Businesses in Spain that encounter various financial problems can initiate the bankruptcy procedures as means of dealing with those issues. Spanish companies also have alternative methods to deal with debt, before filing for bankruptcy.
Our law firm in Spain can offer you solutions and advice for any financial or debt issues you might encounter while running a business in the country. When dealing with foreclosure or liquidation, company owners can rely on the help and expertise of a Spanish lawyer who can negotiate with the creditors and handle all the debt collection procedures.
Who can file for bankruptcy in Spain?
The parties that can initiate bankruptcy proceedings in Spain are the following:
- the debtor – the individual or entity facing financial difficulties and seeking relief from debts;
- creditors – those to whom the debtor owes money;
In situations when the debtor is a legal entity and its shareholders have personal liability for the company’s debts (for example in a partnership), they have the right to initiate bankruptcy proceedings.
In the last case, our Spanish lawyer could act as a mediator to assist the debtor and creditors in reaching an out-of-court agreement on payments and resolving financial issues. If these efforts are unsuccessful, he/she might be authorized to initiate bankruptcy in Spain.
In cases when a person has passed away and left behind an estate with outstanding debts, creditors, heirs of the deceased debtor or the administrator of the estate can initiate bankruptcy proceedings. Our real estate lawyers in Spain can help in this situation.
When do Spanish companies need to file for bankruptcy?
Spanish companies may be declared bankrupt if they are no longer able to fulfill their obligations towards their creditors, if they fail to pay loans or their business partners or fulfill other types of financial obligations. Individuals can also be declared bankrupt and this is applicable in case of small business types, like the sole proprietorship where the assets of the individual are the same as the company’s.
There are two types of bankruptcy in Spain:
– voluntarily: when the debtor files for bankruptcy himself;
– mandatory: when the creditor or other parties file for bankruptcy.
The company in debt must file for bankruptcy within two months after it became insolvent. One of our lawyers in Spain can help you with either one of these procedures.
What is the bankruptcy procedure in Spain?
The bankruptcy procedure starts by filing a petition with the Commercial Court (also referred to as the Mercantile Court) belonging to the company’s registered address. The petition is filed in writing and it is accompanied by other relevant documents. The company must observe the two month time-frame for filing for insolvency but there is no time limit for creditors or shareholders who want to file this petition, provided that there are reasonable motives to file such a claim against the company.
Once the court determines that insolvency has been established, it will issue an order declaring bankruptcy in Spain for the company in case. This order will specify whether the bankruptcy is voluntary or involuntary. The order will detail the effects on the debtor’s ability to manage and dispose of its assets.
In some cases, there may be temporary restrictions placed on the debtor’s assets to prevent them from being transferred, sold, or disposed of while the bankruptcy proceedings are underway. This helps to ensure that the assets remain available for distribution among creditors. Please contact our attorneys in Spain if you find yourself in this situation.
After declaring bankruptcy, the court will invite creditors to provide evidence of the debts they are owed by the debtor. This is a crucial step in the process of determining how the debtor’s assets will be distributed among creditors.
The order declaring bankruptcy must be published in the public register of bankruptcies. An excerpt from the order must also be published in the national Official Gazette as soon as possible. Our bankruptcy lawyers in Spain can explain more about this process.
Pre-bankruptcy framework in Spain
In September 2022, there was a new reform introduced intended to align Spanish law with the EU Directive 2019/1023. Our bankruptcy lawyers in Spain can detail more about the new reform if you are interested to learn more.
The reform aims to motivate individuals or companies to take action to restructure their financial obligations at an earlier stage when they start facing difficulties, rather than waiting until they are on the brink of bankruptcy. During this pre-bankruptcy period, creditors are restricted in their ability to take actions, such as seizing assets or forcing the debtor into insolvency through legal petitions.
The reform also involved other types of creditors as well. This could include trade creditors, suppliers, service providers, employees, and various stakeholders who are owed money or have claims against the debtor. By expanding the involvement of different types of creditors, the restructuring process becomes more inclusive and considers a wider range of perspectives and interests.
Our Spanish lawyers advise you to contact us if you wish to file for bankruptcy, in order to be aware of the newest changes and regulations.
Regarding the subject of bankruptcy in Spain, here are some statistics about the proceeding, according to The Spanish National Statistics Institute in the fourth quarter of 2020:
- A total of 2,987 debtors underwent bankruptcy procedures;
- 1,488 individuals involved in bankruptcy or insolvency proceedings did not have any business activity associated with them;
- There were 1,499 bankrupt companies.
Our lawyers can also help you if you are a Spanish business owner who acted as the creditor for a company and need to secure any unpaid or outstanding debts.
Contact our law firm in Spain if you need any more information regarding foreclosure and the laws for insolvency and bankruptcy in Spain.