Confianz

Etiqueta: concurso de acreedores

  • Rights and obligations of insolvency creditors following legislative reform

    When a company cannot pay its debts and declares itself bankrupt, any person or company that has outstanding debts with the bankrupt company is considered a bankruptcy creditor. The reform of the Bankruptcy Law in September 2022 has completely changed the legal landscape. This new regulation strengthens the position of the bankruptcy creditor and creates more effective tools for recovering debts.

    The current law seeks quick solutions before companies are forced to close down permanently. For the insolvency creditor, these changes mean more guarantees and greater involvement in the entire process. It also allows them to actively intervene in decisions that affect the recovery of their money.

    Expanded rights of insolvency creditors under the new legislation

    The reform has considerably strengthened the rights of insolvency creditors. They now have more legal tools to protect their interests and control the development of the insolvency process.

    The first basic right is to provide all the necessary documents proving that the debt actually exists. This documentation must include contracts, invoices, delivery notes or any other evidence confirming the origin of the debt. It must also specify the exact amount, the dates when the debt was incurred and when it was due to be paid.

    The insolvency creditor may request that their debtor be declared insolvent. If they have several debtors belonging to the same group of companies, they may request that all insolvency proceedings be handled together. This measure speeds up the proceedings and avoids duplication of costs and unnecessary paperwork.

    The new law ensures that creditors are publicly notified when insolvency proceedings commence. This information is published in the Official State Gazette, the Public Insolvency Register and the Commercial Register. Once published, creditors have exactly one month to come forward to the insolvency administrator.

    They may also participate in the assessment of the insolvency proceedings. This means that they may provide evidence to demonstrate whether the company acted in bad faith or negligently prior to the insolvency proceedings. If their debt exceeds one million euros or represents at least 5% of the company’s total debts, they may prepare their own assessment report.

    Another important right allows you to submit arguments throughout the process. The insolvency creditor can defend themselves if they disagree with the proposals of the insolvency administrator ( ). They can also oppose agreements that they consider detrimental to their interests.

    Obligations to be fulfilled by the insolvency creditors in the process

    With new rights come specific obligations that the insolvency creditor must respect. These obligations ensure that the process runs smoothly and protect the rights of all parties involved.

    The first fundamental obligation is to respect the agreements reached in the negotiations. Once an agreement has been signed or a settlement reached, the insolvency creditor cannot demand different or additional conditions. This rule provides legal certainty and facilitates the reaching of agreements between the debtor and creditors.

    They must also accept that other persons may pay the debt on behalf of the debtor. For example, if a relative or partner of the debtor wishes to pay the debt, the insolvency creditor cannot refuse. However, they are not obliged to accept that this third party becomes the new debtor.

    When the place where the debt is to be collected changes location, the insolvency creditor may claim compensation for the extra costs this entails. This compensation must cover the additional travel or management costs resulting from the change.

    The insolvency creditor must participate in good faith in the negotiations. They cannot put up unnecessary obstacles or reject reasonable proposals without justified reasons. The law encourages collaboration between the parties to find solutions that benefit everyone.

    Better guarantees for the insolvency creditors in 2025

    Current legislation gives priority to saving viable companies rather than closing them down. Insolvency proceedings seek to obtain the most satisfactory solution possible for all creditors when a company is unable to meet its obligations on a regular basis. For the insolvency creditor, this increases the chances of recovering at least part of what is owed to them.

    The new legal framework encourages debtors and creditors to negotiate before going to court. Early talks and out-of-court settlements have become real and effective alternatives. These solutions reduce legal costs and speed up the resolution of economic disputes.

    The insolvency administrator now plays a more active role in protecting the interests of the insolvency creditor. Their role as mediator facilitates dialogue between the parties and helps to find balanced solutions. This specialised professional intervention significantly improves the outcome of the process.

