Loss of opportunity in insolvency proceedings: the Supreme Court ruling that changes the rules for the banking sector

In this article for Cinco Días, Lluís Serras and Marta Sagalá, managing partners of the firm's Restructuring Department, analyse the practical and legal implications of the Supreme Court's recent ruling on the loss of opportunity in insolvency proceedings — a concept of French origin, perte d'une chance, and in English, loss of a chance of recovery — a ruling that imposes a heightened standard of care on financial institutions when they decide to withdraw or cancel working capital financing committed to insolvent clients.

The Supreme Court makes it clear that the automatic closure of discount lines and working capital facilities following the declaration of insolvency carries a real and quantifiable legal cost: it is not necessary to prove that the company would have survived, but rather it is sufficient to demonstrate that there was a serious likelihood that the viability plan would have succeeded had the contractual obligations been fulfilled. Bank risk management, contractual policy and the litigation strategy of financial institutions will never be the same again.

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