Corporate insolvency in Spain — the concurso de acreedores — is governed by the Texto Refundido de la Ley Concursal (TRLC, Royal Legislative Decree 1/2020), substantially reformed by Ley 16/2022, which transposed EU Directive 2019/1023 on preventive restructuring frameworks and second chances for entrepreneurs. The reform introduced new pre-insolvency tools, restructured the creditor classification system and modernised the procedure for cross-border insolvencies.
When must a company file for insolvency?
Art. 2 TRLC defines insolvency as the state where the debtor is unable to meet payment obligations regularly. Two situations trigger the obligation:
Current insolvency (insolvencia actual): the company cannot currently meet payments. The director has a legal duty to file at the Commercial Court within two months of the date on which they knew or should have known of this state (Art. 5 TRLC). Delay in filing — especially if creditors suffer harm — is a significant factor in a culpable insolvency classification.
Imminent insolvency (insolvencia inminente): the company can pay today but foresees it will be unable to meet obligations as they fall due in the near future. Filing is voluntary in this case but strongly advisable to access pre-insolvency tools and avoid the two-month clock.
Who can file: the debtor (voluntary insolvency — concurso voluntario) or any creditor (necessary insolvency — concurso necesario). In necessary insolvency, creditors must provide evidence of insolvency. Voluntary insolvency is more common and generally better for the debtor (management retains more control in the common phase).
Pre-insolvency tools under TRLC (Art. 583)
The most important addition of the Ley 16/2022 reform is the strengthened pre-insolvency framework. A company facing financial distress — but not yet formally insolvent — can:
1. Communicate negotiations (comunicación de negociaciones, Art. 583 TRLC)
File a notice at the Commercial Court that the company is negotiating with creditors. Effect: automatic stay of creditor enforcement actions for three months (extendable to six in some cases). No administrator is appointed. Management retains control. The company can negotiate freely.
2. Homologated restructuring plan (plan de reestructuración homologado)
A restructuring plan agreed with the required majority of affected creditors (generally 66% of affected debt by value; 75% for cross-class cram-down) can be homologated (approved) by the court. Once homologated, the plan binds dissenting creditors within the same class. This is the main tool for large companies with complex capital structures.
3. Extrajudicial payment agreement (acuerdo extrajudicial de pagos — AEP)
For smaller debtors, a simpler extrajudicial process with a mediator. Agreement requires 60% of ordinary creditors. If the AEP fails, a consecutive insolvency procedure opens — which, for individual debtors, opens access to the second chance debt discharge (EPI).
The formal insolvency phases
Common phase (fase común)
Duration: approximately 9 months (often longer in overloaded Commercial Courts).
- Maps all assets (active mass — masa activa)
- Classifies all creditor claims (passive mass — masa pasiva)
- Produces the insolvency report (informe de administración concursal)
- Assesses viability of a restructuring agreement
- Challenges pre-insolvency transactions at undervalue (acciones de reintegración, Art. 226 TRLC — typically covers transactions in the two years before insolvency declaration)
During this phase, the company can continue trading. In voluntary insolvency, management is supervised (intervenida) by the administrator. In necessary insolvency, management may be suspended and replaced by the administrator.
Convention phase (fase de convenio) — restructuring
If the administrator’s report indicates the business is viable, the company (or creditors) can propose a restructuring agreement (convenio). The convenio is voted on by creditors:
- Ordinary majority for light restructuring (up to 50% haircut, extensions up to 5 years)
- Supermajority for deeper restructuring (up to 75% haircut, extensions up to 10 years)
If approved and homologated by the court, the convenio binds all ordinary and subordinate creditors. Privileged creditors (mortgage, pledge, Social Security, AEAT) are only bound if they voted in favour.
Liquidation phase (fase de liquidación)
Triggered when: no convenio is proposed or approved, the company itself requests liquidation, or the convenio fails in execution.
The administrator sells all company assets in the most commercially advantageous manner (business as a whole preferred over piecemeal sale). Sale proceeds are distributed to creditors according to the legal priority order.
Creditor priority order:
- Specially privileged creditors (mortgage, pledge — paid from specific assets)
- General privileged creditors (TGSS Social Security, AEAT — highest priority among general creditors)
- Ordinary creditors (suppliers, banks without security)
- Subordinate creditors (related-party loans, interest accrued after insolvency, penalties)
Qualification section (sección de calificación)
Runs in parallel when liquidation is ordered or when a convenio fails. Determines whether the insolvency was:
- Fortuitous (fortuito): insolvency was caused by external economic factors, without fault. No personal liability for directors.
- Culpable (culpable): insolvency was caused or worsened by fraud, gross negligence, or specific presumed culpable acts (e.g., falsified accounts, concealment of assets, unjustified capital flight).
Consequences of culpable classification: disqualification of responsible directors from managing companies (2–15 years), obligation to return company assets extracted, and — in extreme cases — personal liability to cover unmet creditor claims.
Express insolvency (concurso exprés)
When the debtor has no assets, or only assets insufficient to cover even procedural costs, the court applies Art. 470 TRLC: it simultaneously declares the insolvency and concludes the procedure (concurso exprés). The company is dissolved without a prolonged process.
The practical effect:
- No common phase, no administrator report
- Company dissolves and is struck off the Companies Registry
- The qualification section can still open if the administrator requests it
- Individual directors/shareholders face the same Social Security and AEAT direct liability rules as in any insolvency
Key differences after Ley 16/2022
| Before Ley 16/2022 | After Ley 16/2022 |
|---|---|
| Pre-insolvency tools were limited and rarely used | Strengthened Art. 583 stay + homologated restructuring plans |
| Creditor classification had three classes | Simplified to: specially privileged, ordinary, subordinate |
| Cross-class cram-down not available | Available (75% threshold) |
| No specific microenterprise procedure | Simplified procedure for debtors with < €1M liabilities |
| Second chance for directors not formally integrated | Linked to individual EPI (debt discharge) |
When to act — and why delay is dangerous
The single most common and most damaging mistake is directors waiting too long to seek advice. The two-month filing obligation means that a director who identifies insolvency in January but does not file until July has already triggered the delay presumption used in culpability analysis. That delay, combined with continued trading (likely generating new debts to suppliers), exposes the director to personal liability for all creditor losses incurred during the delay period.
How BMC can help
Our insolvency advisory team advises both debtors and creditors at every stage. We assess whether pre-insolvency tools are viable, guide directors through the filing obligation, represent companies and administrators in the common phase, and advise creditors on claim classification and recovery strategies.
Our pre-insolvency practice handles Art. 583 TRLC communications, homologated restructuring plan negotiations, and extrajudicial payment agreements — all aimed at resolving financial distress without entering formal insolvency.
If your company is facing payment difficulties, contact us for an immediate initial assessment. Early action — even a week earlier — can materially change the outcome.
