Effects of exchange preference shares and subordinated debentures

canje preferentes subordinadas

Sometimes there is a question of the legal effect that may arise from having made redemption of preference shares and subordinated debentures. If the product subscription was void or voidable, the exchange will also be for the following reasons.

The doctrine of the spillover effects of invalidity related contracts admitting it comes from the STS 10 November 1964 which states that it is possible the spread of contractual inefficiency to other acts that relate to the business declared invalid "not only when there is a specific provision imposing the nullity of the posterior, but when (….) presiding over a unit both intentional, is above the efficient cause of posterior, thus afforded as a result or culmination of the proceedings ".

More recently, the Supreme Court has accepted this doctrine in these two sentences: STS 22 December 2009 (LAW 283751/2009) y STS de 17 June 2010 (LAW 114039/2010).

The STS 17 June 2010 says that if the contracts are causally linked under functional link:

“(…) Must be maintained that there is a chain or widespread inefficiency (….) to such a degree that the inefficiency of the original contract is budget, the nullity of the contract is therefore dependent yours ".

It must also take into account the provisions of Article 1289 paragraph 2 of the Civil Code on the interpretation of contracts: when there is doubt about the principal subject of the, with regard to the intention or will of the parties, the contract will be void.

Furthermore Article 1.208 of C. Civil provides that:

"The novation is void if the original obligation it may also, unless the cause of nullity may be invoked only by the debtor, or that ratification validates acts originally null ".

The Courts of First Instance have referred to the STS 17 June 2010 in numerous judgments of interests among which we would highlight:

  • Judgment of 29 November 2012, the Court number 1 Santander, that is blunt about:

“Declared invalid is inevitable application of the doctrine of the spread of for ineffectiveness drag the exchange made for the conversion of preference shares, considering such that, excluding conversion confirmation or void contract as aforesaid, inefficiency by relative nullity covers or includes the initial and subsequent contract with the same origin - Thereby overcoming, but the final effect is the same, the mention of the resolution of the exchange occurred. "

"Unquestionably, there is a clear connecting link between contracts that were acquired by successive swapping preferred shares and later by other products to which the actor was hampered by the need for liquidity reserves obvious even with the nullity action. As maintaining the TS in Case 17 June 2010 and in a situation very similar to this, are causally linked contracts under functional link, since without the loss of the preference shares is not held the second, I had intended to try to alleviate them or combine them. "

  • Judgments of the Court of First Instance 2 de Mataro 14 March 2013 and 18 June 2013.

Moreover, in most cases, was performed trade under the threat made by the staff of the financial institution: Customers were told that if they refused the exchange, lose all your money (or similar versions). This makes the consent for the exchange were flawed, which is a second reason for the cancellation of the exchange.

Ultimately, having made the exchange their preference shares and subordinated debentures, even "voluntarily", no problem to claim the recovery of money in court.

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