New features introduced by Law 5/2015 on promoting business finance
Law 5/2015, of April 27, on promoting business finance, which was published in the Official State Gazette on April 28, has the twofold objective of facilitating and making bank financing for SMEs more flexible, in view of the need to further the recovery of bank lending and to develop alternative means of financing, thereby laying the regulatory foundation to strengthen corporate and non-banking sources of financing in Spain.
The new features introduced by Law 5/2015 include most notably the following:
1.- New provisions aimed at fostering bank financing for small and medium-sized enterprises (SMEs)
Title I of Law 5/2015 introduces two new provisions:
- Rights of SMEs where the flow of financing is cancelled or reduced (Chapter I)
The Law establishes that credit institutions will be required to give at least three months’ prior notice in the event of the termination or reduction of the flow of financing to an SME so that it can find new sources of finance or adjust its cash management (article 1 Law 5/2015).
Ten days after serving notice, the credit institution will have to provide the SME, free of charge, with a document entitled “Financial Information-SME”, containing all of the financial information that the institution has collected from the SME in order to facilitate the search for alternative financing sources (article 2 Law 5/2015).
- Mutual guarantee societies and counter-guarantee companies (Chapter II)
The Law also seeks to give SMEs easier access to bank credit by reforming the legal regime governing mutual guarantee societies contained in Law 1/1994, of March 11, on the Legal Regime for Mutual Guarantee Societies.
The Law amends the working of the counter-guarantee which the Spanish Counter-Guarantee Company provides to mutual guarantee societies, indicating that the counter-guarantee will be activated upon the first breach by the mutual guarantee society, in order to ensure that credit institutions value the counter-guarantee provided by the Spanish Counter-Guarantee Company, which should translate into improved credit conditions for SMEs.
The regime governing the suitability of directors and executives or persons treated as such or persons holding key positions at credit institutions is extended to mutual guarantee societies and counter-guarantee companies in order to increase the level of professionalism at these entities.
In addition, administrative burdens are reduced and a transitional regime is established which applies to the procedures for authorizing the creation of mutual guarantee societies and for adapting them to the new legislation.
2.- Legal regime for credit financial establishments
Title II of Law 5/2015 lays down the new legal regime for credit financial establishments (EFCs), brought about by the recent approval of Law 10/2014, of June 26, on regulation, supervision and solvency of credit institutions (“LOSS”).
Under this new legislation, EFCs lose their credit institution status, although they remain within the scope of financial supervision and regulation, and are treated the same for tax purposes.
3.- Legal regime for securitization
4.- Improvements in access to and the functioning of capital markets. Debenture issues
Under Title IV, the Law introduces a raft of reforms to Securities Market Law 24/1988, of July 28 (“Securities Market Law”), Legislative Royal Decree 1/2010, of July 2, approving the Capital Companies Law and Cooperatives Law 27/1999, for the purposes of amending the legal regime for debentures. We have also prepared a specific commentary on this matter entitled “New legal framework for issuing debentures”.
5.- Legal regime for crowdfunding platforms
Title V regulates for the first time a legal regime for what are known as “crowdfunding” platforms.
These platforms offer a new means of financial disintermediation based on new technologies, which place promoters seeking funds for high potential and risky projects in contact with a large number of investors who each contribute small amounts to finance these projects.
6.- Reinforcement of the CNMV’s oversight capacity
Title VI amends the Securities Market Law to give greater powers of oversight to the CNMV, including most notably the fact that, aside from Circulars, the CNMV can draw up technical guidelines for entities and groups subject to oversight, indicating the criteria, practices, methodologies or procedures that CNMV considers suitable to comply with the legislation. It also gives it the authority to require entities to explain why they have deviated from the CNMV’s guidelines.
This article is an excerpt from the document drawn up by our corporate/commercial specialists which discusses the new features introduced by Law 5/2015 and other features in greater detail and depth, and is available at the following link.
Garrigues Corporate/Commercial Department