Insolvency or bankruptcy, take place when a company fail to pay their debts. Insolvency declaration leads to a bankruptcy proceeding. Corporate restructuring takes place when a company encounters a difficult situation and management decides to change the outer and inner structure and direction of the company.

Closing a Subsidiary in Spain

Closing a Subsidiary in Spain: With or Without Bankruptcy Proceedings?

When partners of a subsidiary in Spain decide its closing due to economic reasons, the question arises as to how to do it. Depending on each specific case, the company may be dissolved and liquidated with or without bankruptcy proceedings.


Unsuccessful enforcement by the creditor as a basis for the necessary bankruptcy application

Unsuccessful enforcement by the creditor implies the existence of a title by which enforcement has been effected, without sequestration resulting in sufficient unencumbered assets for the payment of the outstanding credit.

Court approval of refinancing agreements in Spain

The majority of Spanish bankruptcy proceedings end in favor of the debtor. The preliminary phases aim to achieve continuity of businesses that are in critical financial situations. Judicial approval is tantamount to a quasi-automatic resolution of a refinancing agreement, which put minority dissenting creditors at major disadvantages.

Legal framework for restructuring and insolvency proceedings in Spain

The legal framework for restructuring and insolvency proceedings governs the reorganization of debt. An insolvency proceeding is an in-court-restructuring procedure that consists of obtaining an insolvency order from a judge. An out-of-court restructuring is where a debtor negotiates directly with its creditors.

Out-of-Court Restructuring in Spain

In 2014, the Spanish government implemented the out-of-court restructuring procedure through the Royal Decree Law. Its objective is to help debtors avoid bankruptcy by negotiating with their creditors. Given the time and effort it takes, an out-of-court restructuring can be very favourable to both parties.

Developments in the legal framework of restructuring and insolvency proceedings in Spain

By the introduction of a new law, the Spanish legal framework on restructuring and insolvency proceedings is more adjustable to a debtor facing bankruptcy. Still, the difficulty of implementing a complete legal framework lies in covering all possible situations of insolvency.

The liquidation of companies in Spain

The liquidation of a company in Spain is a legal option chosen in a shareholder’s meeting. It leads to the splitting of the company’s assets after complying with its obligation of payment to creditors.

Seizure of a main residence in Spain due to debts to Social Security

The Entrepeneurs Act aims to find a different solution for debt collection procedures by facilitating a second opportunity to self-employed workers affected by the debt collection procedure.  

Changes in the Bankruptcy Law in Spain

The Royal Decree-Act 4/2014 is focusing on the refinancing agreements which may include waivers and capitalisation of debt and deferral payments. These agreements will essentially make the heavy burden of debt much more manageable for businesses.

Merry-Go-Round of Amendments to the Spanish Insolvency Law

Three partial reforms of the Spanish Insolvency Law have already been approved by means of Royal Decree-Laws dated on March 2014, September 2014 and February 2015. The three main purposes sought are: enhancement of prepetition restructuring deals; extension of pre-insolvency refinancing agreements to composition agreements and offer a second chance for individual creditors.