In the current global economic context, companies operating in Spain must be aware of the legal mechanisms provided by Spanish law to anticipate and address potential insolvency situations.
One of the most relevant instruments in this area is the communication of the opening of negotiations with creditors, as set out in the Spanish Insolvency Law. This tool enables debtors to gain time and create a legally protected framework for negotiating a restructuring plan, helping to avoid the need to initiate formal insolvency proceedings.
What is the communication of the opening of negotiations?
It is a formal communication submitted by the debtor to the competent court, informing that it has initiated – or intends to initiate – negotiations with its creditors to reach a restructuring plan that will allow it to overcome its financial difficulties, whether these involve a likelihood of insolvency or imminent insolvency.
The purpose of this mechanism is to preserve the company’s continuity while negotiating debt settlements with creditors, thereby avoiding the immediate need to file for insolvency.
What are the effects of communicating the opening of negotiations?
Suspension of the obligation to file for voluntary insolvency
For three months, the debtor is exempt from the legal obligation to file for insolvency, allowing time to negotiate with creditors.
Protection against creditor-initiated insolvency petitions
During this period, creditors cannot initiate insolvency proceedings against the debtor, preventing external pressure that could hinder negotiations.
Continuity of contracts
Pending contracts involving reciprocal obligations cannot be terminated, modified or suspended, which reinforces the operational continuity of the business during the restructuring phase.
Suspension of judicial or extrajudicial foreclosures
Any judicial or extrajudicial enforcement actions on assets essential to the business are suspended, protecting the company’s productive resources.
Suspension of compulsory dissolution
The obligation to dissolve the company due to losses reducing the net equity below half of the share capital is also suspended, providing the company with legal and financial breathing room.
Conclusion
Communicating the opening of negotiations with creditors is a proactive, flexible and effective legal mechanism to address liquidity issues or financial imbalance without the immediate need for formal insolvency proceedings. Successful use of this tool requires expert legal advice, both during the initial phase and throughout negotiations with creditors.
If you need additional information regarding the communication of the opening of negotiations with creditors in Spain,
