Monthly Archives:' July 2020

China adopts comprehensive Civil Code

The long-expected comprehensive Civil Code in China has been finally passed on May 28, 2020 by the 13th National People’s Congress (PRC -People’s Republic of China’s highest legislature) taking take effect on 1st January 2021. It is the PRC most extensive, modern laws compilation, the only one known as a “code”.

The process has taken about 60 years starting back in 1954, but after several unsuccessful attempts, even in spite the ‘reform and opening-up policy’ of December 1978, the complexity and controversy, finally in October 2014, the Communist Party of China, as part of the necessary progress to achieve the country’s rule of law, resolved to compile a unified civil code by 2020. 

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Spanish real estate legal context post-Covid19- REO, NPLs: Keys and tips for investors.

Spanish Real estate market has suffered for some years from the public scrutiny, from authorities and society representatives and numerous rules and intervention measures aim at favoring and protecting debtors, especially consumers and small businesses, widening a gap of legal uncertainty that has been exacerbated by the economic crisis following the outbreak of the Covid-19, which now discourages the interest of investors and, at the same time, as all crisis this one brings opportunities for those who can identify them on the right time.

1   At present we have:

  • Law 29/1994 of 24 November on Urban Leases, in its latest reform on the subject of rental periods, extended the term of the tenant of dwellings from 3 to 5 years.
  • Law 5/2019, on real estate credit, reinforces the protection of the mortgage borrower and/or guarantor, debtor, and guarantors, with longer and more complex procedures. Spanish central Bank has been warning of its interpretation that loan portfolio assignments must respect the rights of debtors and guarantors provided in this Law.
  • Multiple scattered rules at regional and municipal level on housing policies with debtor-friendly measures for vulnerable groups complicate the picture, e.g. in Catalonia, Law 18/2007, of 28 December, on the right to housing, and more recently Decree-Law 17/2019, of 23 December, on urgent measures, amended by Decree 1/2020, forcing the exploitation of empty housing, and house availability as a solution for vulnerable groups at risk of eviction, even accepting squattering.
  • COVID-19 measures: aids after the coronavirus crisis substantially consist of moratoriums on evictions, on mortgage loan installments and rents, for residential houses and offices, retail stores, and industrial premises of small businesses.   The impact on the real estate sector will not be uniform, but rather will vary according to the sector (tourism, hotels, and restaurants, etc.), the type of product (offices, commercial premises vs. residential) and location, etc

2. In this new context, investments in REO and non-performing Loans NpLs portfolios will sustain a significant impact:

Investors must review the composition mix of each portfolio, taking into account,

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“New normal” in Spain: Business crisis and restructuring scenarios: Risks and opportunities. New insolvency rules and EU Directive 2019/1023

The “new normal” requires companies to review their structure and adapt it to the new economic situation: Companies will have to review costs, adapt the way of servicing customers, work, redefine business strategies, perhaps transfer or discontinue some business units with their elements, or start others: structural changes will affect many areas of the organization, including the corporate level, offering advantages of opportunities to grow acquiring companies, assets or business units having to be smart to negotiate with potentially accumulated debt, integrate with other companies or establish strategic joint-venture agreements, etc.

In many cases this crisis will also trigger latent crisis  pre-covid-29, underlying crises that had been brewing in recent years long before the pandemic. Spanish business landscape, extremely fragmented in numerous medium, small and “micro-business” tiny enterprises and self-employed whose small size and “weak financial muscle”, prevents access to markets, financing and business opportunities will be even more vulnerable to this crisis: It is necessary to gain robustness if you want to survive.

Investors, with savings, financial capacity and funds ready to invest, will find investment opportunities in well-planned businesses and projects needing financing to materialize value propositions.

In the midst of the state of alarm, emergency regulations have been issued, including some relating to certain bankruptcy obligations that, after removal of the state of alarm, become relevant.

In the broader framework in our Law there are legal instruments (more and better than in the previous crisis of 2008) that will be useful to tackle new challenges, but they also have requirements that should not be ignored by directors, shareholders and particularly creditors, let’s see:

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