Insolvency and restructuring
When the company can no longer meet its payments
Insolvency is best dealt with early. While the company still has cash and bargaining power there are instruments to restructure the debt and keep trading; by the time it cannot pay wages, the range of options has almost entirely closed and all that is left is managing the end.
Moreover, a director has duties of their own from the moment the situation becomes apparent, and is liable for what happens if they do not meet them. It is common for the person with most at stake in an insolvency to be the one least aware of being at risk.
What we review
Diagnosis of the situation
Whether what you have is a one-off cash-flow problem or genuine insolvency, whether it is current or imminent, and what real margin is left. Everything else depends on that distinction, and it is the first thing we look at.
Negotiation with creditors
Notice of the opening of negotiations, with the protection against enforcement that comes with it, and agreements with banks, suppliers and landlords before reaching formal insolvency.
Restructuring plan
Restructuring the debt while continuing to trade: the perimeter of affected creditors, classes, required majorities, and judicial confirmation of the plan.
Formal insolvency proceedings
Preparing and filing the petition, with the accounting documentation it requires, and conducting the proceedings through to liquidation or a creditors’ arrangement.
Directors’ liability
Duties when facing insolvency and grounds for dissolution, the moment the obligation to act arises, and defence against liability claims and against a finding of culpable insolvency.
If you are the one not getting paid
Claiming unpaid amounts before the debtor enters insolvency, filing your claim once proceedings are open, challenging the list of creditors, and defending any preferential ranking or security you hold.
When a consultation is worthwhile
Specific situations in which a short conversation before deciding avoids, in most cases, later proceedings.
- You have spent several months in a row deferring supplier payments in order to pay wages.
- You have accumulated debt with the tax authorities or Social Security and a deferral you have failed to meet.
- Net assets have fallen below half the share capital.
- A creditor has told you it is going to petition for your insolvency.
- You are negotiating a refinancing with the bank and they are asking for personal guarantees.
- An important client owes you a significant amount and has stopped responding.
Frequently asked questions
When is a company considered insolvent?+
Current insolvency exists when the company cannot regularly meet its due obligations, and imminent insolvency when it foresees it will not be able to within the next three months. There is also a likelihood of insolvency, which is the situation where, unless a restructuring plan is reached, it is objectively foreseeable that obligations falling due over the next two years cannot be met.
How long do I have to file for insolvency?+
Two months from when the debtor knew, or should have known, of its current insolvency. The law presumes the debtor knew when any of the events that would allow a creditor to file has occurred, such as an enforcement order with no sufficient unencumbered assets. Letting the deadline pass has consequences for the director.
What can be done before insolvency proceedings?+
In a likelihood of insolvency or imminent insolvency, the management body can notify the court that it is negotiating with creditors, or will do so immediately, a restructuring plan. A company already in current insolvency can do so as long as an involuntary insolvency petition has not been admitted. The notification does not by itself accelerate credits that are not yet due.
Is a director personally liable for the company’s debts?+
They can be. If a cause of dissolution exists, for example losses that bring net equity below half of the share capital, the directors have two months to call the general meeting, and if they do not, or do not seek judicial dissolution or insolvency in the following two months where appropriate, they are jointly liable for later company obligations. They need not call the meeting if they have filed for insolvency or notified the court of negotiations with creditors.
Fees and conduct of the matter
Fees are assessed case by case. Before any work begins you receive a written engagement letter setting out its scope and the corresponding fees.
Your matter is handled by the best professional in our team for your case, a lawyer registered with the Valencia Bar Association (ICAV). You deal directly with the lawyer handling the file.
Everything you tell us is covered by the duty of legal professional privilege under article 542.3 of the Spanish Judiciary Act (Ley Orgánica del Poder Judicial), including at the first consultation and even if you do not go on to instruct us.
Let us talk about your specific case
Tell us your situation and we will explain how we would approach it and what documentation is required. We reply within 24 working hours.