Help for local governments to pay their debts to suppliers

Automatic summary, not yet reviewed

1. This creates a mechanism so that local entities can cancel their outstanding debts to suppliers of works, supplies or services. Only debts that are due, liquid and enforceable, with an invoice registered before January 1, 2012, and from contracts covered by the Public Sector Contracts Law, qualify.
2. Local entities must send the Ministry of Finance, before March 15, 2012, a certified list of those debts, with supplier details and amounts. Suppliers can check whether they are on the list and request an individual certificate if they are not.
3. If a civil servant fails to issue the required certificates or communications, it counts as a very serious offense under the public employee law.
4. Local entities that want to join the mechanism must approve an adjustment plan before March 31, 2012, which the Ministry of Finance will assess within 30 days. A favorable assessment authorizes the long-term borrowing operation.
5. Payment to the supplier extinguishes the local entity's debt, including interest and costs. The mechanism may prioritize based on the discount the supplier offers, whether the debt is in court, or its age, and may set minimum discounts and tracks for small and medium-sized businesses and self-employed workers.
6. If the entity does not take out the loan or fails to pay it, the Ministry may withhold its share of State taxes to collect the debt.

Who it affects

• Local entities (municipalities and other local entities) with outstanding debts to suppliers: They must send the certified information, approve an adjustment plan, and can join the financing mechanism.
• Suppliers, contractors and self-employed workers with unpaid invoices from local entities: They can check whether they are on the certified lists, request individual certificates, and get paid through the mechanism.
• Auditors (interventores) and civil servants of local entities: They must issue certificates and communications; if they fail to do so, they commit a very serious offense.
• Credit institutions: They enable suppliers to collect payment and issue the payment receipt document.

Words worth knowing

Vencida, líquida y exigible (due, liquid and enforceable)

The debt is already payable, its amount is clear, and the creditor can demand payment.

Plan de ajuste (adjustment plan)

A document where the local entity explains how it will balance its income and spending to pay the debt.

Operación de endeudamiento (borrowing operation)

A long-term loan that the local entity can take out to pay its suppliers.

Interventor (local auditor)

The civil servant who oversees and certifies the municipality's accounting and spending.

Silencio positivo (positive silence)

If the local entity does not answer a certificate request in time, the right to collect is deemed recognized.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries