Leveraged Buy Outs (LBOS)

Concept and legal prohibition in recent years have been very frequent in Spain the so-called purchases leveraged, also known in the trade as leveraged buy-outs (LBOS). These operations are characterized by acquisitions of a majority percentage in the share capital of a company target (target company), such an acquisition through loans obtained from a third party that are guaranteed by the assets of the company to be financed aim or they repay with charge to the heritage resources and expected cash flows of the same. It can even happen that the purchase price be paid aplazadamente sellers by the own company, which is merged following its acquisition – target and prior to the payment of the price – with a vehicle company incorporated by inverter (traditionally a venture capital fund) for the sole purpose of buying shares in issue. I.e., the LBO have as a result that the buyer takes over the heritage of society itself objective or target company the cost of its acquisition. Thus, LBO operations contravendrian the prohibition of financial assistance for the acquisition of shares/shares established in articles 81 of the anonymous and 40 of the law of societies of limited liability companies act.

This prohibition, the legislator seeks to preserve the integrity of the social capital, preventing that this, rather than nourish of external contributions from partners, is financed to the heritage of society itself. The prohibition is intended also to protect the interests of the third creditors, which can adversely their legitimate rights of collection on the occasion of the high indebtedness that financial assistance operations can lead to society. On the other hand, is intended to protect against the majority minority partners and administrators. These may be tempted to facilitate your trusted third party funds of the society so that they acquire shares they need to ensure success of the Board’s deliberations.



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