    When it is impossible to save the company, the new law ensures an orderly and efficient liquidation. The aim is to minimise losses for the insolvency creditor and other interested parties. Procedures have been simplified to reduce administrative costs and make better use of the value of the assets being sold.

    The participation of the insolvency creditor in important decisions is another significant advance. Their opinion counts in votes on restructuring plans and agreements with creditors. This greater participation reinforces the legitimacy of the decisions taken.

    The Public Insolvency Register contributes to improving legal certainty by allowing any insolvency creditor to consult up-to-date information on ongoing proceedings. This transparency facilitates informed decision-making.

    Confianz is a reliable partner to help you navigate this complex legal landscape. Our team of specialised professionals understands the particularities of each insolvency situation. We offer comprehensive advice for both companies in difficulty and creditors who want to protect their rights.

    Confianz’s practical experience in insolvency proceedings ensures a personalised and effective approach. We analyse each case individually to design the best debt recovery strategies. Our goal is to maximise the chances of recovery for the insolvency creditor within the current legal framework.

    You can visit our information channel.

  • The Supreme Court equates dation in payment in insolvency proceedings with forced alienation

    A Supreme Court ruling handed down on 21 October 2024 has put an end to the numerous contradictory jurisprudence that existed until now between the different Spanish provincial courts on the effects on lease contracts when there is a dation in payment in the context of bankruptcy proceedings.

    The Supreme Court has decided that the dation in payment, in the context of an insolvency proceeding, can be equated to a forced disposal. Always bearing in mind that it is a transfer subject to supervision and authorisation by the insolvency judge following approval of a liquidation plan.

    The interpretation of the Law on Urban Leases is extended

    In this case a number of properties had been awarded by way of dation in payment in the bankruptcy proceedings of the landlady. The Supreme Court has confirmed that there are two cases in which the existing lease contract with the previous owner (subsequently bankrupt) must be extinguished:

    1. When these contracts are not registered in the corresponding land register.
    2. When, in addition, the new owner after the dation in payment of these properties is unaware of the pre-existence of tenants. He therefore becomes a bona fide third party.

    Legal certainty is therefore guaranteed in these cases.

    The Supreme Court indicates that article 13.1 of Law 29/1994, of 24 November, on Urban Leases is applicable in this type of case. Even though dation in lieu of payment is not included in the list of this regulation. And it does so because, although this is not one of the cases contemplated in the Law, it can be assimilated to a forced disposal derived from a mortgage foreclosure or a court ruling.

    The judgement makes it clear that, in a dation in payment in the context of insolvency proceedings, the debtor’s voluntariness does not play any part whatsoever. We are therefore dealing with a compulsory alienation. This ruling guarantees legal stability in these cases, where until now, clients were forced to recognise leases that were not registered in the Land Registry. All for the simple fact of having acquired the property in an insolvency proceeding and not in a judicial auction.

    Conclusion on dation in lieu of payment in bankruptcy proceedings 

    In its decision, the Supreme Court starts from the interpretations of the precept already made in previous case law. Such as STS 577/2020 of 4 November, 109/2021 of 1 March and 379/2021 of 1 June. In them, it has already declared that, when there is a forced alienation of a property whose lease is not registered, the loss is produced by extinction of the title that legitimised the possession of the occupants. Therefore, the lessor’s right is terminated whenever there is a loss of the right over the property that allowed the owner to lease it.

    The Supreme Court therefore concludes that the dation in payment can be equated to the forced disposal derived from a foreclosure. Especially because it takes place within the framework of a universal process in which an alienation of assets is carried out. The same requirements implicit in the aforementioned article 13.1 of the Urban Leasing Act are therefore met. This is because a transfer of the right to the property that allowed the owner to lease it is assumed by means of the corresponding judicial authorisation. Thus, leases that have not been entered into the Land Registry beforehand will be automatically extinguished.

  • Is buying a company in insolvency proceedings a good idea?

