Recession-stricken Spainwhere GDP has dropped for five quarters in a rowneeds outside investors. But while there may be bargains to be found among distressed Spanish companies, investors should beware of the quirks in Spanish insolvency law.
The Spanish Insolvency Act (SIA), which went into effect in 2004, introduced significant changes to an insolvency regime that dated back to the 1800s. “At the time, [the act] was heralded as a breakthrough,” says Conrado Tenaglia, a London-based partner at Linklaters. “Spain had never had a formal insolvency procedure.” Still, the SIA was largely a tool for liquidation and didn’t encourage financial restructuring for viable companies.
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