SPAIN Law and Practice Contributed by: Ángel Pérez López, Luis Jiménez and Rodrigo del Saz, Uría Menéndez
Chattel Mortgages and Pledges Without Displacement Chattel mortgages can only be created over business premises, cars, trains, planes and oth- er motor vehicles, machinery and equipment, and intellectual and industrial property. There is a specific type of mortgage for ships (known as a naval mortgage). Pledges without displacement can be created over harvests from agricultural plots, livestock on plots, harvesting machinery, raw materials or merchandise in warehouses, and credit rights held by the beneficiaries of administrative con- tracts, licences, awards or subsidies, provided that this is permitted by the relevant law or the corresponding granting title, and over receiva- bles (including future receivables) not represent- ed by securities and not qualifying as financial instruments. These security interests are seldom used in Spain (except for the naval mortgage in ship financing, which is quite common). The Supreme Court has recently maintained that for the securities to be validly constituted, they must be registered with the relevant registry. In addition, according to the most recent Supreme Court case law, when pledging future credit rights, it is more advisable to grant a pledge without displacement rather than an ordinary pledge. Financial Collateral Arrangements Financial guarantees are governed by Royal Decree-Law 5/2005, which transposes Directive 2002/47/EC of the European Parliament and the Council of 6 June 2002 on financial collateral arrangements into Spanish legislation. Financial guarantees are those that secure the fulfilment of the main financial obligations. Although the meaning of this expression has
been discussed among scholars, the most com- mon interpretation is that obligations pursuant to nearly any financing document can be secured by these financial guarantees. Financial collater- al can relate to cash, securities and other finan- cial instruments or over credit rights held against financial entities (eg, derivatives). Thus, it may include shares issued by public limited liability companies ( sociedades anónimas ) – although this is disputed by some scholars in connection with non-listed shares since they are not techni- cally securities – and credit rights arising from the balances in bank accounts or deposits (cash) or under hedging agreements. This type of security interest (i) is not affected by the suspension of enforcement in the context of an insolvency proceeding and, (ii) as regards pledges over shares, they may be enforced through a private sale (not at a public auc- tion, as is the general rule under Spanish law) conducted by the depository of the shares or through the pledgee’s direct appropriation of the shares, breaching the general Spanish law prin- ciple under which any form of enforcement of a security agreement that permits the holder of the security interest to directly and immediately acquire the secured asset is not allowed. The only two requirements that must be met for a lender to be entitled to enforce the col- lateral through appropriation are that (i) the par- ties to the financial collateral arrangement have agreed to permit that enforcement mechanism, and (ii) the enforcement is made at fair market value (which, in the case of listed shares, is easy to determine by reference to the listed price of the shares during the agreed period of time; although, in the case of non-listed companies, that usually requires developing valuation rules based on an independent expert’s determination of the collateral’s market value).
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