    Certainly, acquiring a company in insolvency is not an investment for everyone. However, the boldest can find unique opportunities in this market. Companies that, although now in distress, have a strong legacy on which they can build to overcome these difficulties. This is a great opportunity for potential buyers to gain access to their assets at a reduced price, restructure the company, adapt it to current needs and return it to profitability.

    Within the uncertainty inherent to this type of operation, in this article we review how to buy a company in insolvency proceedings with maximum guarantees of success.

    Comprehensive preliminary assessment

    Before embarking on the purchase of a company in insolvency proceedings, the first step is to carry out a thorough preliminary assessment to determine the potential of the investment and identify the risks involved. To this end, it is important to review any documentation that may be relevant: the latest financial reports, minutes of the administrative and management bodies, etc.

    Identifying the causes of insolvency

    When assessing the purchase of a company in insolvency proceedings, perhaps the most important point is to evaluate the causes that have led it into insolvency. To analyse whether it is a viable company, it is not the same whether its difficulties are due to structural problems, whether they are the result of poor management by the management team, the appearance of new competitors…

    Analyse the debt structure

    The Insolvency Act establishes a certain order in the payment of creditors. In order to negotiate with them, it is therefore essential to analyse the structure of the company’s debt: its total debt, the hierarchy of creditors and the conditions of the credits.

    Analysis of the assets of the company in insolvency proceedings

    The chances of recovering the investment will depend to a large extent on whether the assets of the business are liquid or whether they will be difficult to sell. Another point to clarify is whether the core business assets are encumbered by liens or encumbrances.

    Review of existing contracts

    • In the case of existing contracts with customers and suppliers, it is essential to know whether they are transferable after the acquisition.
    • With regard to existing contracts with employees, it should be noted that the acquisition usually entails the subrogation of employment responsibilities. The purchaser must be prepared to assume the obligations in terms of wages, severance and other labour rights.

    Full due diligence

    In order to minimise risks, it is essential to carry out a complete due diligence including all commercial, legal and financial aspects. This process identifies each and every burden and liability of the company and assesses its viability. The legal review should cover, among others, ongoing litigation and possible tax contingencies.

    Drawing up a realistic viability plan for the company in insolvency proceedings

    A realistic viability plan based on sound financial projections must be drawn up before the purchase is initiated. Because this will be the key document in the negotiation with the insolvency administration and creditors.

    In short, the purchase of a company in insolvency proceedings is an investment for investors with a high risk profile. The uncertainties are many, but with a thorough preliminary assessment and advice from a team of insolvency and M&A specialists, it is possible to find excellent opportunities.

  • BEPI: how the employer can claim the benefit of exoneration of unsatisfied liabilities

    Within the insolvency field, the Benefit of Exoneration of Unsatisfied Liabilities or BEPI is a legal tool that provides relief to entrepreneurs (and any natural person in general) who find themselves in a situation of insolvency. With it, the entrepreneur can be totally or partially released from debts that he or she is unable to pay, provided that the established requirements are met. Thus, the BEPI represents an exception to the principle of universal patrimonial liability of the debtor established in Article 1911 of the Civil Code, which states that the debtor is liable with all his present and future assets for the fulfilment of his obligations.

    Objective of the BEPI

    The purpose of the BEPI is, as stated in the Explanatory Memorandum of the Second Chance Law: «to allow a natural person, despite a business or personal economic failure, to have the possibility to get his or her life back on track and even to risk new initiatives, without having to carry around indefinitely a burden of debt that he or she will never be able to pay off».

    How does BEPI work?

    The BEPI is regulated in Articles 486 to 502 of Royal Legislative Decree 1/2020 of 5 May and has two possible modalities or regimes:

    • General or immediate payment regime: this involves the payment at the same time of a minimum amount of credits with the income generated by the liquidation of the debtor’s attachable assets.
    • Special Regime or subject to a payment plan: allows an initial partial exoneration of unsatisfied debts. Subsequently, the debtor must comply with a deferred payment plan approved by the insolvency judge.

