Insolvency Law at Spain
Spain's insolvency framework is governed by the Royal Legislative Decree 1/2020, which consolidated and reformed the previous Insolvency Act (Ley Concursal 22/2003). This legislation, amended by Law 16/2022, aims to provide a comprehensive system for addressing both corporate and individual insolvencies, with a strong emphasis on restructuring and creditor protection. (Restructuring and insolvency law in Spain | CMS Expert Guides, Comparisons | Global Practice Guides | Chambers and Partners)
⚖️ Key Features of Spain's Insolvency Law
1. Initiating Insolvency Proceedings
Voluntary Proceedings: Initiated by the debtor when they are unable to meet their payment obligations.
Compulsory Proceedings: Initiated by creditors or other legitimate parties, provided they can substantiate the debtor's insolvency.
Mandatory Filing: Debtors must file for insolvency within one month of becoming aware, or when they should have become aware, of their insolvency status. (Restructuring and insolvency law in Spain | CMS Expert Guides, Restructuring and insolvency law in Spain | CMS Expert Guides)
2. Types of Insolvency Proceedings
Ordinary Proceedings: Standard insolvency procedures applicable to most entities.
Special Proceedings for Microenterprises: Tailored for businesses with fewer than 10 employees and annual revenues under €700,000, aiming for simplified and expedited processes. (Restructuring and insolvency law in Spain | CMS Expert Guides)
3. Restructuring Plans (Planes de Reestructuración)
Judicial Homologation: Restructuring plans must be approved by the court to be enforceable, even against dissenting creditors.
Creditor Classes: Creditors are grouped into classes based on the nature of their claims, allowing for tailored negotiations.
Transparency: Debtors are required to provide detailed financial disclosures to facilitate informed decision-making by creditors and the court. (Insolvency 2024 - Spain | Global Practice Guides | Chambers and Partners)
4. Liquidation Proceedings
Asset Realization: Insolvent entities may enter liquidation, where assets are sold off to satisfy creditor claims.
Priority of Claims: Creditors are paid in a specific order, with secured creditors receiving payment first, followed by preferential, ordinary, and subordinated creditors. (Restructuring and insolvency law in Spain | CMS Expert Guides)
5. Pre-Insolvency Measures
Insolvency Mediation (Acuerdo Extrajudicial de Pagos): A voluntary, out-of-court procedure where a mediator assists the debtor and creditors in reaching an agreement.
Court Notification: While the court does not supervise these negotiations, it must be informed of the initiation of such proceedings. (Commencing the Process | Spain | Global Restructuring and Insolvency Guide | Baker McKenzie Resource Hub)
🏛️ Court Involvement and Procedures
Competent Court: Insolvency proceedings are overseen by the Commercial Court of the debtor's center of main interests.
Debtor's Management: In the early stages, the debtor retains control, but an insolvency administrator may be appointed to oversee operations.
Public Disclosure: Insolvency declarations are published in the Official Gazette and the Spanish Public Insolvency Register to inform creditors and other stakeholders. (Insolvency or bankruptcy - Insolvency and liquidation of companies - Starting, running and closing a business - Business - Your rights and obligations in the EU - Tu espacio europeo - Punto de Acceso General, Restructuring and Insolvency in Spain 2024)
📊 Trends and Developments
Reform Impact: The 2022 reform introduced more flexible and creditor-friendly restructuring tools, aiming to facilitate early intervention and preserve business viability.
Efficiency Gains: The average duration of insolvency proceedings has decreased, reflecting improvements in procedural efficiency. (First Year of Implementation of the Bankruptcy Reform in Spain | Restructuring plans, Comparisons | Global Practice Guides | Chambers and Partners)
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