Pre-Insolvency & Express Insolvency Lawyers in Spain

WHEN SHOULD I FILE FOR INSOLVENCY OR PRE-INSOLVENCY PROCEEDINGS?

Josep Conesa. employment lawyer (Barcelona)

Written by Josep Conesa

Employment and insolvency lawyer

Find out more

WHEN THERE IS A RISK OF INSOLVENCY:

1. The debtor is unable to meet payments in general.

2. There are attachments that broadly affect the debtor's assets.

3. Three months of widespread non-payment of:

tax obligations.
Social Security contributions
wages and severance payments owed to employees

Full information on pre-insolvency proceedings

WHEN SHOULD I BEGIN PRE-INSOLVENCY PROCEEDINGS?

TIMELINE FOR PRE-INSOLVENCY PROCEEDINGS: ARTICLE 5 BIS OF THE INSOLVENCY ACT

Both insolvency and pre-insolvency proceedings must be notified within two months of the moment the debtor knew or ought to have known of their insolvency. The debtor must invoke the Insolvency Act and give notice of either:

- A pre-insolvency situation

- A direct application for creditor insolvency proceedings.

COURT NOTIFICATION OF PRE-INSOLVENCY PROCEEDINGS

The pre-insolvency communication under Article 583 of the Insolvency Act (formerly Article 5 bis) must be filed within two months of the moment the debtor knew or ought to have known of their insolvency. The debtor must invoke the Insolvency Act and give notice of:

- Pre-insolvency situation

- Filing directly for creditors' voluntary arrangement (concurso de acreedores).

Nueva llamada a la acción Assess whether you are in an insolvency situation

Filing a pre-insolvency notice involves informing the Court that the debtor has reached, or is in the process of reaching:

Refinancing agreement (Article 71 bis.1 and Fourth Additional Provision)
Advance proposal for an insolvency arrangement (on the terms set out in the Insolvency Act)
Out-of-court payment agreement (Art. 231 et seq. of the Insolvency Act) or appointment of an INSOLVENCY MEDIATOR:
1. A request is made to a notary or the Commercial Registry for the appointment of an insolvency mediator
2. Acceptance of the appointment by the mediator
3. The Registrar or the notary must notify, ex officio, the opening of negotiations to the Court with jurisdiction to declare insolvency.
4. Within 10 days of accepting the appointment, the mediator must convene a meeting between the debtor and the creditors (excluding public creditors) to be held within 2 months, or within 30 days if the debtor is a natural person. The notice must state the purpose of reaching an out-of-court payment agreement, and must identify each creditor convened, specifying:
  1. the amount of the claim,
  2. the date of grant
  3. the date of maturity
  4. any personal or real guarantees provided.
The pre-insolvency filing suspends enforcement actions and attachments:

During the negotiation period, the accrual of interest — whether statutory or contractual — on any debts that may be affected by the agreement shall be suspended, subject only to the exceptions applicable in formal insolvency proceedings.

This does not apply to public debts (Social Security and Spanish Tax Authority), for which a deferral or instalment payment arrangement must be requested separately.

2126884 All pre-insolvency filing templates

the express insolvency procedure:

Section 3, Articles 249 and 250 of the new Insolvency Act (formerly Article 176 bis):

special rules where the insolvency estate is insufficient — the "EXPRESS INSOLVENCY PROCEDURE":

As soon as it becomes apparent that the assets of the insolvency estate are insufficient to meet the claims against it, the insolvency administrator shall notify the insolvency judge, who will make this known to all parties involved through the court office.

This means that, except for those claims against the estate that are strictly necessary to carry out the liquidation, the order of payment of claims against the active estate shall be modified:

Payment of those claims that have already fallen due or that fall due after the notification shall be made in the following order, and, where applicable, on a pro-rata basis within each category:

Wage claims for the last thirty days of actual work, up to an amount not exceeding twice the minimum interprofessional salary.
Claims for wages and severance pay, in an amount equal to three times the minimum interprofessional salary multiplied by the number of days of outstanding salary.
Claims for maintenance accrued after the opening of the liquidation phase, up to an amount not exceeding the minimum interprofessional salary.
Claims for court costs and expenses of the insolvency proceedings.
All other claims against the insolvency estate.

Contact our insolvency team

LEGAL BASIS FOR THE EXPRESS CLOSURE OF INSOLVENCY PROCEEDINGS:

The Consolidated Text of the Insolvency Act of May 2023 preserves the possibility of ordering the closure of insolvency proceedings on grounds of insufficient assets in the very same order declaring insolvency. in accordance with Article 470, "the court may, in the same order declaring insolvency, order the closure of the proceedings where it is manifestly apparent that the active estate will presumably be insufficient to cover the likely costs of the proceedings, and furthermore, that neither the exercise of clawback or third-party liability actions nor a finding that the insolvency was culpable can reasonably be anticipated". In assessing whether the debtor's assets are sufficient to meet the foreseeable claims against the estate, regard must be had to the information provided by the debtor and, principally, to the assets and rights listed in the inventory. Assets subject to special privileges shall only be taken into account for these purposes to the extent that their value exceeds the amount of the claim they secure (Article 430 TRLC). Assets seized in administrative or employment enforcement proceedings — to which Article 146 TRLC recognises a right of separate enforcement — must likewise be disregarded when determining whether the active estate is or is not sufficient to meet claims against the estate, provided the conditions set out in that provision are met. In any event, since the closure of the proceedings must be based on the data provided by the debtor, extreme caution is required. Accordingly, the closure of insolvency proceedings in the same order of declaration will only be justified where it is very clearly evident that the assets are insufficient to meet claims against the estate and the costs of the proceedings, and where, given the circumstances surrounding the debtor, no clawback, challenge or third-party liability actions can reasonably be anticipated.