    Eligibility for the benefit of exoneration of unsatisfied liabilities

    Subjective requirement: requirement of good faith

    As mentioned above, the debtor-entrepreneur can only qualify for the benefit of the waiver of unsatisfied liabilities if he has acted in good faith. To prove this, two conditions must be met:

    – The insolvency proceedings must not have been declared guilty. In practice, this requirement means that the BEPI can only be applied for once the debtor has already tried to resolve his payment difficulties by all means. In addition, he has had to prove that the insolvency proceedings are fortuitous. This is intended to provide maximum guarantees for creditors. The only exception foreseen for this condition is that the insolvency proceedings have been declared guilty because the debtor has failed to comply with the duty to apply for the declaration of insolvency in a timely manner. In this case, depending on the circumstances of the delay, the judicial authority may grant the BEPI.

    – The debtor has not been convicted of offences related to dishonesty in business activity in the ten years prior to the declaration of insolvency proceedings. This includes offences against assets, against the socio-economic order, forgery of documents, against the Public Treasury and Social Security or against workers’ rights.

    Objective requirements

    As for the objective requirements, in order to obtain the benefit of exoneration of unsatisfied liabilities, it is necessary:

    • That in the insolvency proceedings all claims against the insolvency estate and privileged insolvency claims have been paid in full.
    • The debtor has concluded or attempted to conclude an out-of-court payment agreement with the creditors. Even if the agreement is not reached, is not complied with, is annulled or is terminated early for a reason not attributable to the debtor’s wilful misconduct or negligence. Only if the out-of-court payment agreement is terminated due to the debtor’s withdrawal will it be deemed not to have been attempted. Even in this case, the entrepreneur still has a chance to obtain the BEPI if in the insolvency proceedings he has satisfied the claims against the insolvency estate, the privileged claims and at least 25% of the ordinary insolvency claims.

    If you are an entrepreneur and you are facing insolvency proceedings, Confianz can advise you so that you do not put your personal assets at risk.

  • Alternatives to insolvency proceedings: restructuring plans and sale of the production unit

    Insolvency proceedings are not the only option available to a company facing insolvency difficulties. Restructuring plans before and the sale of the production unit after the insolvency proceedings are two options to be considered in order to achieve the company’s continuity.

    In this article we analyse the pros and cons of these alternatives to insolvency proceedings, a solution that still unfairly suffers a great deal of negative stigma and is often seen more as a way to dismantle the business than as a tool for its survival after a difficult transitional period.

    Restructuring plans: the pre-bankruptcy option

    The latest insolvency reform gives great weight to restructuring plans, consisting of pre-insolvency agreements of the debtor with its creditors or of the creditors and binding on the debtor. However, in the time that the new rules have been applied, successful restructuring plans have been scarce in comparison with the number of insolvency proceedings.

    This is primarily because restructuring plans face a number of constraints:

    • The court’s protection periods for debtors are short, so it is necessary to act quickly.
    • They cannot affect labour credits or practically public credits, which affect the majority of Spanish companies in insolvency. The most common situation is that companies in difficulties are in a situation of non-payment of debts with the AEAT, TGSS and salaries.
    • They involve a significant investment in the services of lawyers and restructuring experts, whose fees are not regulated.

    In any case, the pre-bankruptcy mechanism of debt restructuring through a restructuring plan is an option to be taken into account due to its viability for medium and large companies.

    Sale of the production unit in liquidation: the post-bankruptcy option

    When the insolvency proceedings fail and the insolvency agreement is not approved, there is still the possibility of selling the production unit in liquidation. This is an option that has grown significantly in the last year.

    The sale of the production unit is a judicial procedure whereby all the assets inherent to an economic activity (material means, machinery, intangible assets, employees, etc.) are sold. The buyer does not assume the company’s debts prior to the transfer, whether they are bankruptcy debts or debts against the insolvency estate. The liabilities remain with the insolvent company unless the purchasers of the production unit are partners, administrators or relatives of the insolvent company.

