The Scope of the Prohibition against Financial Assistance in Leveraged Acquisitions

By Alberto Palomero Benazerraf Sr. & Pablo Sanz Bayón (Comillas Pontifical University)

This paper critically analyzes the scope and exceptions of the prohibition against financial assistance with a focus on Leveraged Buy Outs (LBOs) in the Spanish legal system. The authors endeavor to point out potential deficiencies that prevent the current legal framework from meeting the desirable legal certainty standards pursued by legal operators. Moreover, the legality of these operations is being questioned by a significant portion of legal scholars, who identify a significant risk of legal avoidance, since proving that the operation is made due to economic reasons different than the mere leveraging of debt can be difficult.

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