Reform of Spain's insolvency law to speed up and improve the process

Automatic summary, not yet reviewed

1. Companies may notify the court that they are negotiating a refinancing agreement with their creditors. While that notice is in force (up to three months), they are not required to file for insolvency themselves.
2. The law regulates court approval (homologation) of refinancing agreements: if creditors holding at least 75 percent of financial liabilities sign it, the judge can extend the agreed waiting period to financial institutions that did not take part.
3. The insolvency administration will have a single member (a lawyer, economist, mercantile expert or auditor with five years of experience), though in especially significant proceedings a significant creditor is added. Legal entities may also act as insolvency administrators.
4. A new chapter on connected insolvency proceedings is created: related debtors (spouses, partners, groups of companies) may file jointly or have their proceedings consolidated and handled in a coordinated way.
5. Worker protection is strengthened: collective proceedings to suspend, terminate or modify contracts will be handled by the insolvency court with a consultation period, and the Wage Guarantee Fund will pay and be subrogated to salary claims.
6. A shortened procedure is created for non-complex insolvencies (fewer than 50 creditors, liabilities or assets of up to 5 million euros), with shorter deadlines for the report and liquidation.
7. Quick closure of assetless proceedings is made easier: an order of payment for claims against the estate is set when assets are insufficient, and closure for lack of assets is regulated in detail.
8. Sports entities in insolvency remain subject to the sports rules governing participation in official competitions, and the Government must send Parliament within six months a bill on insolvency of professional sports companies.

Who it affects

• Companies in distress: They can negotiate refinancings before insolvency, use a faster and cheaper shortened procedure, or liquidate early.
• Creditors of insolvent companies: They must file their claims in writing or electronically, and if they sign refinancing agreements a judge may extend them to others.
• Workers of insolvent companies: Collective dismissals and modifications will be handled by the insolvency court, and the Wage Guarantee Fund will pay and take over salary and severance claims.
• Directors and auditors of insolvent companies: They may face precautionary attachment and be ordered to cover the shortfall if the proceeding is found culpable.
• Sports clubs and companies: Insolvency will not exempt them from meeting the financial rules required to take part in official competitions.

Words worth knowing

Concurso de acreedores

Spanish court proceeding for a company or person that cannot pay its debts, in which assets are distributed among creditors or a payment plan is agreed.

Refinanciación

Refinancing: an agreement between a company and its creditors to reorganize debts, for example by extending deadlines or providing new money.

Masa activa

The set of assets and rights of the debtor used to pay creditors.

FOGASA

Wage Guarantee Fund: a public body that pays workers the wages and severance the insolvent employer cannot cover.

Calificación del concurso

The judge's decision on whether the insolvency was culpable (due to mismanagement or fraud) or fortuitous, with consequences such as disqualifications.

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