    Conditions for selling the production unit

    The conditions for the sale of the production unit are as follows:

    • The company has to be operational.
    • The sales proposal should be public in order to get the best possible offer.

    What is a production unit

    It is essential to identify and delimit the scope of the production unit to be transferred. A production unit is understood as an economic entity with a set of means organised for the purpose of carrying out an essential or ancillary economic activity.

    Therefore, with the sale of the production unit we can save part of the company, that which is profitable.

    When to sell the production unit

    In reality, the possibility of selling the production unit is not limited to the moment of liquidation of the insolvency proceedings. It can also be done in the common phase of the insolvency proceedings and even in the application itself. This must include a binding written proposal for the purchase by a creditor or third party. The aim should always be to take measures to save the company as soon as possible, at an early stage. If your company is in insolvency difficulties, please contact us as soon as possible for personalised advice.

  • Can a company in insolvency proceedings continue its business?

    The reform of the Insolvency Act seeks to safeguard both the interests of creditors and the rights of debtors. This means that, in principle, companies that are forced to file for insolvency proceedings in order to resolve their insolvency situation do not have to interrupt their activity for the duration of the insolvency proceedings.

    Without prejudice to the precautionary measures that may be adopted by the judge when declaring the insolvency proceedings to guarantee the correct development of the insolvency proceedings and to protect the rights of the creditors, the insolvent party may carry out the acts that are essential for the continuation of its business activity. Even if the liquidation phase is reached, the law allows the continuation of the debtor’s professional or business activity if this is in the interests of the insolvency proceedings.

    However, this decision is subject to the approval of the insolvency judge. The ultimate goal is always to reconcile the interests of the insolvent party and the creditors, ensuring the proper development of the insolvency process and the satisfaction of legal obligations.

    Conditions

    In order to be able to continue the business during the insolvency proceedings, a number of conditions must be met:

    • The insolvent company must accept the insolvency administration. This will be responsible for supervising its actions to ensure compliance with legal obligations and to protect the interests of creditors.
    • It may only continue with those acts which are indispensable for the continuation of its business.
    • These acts must be in line with normal market conditions, must not harm the interests of creditors and must be subject to the supervision and control of the insolvency administration and the insolvency judge.

    Voluntary vs. necessary insolvency proceedings

    The conditions change depending on whether the insolvency proceedings are voluntary or necessary:

    • In voluntary insolvency proceedings, the insolvent company retains the powers of administration and disposal of its assets, but always under the supervision of the insolvency administration.
    • In an insolvency proceeding, the insolvent company’s powers of administration and disposal of its assets are suspended. These are taken over by the insolvency administration. It is the insolvency administrator who is responsible for the continuity of the company’s business activity.

    What does the supervision of the insolvency administration and the insolvency judge consist of

    The scope of intervention only extends to the assets and rights that are part of the insolvent party’s assets. However, at the request of the insolvency administrator, the judge may, at any time, issue a court order changing or even suspending the insolvent party’s powers over its assets. In this case, the insolvency administrator replaces the insolvent party in the exercise of his powers.

    The general authorisation of the administrator

    In order to speed up the acts, the Insolvency Act also provides for a general authorisation of the administrator for the acts or operations that are intervened. This avoids the administrator having to authorise each and every one of the specific acts that the insolvent party has to carry out.

    However, the acts remain under the supervision and subsequent control of the insolvency administrator. He can annul acts that have not been authorised. Either on his own initiative or at the request of creditors who have been affected by them.

    In a nutshell

    The ultimate aim of the Insolvency Act is to safeguard both the rights of debtors and the interests of creditors. To this end, it creates a regulatory framework that allows the continuity of professional or business activity during insolvency proceedings. However, provided that the established requirements are met and the acts are subject to the supervision of the insolvency administrator.

