SPAIN Law and Practice Contributed by: Ángel Pérez López, Luis Jiménez and Rodrigo del Saz, Uría Menéndez
cross-stream guarantees for the benefit of the majority shareholder or the parent of the group. Spanish banks are normally reluctant to accept any language that limits the scope of the guar- antees or security interests due to corporate- benefit issues. The key issue is whether the gen- eral good of the group is an acceptable basis for concluding that there is a corporate benefit; unfortunately, no regulation or case law clearly answers this question. Nevertheless, it is rea- sonable to conclude that a transaction that is in the interest of the group may also be construed to be in the interest of the company providing assistance in so far as, over a period of time, the resources and support from the rest of the group can also benefit the company providing the assistance (eg, through intercompany loans or by receiving guarantees to secure its own obligations). As a practical rule, directors are less likely to face liability when a company has a sole shareholder or is controlled by a limited number of shareholders and they all agree to the provision of assistance. With regard to downstream guarantees, the corporate benefit should be easier to evidence, although a case-by-case analysis is advisable. 5.5 Financial Assistance Under Spanish law, financial assistance, defined as the Target or any of its controlled companies not being allowed to provide financial assis- tance, guarantees or securities over its assets guaranteeing the acquisition financing, is pro- hibited. Breaching this prohibition can entail both liability for directors and the nullity of the transaction by virtue of which the financial assis- tance was provided. In such case, the security and guarantees could be declared null and void. Acquisition finance transactions have been structured to comply with the restrictions on
financial assistance (other than creating sepa- rate debt tranches between the SPV and the Tar- get) by implementing a debt push-down through a forward merger. In June 2023, regulations governing leveraged mergers (defined as those involving two or more companies, where one has incurred debt in the preceding three years to acquire control over the other) were amended. The revised framework strengthens the requirements for the merger plan and the directors’ report by requiring the inclusion of a payment plan for the acquisition debt and a justification for both the acquisition of control and the subsequent merger. However, it removes the obligation for the independent expert’s report (which remains mandatory in all cases) to assess the existence of financial assis- tance, a requirement that had previously been a source of considerable debate. Asset deals do not entail financial assistance risk. 5.6 Other Restrictions Directors and shareholders have a duty to avoid conflicts of interest. Specifically: • directors are obliged to: (a) refrain from participating in discussions and votes on agreements and decisions in which the director or any related per- sons may have a direct or indirect conflict of interest; and (b) adopt the necessary measures to avoid situations in which their own interests or the interests of any other third party may conflict with the company’s interests and their duties to the company; and • a shareholder will not be entitled to exercise its voting rights at general shareholders’ meetings when the resolution to be passed is:
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