the first two being totally contrary to what is required by our current system): (i) suppression of voting rights for shareholders in the restructuring plan (article 9.3.a); (ii) imposition on shareholders of the restructuring plan, even if they had exercised their voting rights and the plan had not been approved with the necessary majorities (article 11); and (iii) exclusion of shareholders from the application of the above provisions, provided that Member States ensure by other means that shareholders cannot unreasonably prevent or create obstacles to the adoption of the plan (article 12).
Application of article 9.3.a) of the Directive
The Directive allows Member States to opt for the application of article 9.3.a) of the Directive, thereby suppressing the voting rights for shareholders on the approval of restructuring plans. In other words, a restructuring plan may be binding for the shareholders of the debtor company even if they were not involved in the approval of the plan.
Application of article 11 of the Directive
If Member States were to waive the option offered in article 9.3.a), thus giving shareholders the voting rights on the approval of the restructuring plan, the regulation of article 11 of the Directive would come into play. According to this article, a judicial or administrative authority may, on the proposal or with the consent of a debtor, confirm the adoption of a restructuring plan even if the shareholders had exercised their right to vote and the plan had not been approved with the necessary majorities (provided that a series of requirements regulated in this article are met).
In summary, even if Member States grant shareholders the voting rights, and they do not vote in favour of the plan, they can still be bound by it in application of article 11 of the Directive.
Application of article 12 of the Directive
Finally, the Directive, with a striking lack of clarity, seems to allow Member States to exclude shareholders from the application of the above-mentioned provisions (thus requiring in any case the majority consent of shareholders for the approval of restructuring plans), but then requiring the establishment of mechanisms to prevent shareholders from unreasonably preventing or creating obstacles to the adoption, confirmation or implementation of the plan. The Directive also allows Member States to determine the scope of the concept of "unreasonably prevent or create obstacles" to the adoption and confirmation of a restructuring plan.
However, the lack of precision in the Directive makes it difficult to determine which mechanisms, other than the removal of voting rights for shareholders, could be used by Member States to prevent a shareholder from blocking the operation. Having said this, it would be necessary to determine whether the measure/incentive contained in article 165.2 of the Insolvency Law could cover the requirements of article 12 of the Directive.
In short, the Directive offers Member States the choice of (i) applying articles 9 to 11 of the Directive to shareholders (with the possibility of a plan being imposed on shareholders without their majority consent - either by the removal of their voting rights or by the imposition of the plan by the judicial or administrative authority) or (ii) excluding shareholders from the application of articles 9 to 11 of the Directive, and therefore the majority consent of shareholder is unavoidable (as required by our current system), provided that it can be guaranteed by some other means that the shareholders cannot unreasonably block the adoption of the plan.
Finally, it should be noted that Member States must adopt and publish, by 17 July 2021 at the latest, all the laws, regulations and administrative provisions necessary to comply with the Directive, with the exception of certain paragraphs of article 28 of the Directive, giving them a longer transposition period.