    If your company is close to filing for insolvency proceedings, Confianz’s specialist team can help you get through it in the best possible way.

  • Rights and obligations of the insolvency creditor

    When a company in difficulty files for bankruptcy, any natural or legal person to whom the company owes debts is considered a creditor in bankruptcy.

    To remedy this situation, the reform of the Insolvency Act launched in September 2022 establishes new debt cancellation mechanisms that aim to provide greater protection to both insolvency creditors and debtors.

    With this objective in mind, the new Insolvency Law seeks an early solution and introduces mechanisms to resolve potential problems of default by companies as quickly and efficiently as possible. To this end, it gives the insolvency creditor the opportunity to participate in the negotiations to obtain its money. If both parties do not reach an agreed solution, the insolvency creditor must participate in the insolvency proceedings. In this respect, it should not be forgotten that in the insolvency proceedings it is also a priority to avoid, whenever possible, that the debtor loses all economic stability and is forced to liquidate his assets. If the debtor’s situation is insurmountable, insolvency law provides the necessary legal tools so that the debtor can make an orderly exit from the market by carrying out a liquidation with the least possible impact for all parties involved.

    Rights of an insolvency creditor

    The reform of the Insolvency Law grants more participation and prominence to the insolvency creditor, who has a series of legal protections. Their most important rights are:

    • Submit all relevant documentation proving that a debt does indeed exist. All parties adversely affected by the debtor’s insolvency must be accredited in accordance with the law in order to participate in the negotiations. Ideally, this should be done through evidence showing the origin, nature, amount, acquisition and maturity dates of the claim.
    • Apply for a declaration of insolvency of your debtor.
    • If several of your debtors are part of the same corporate group, the insolvency creditor can apply for a joint court declaration.
    • To be able to know the declaration of the commencement of the insolvency proceeding in a public manner in order to have the opportunity to participate in it. This pronouncement is called the order of declaration of insolvency and must be published in the Official State Gazette, in the Public Insolvency Register and in the Commercial Register. After this publication, creditors have a period of one month to file with the insolvency administration.
    • Send by e-mail to the insolvency administration any documents it considers relevant to support the classification of the insolvency proceedings as guilty.
    • Appearing in the qualification phase of the insolvency proceedings, even when the insolvency administrator issues the report on the insolvency proceedings, in order to defend this position.
    • Creditors who have made allegations and whose debt exceeds one million euros or represents at least 5% of the total liabilities of the insolvent company may file a qualification report.

    Obligations of creditors in bankruptcy

    In order to carry out the insolvency proceedings, the insolvency creditors must comply with the following obligations:

    • Respect what is established in the negotiations and do not demand other conditions.
    • Accept payment from third parties to settle the debt. However, you are not obliged to subrogate the debt.
    • Pay compensation to the debtor in the event of a change in the debtor’s address where payment is due.

    Whether your company is about to file for bankruptcy or you are acting as a creditor in bankruptcy, the team of professionals at Confianz can advise you and help you to overcome these difficulties in the best possible way.

  • The duty of cooperation and information in insolvency proceedings

    One of the conditions for achieving the forgiveness of debts in an insolvency proceeding is that the debtor complies with his duties of cooperation and information. He must do so with respect to both the insolvency judge and the insolvency administration. What is more, non-compliance will not only prevent the debtor from being exonerated from unsatisfied liabilities, but the insolvency proceedings will also be presumed to be guilty.

    The reform of the Insolvency Act requires an assessment of the good faith of the insolvent party in its cooperation with the supervisory agents of the proceedings. In practice, this translates into the provision of documents that faithfully reflect their economic situation and the reasons for insolvency. Documents such as annual accounts, company minutes…

    Who must comply with the cooperation and reporting requirements

    In the case of a natural person, the duties of collaboration and information are incumbent on the insolvent party itself. In the case of legal persons, they fall on the administrators or liquidators and those who have held these positions within the two years prior to the declaration of insolvency. This two-year margin has been added to prevent the insolvent party from evading the duty to provide information by claiming ignorance of the company’s past.

