ANDORRA Law and Practice Contributed by: Miguel Cases, Marc Ambrós and Marta Felipó, Cases & Lacambra
2.2 Priority Claims in Restructuring and Insolvency Proceedings Priority claims are generally classified considering whether their privilege is qualified as special or gen - eral (see 2.1 Types of Creditors ). Employees’ salaries and social security claims benefit from a general privi - lege over unsecured credits. However, secured credi - tors holding mortgages or pledges over the debtor’s assets have priority over those general privileges. In the event of a bankruptcy or restructuring proce - dure of an entity provided for in the Banking Recovery Act, the following are considered credits with special privilege: • credits of the beneficiaries of the Andorran deposit guarantee fund (the “Fagadi”) and the Andorran investment guarantee system (SAGI) and of the Fagadi and SAGI itself; and • the part of the eligible deposits of natural persons and any natural or legal person, regardless of its legal form, that carries out an economic activity, employs fewer than five people and has an annual activity volume or an annual balance not exceed - ing EUR300,000 that exceeds the level of cover - age provided for in Law 20/2018, of 13 September 2018, regulating the Andorran Deposit Guarantee Fund and the Andorran Investment Guarantee System. Ordinary preferential credits are considered, with pri - ority in the order of precedence over the rest of the ordinary credits and behind credits with special privi - lege, those resulting from debt instruments that do not meet the following conditions: • that have been issued or created with an effective maturity term equal to or greater than one year; • that are not derivative financial instruments or implicit derivative financial instruments; and • that the terms and conditions and, where appli - cable, the brochure relating to the issue, include a clause establishing that they have a lower bank - ruptcy priority compared to the rest of the ordinary credits and that, therefore, the credits derived from these debt instruments must be satisfied after the rest of the ordinary credits.
Ordinary preferential credits that meet these condi - tions have the same rank among themselves with a higher priority than the other ordinary credits and subordinated credits and must be paid prior to them. 2.3 Secured Creditors Secured creditors are entitled to take mortgages over real estate. They may also take pledges over accounts, equity shares, movable property, credit rights and intangible and intellectual property. The Insolvency Decree establishes a special privi - leged regime applicable to secured creditors holding mortgages or pledges over the debtor’s assets. These assets are therefore excluded from the insolvency estate and will be sold to the exclusive benefit of the secured creditors. In an informal consensual restructuring proceeding, secured creditors may enforce their liens/security through an agreed specific enforcement procedure. Outside of the insolvency proceedings, these rights and remedies may therefore be subject to contractual intercreditor covenants and to the terms freely agreed by the parties. The Insolvency Decree establishes that unsecured creditors must respect the principle of par conditio creditorum. However, secured creditors who benefit from special privileges are not bound by the par conditio credito - rum principle, as these creditors are not part of the insolvency estate, except when the security or guar - antee is not sufficient to cover all the credit. Concerning the possibility of creditors disrupting or blocking judicial proceedings, under the judicial settle - ment proceeding, dissenting creditors and those who have not participated in the approval of the agreement may, within eight days of the approval, object to the judicial approval of the agreement. 2.4 Unsecured Creditors Outside of a restructuring or insolvency context, unse - cured creditors may request the adoption of several remedies such as pre-judgment attachments, which allow the debtor to secure their property, set offs, and
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