    Article 135 of the revised text of the Insolvency Act specifies that these persons «have the duty to appear in person before the court and before the insolvency administration whenever they are required to do so and to collaborate and provide any information necessary or convenient for the interests of the insolvency».

    How to obtain debt relief 

    It is essential, even before filing for insolvency proceedings, to carry out a thorough analysis of all available documentation and of the causes that have led the debtor to become insolvent.

    The debtor must provide truthful information from the very moment he applies for the declaration of insolvency proceedings. Even more so if he intends to opt for the exoneration of unsatisfied liabilities. Already in this first phase of the insolvency proceedings, he must provide all the documents that prove and justify his insolvency situation. It is better to err on the side of completeness than to omit information that may initially seem minor. Because later on they may prove to be transcendental in the insolvency proceedings.

    It is the insolvency judge and the insolvency administrator, if appointed, who will assess the debtor’s good faith and ultimately consider whether the debtor deserves to be exonerated. For this reason, the insolvent party must adopt a fully collaborative and transparent attitude. To this end, it will provide the supervisory agents with as much information as possible.

    Consequences of breaching the duties to cooperate and to inform

    In the event that the judge and the insolvency administrator consider that there has been a lack of cooperation and information on the part of the debtor, they will not only prevent the debtor from being exonerated from his debts. In addition, they may also declare the insolvency proceedings guilty. This is an additional impediment. Because the administrator of the company may lose any rights it has in the insolvency proceedings, be ordered to cover the deficit and be ordered to pay damages.

    At this point, it is worth remembering a change that occurred with the implementation of the insolvency reform. The judge now has to classify the insolvency proceedings as fortuitous or culpable in all cases. There is no longer any exception in this sense, which gives more weight to the creditors.

    In order to bring the insolvency proceedings to a successful conclusion and obtain debt exemption, it is essential to have a consultancy firm specialised in insolvency law such as Confianz from the outset.

  • 72 key hours for a company to exonerate its debts with Social Security and Tax Authorities

    The new Insolvency Act provides companies with fewer than ten employees and a turnover of less than two million euros that are in difficulties with the possibility of opening a special continuation procedure. This procedure may allow them to exonerate their debts with the Social Security and Tax Authorities for a maximum value of 10,000 euros in each case.

    This is an important advantage over the previous legislation, which set the limit at €1,000 of debt owed to each public entity. However, this possibility is subject to some conditions and it is important to act quickly.

    Micro-enterprises in insolvency proceedings may lose their exemption if they do not inform the Adminstration

    72 hours from the request to open a special continuation procedure. This is the deadline for companies to inform the Social Security and Tax Authorities, according to a recent publication on the Social Security website. Otherwise, they could lose the right to exonerate their public debts.

    This is a very relevant issue in a procedure of this type. Failure to notify the opening of insolvency proceedings to the administration, or failure to do so in time or correctly following the established channels, may mean that the company loses the right to the reductions and waivers resulting from the special continuation procedure.

    Exemption of up to 20,000 euros on public debts of companies

    And these exonerations could amount to a total of 20,000 euros (10,000 euros for the Treasury and another 10,000 euros for the Social Security). Specifically, the new Insolvency Law foresees that the exoneration of public debts will be 50% of the total amount owed to the Administration and without being able to exceed 10,000 euros per entity. In other words, the company can only reach the maximum of 20,000 euros if it has outstanding obligations of more than 20,000 euros with the Tax Authorities and more than 20,000 euros with the Social Security.

    How to inform Social Security of the opening of special bankruptcy proceedings

    The Social Security has set up an online service through which microenterprises that are in special insolvency proceedings and have debts with the General Treasury can notify this situation.

    The basic condition is that the initiation of the special continuation procedure has been requested not earlier than 72 hours before.

    How to obtain discharge of public debt in special bankrupcy proceedings

    In order to be exonerated from its public debts, the microenterprise must prove its indebtedness through a special bankruptcy procedure. In order to facilitate this procedure, a procedure consisting of a digital test was launched on 9 January.

    This new insolvency platform allows microenterprises to communicate directly with the commercial courts. For example, it makes it easier for them to file the various standard forms. In this way, the information arrives and can be stored by the Commercial Registry or by the competent court, speeding up the procedures.

    There are two requirements for companies wishing to initiate the fast-track procedure:

    • Have an average of less than 10 workers over the previous year.
    • Have recorded a turnover of less than 700,000 euros and liabilities of less than 350,000 euros during the previous year.

    If your company is in difficulties and you are facing the filing of a special insolvency proceeding, Confianz can advise you throughout the whole process.

  • How to declare the insolvency proceedings culpable under the new insolvency law

    Among the many changes introduced by the recent Reform of the Insolvency Act, today we are going to highlight those related to insolvency liability. That is to say, the liability that can be derived from the administrator. Because the new law now establishes a series of actions and breaches by the administrator in order to classify the insolvency proceedings as culpable.

    The first important change is that now the judge must always, in all cases, classify the insolvency proceedings as fortuitous or culpable. Until now there were exceptions. This opens the door to greater power on the part of creditors to have the insolvency proceedings declared culpable.

    As a result of his declaration of guilt, the administrator of the company in insolvency proceedings may be ordered to cover the deficit and to pay damages. He may also lose any rights he has in the insolvency proceedings.

    When an insolvency proceeding is classified as culpable

    In the event of classifying the insolvency proceeding as culpable, the judge must specify the cause or causes on which this classification is based.

    The insolvency proceedings are classified as culpable and, therefore, the insolvency liability of the administrators may be declared when in the generation or aggravation of the company’s insolvency situation there has been fraud or gross negligence on the part of the debtor, its administrators or liquidators, de jure or de facto, general directors and those who, within the two years prior to the date of the declaration of insolvency proceedings, have held any of these conditions.

    What actions may lead the classification of bankruptcy as culpable bankruptcy

    The law specifies a series of actions and breaches that the administrator may commit and that justify the classification of the insolvency proceedings as culpable when the debtor:

    • Has taken all or part of his assets to the detriment of his creditors.
    • Delays, hinders or prevents the effectiveness of an attachment in any kind of enforcement which has been or is likely to be initiated.
    • Perform any legal act aimed at simulating a fictitious asset situation prior to the declaration of insolvency.
    • Submitting false or seriously inaccurate documents in the application for the declaration of bankruptcy or during its processing.
    • Is in material breach of the obligation to keep accounts, is guilty of double bookkeeping or commits any irregularity which makes it difficult to understand its assets and liabilities or financial position.
    • Where assets or rights have been fraudulently removed from its assets in the two years preceding the date of the declaration of bankruptcy.
    • When the opening of the liquidation has been agreed ex officio due to non-compliance with the agreement due to a cause attributable to the insolvent party.

    Presumption of guilt

    Similarly, the new Insolvency Act also provides for three situations in which the insolvency proceedings are presumed to be culpable, but evidence to the contrary is permitted: 

    • When the debtor has failed to comply with the duty to apply for the declaration of insolvency.
    • When the debtor has breached the duty to cooperate throughout the insolvency proceedings. For example, he does not provide the necessary information or does not attend the creditors’ meeting in situations where his participation is decisive for the adoption of the arrangement.
    • When the debtor legally obliged to keep accounts has failed to comply with its duties in any of the last three financial years prior to the declaration of insolvency. These are: to draw up the annual accounts, submit them to audit if necessary and deposit them in the Commercial Register or in the corresponding register.