A routine commercial payment made two years ago can be clawed back by the insolvency administrator

What Is Insolvency Rescission?

Insolvency rescission (rescisión concursal) is the action under Arts. 226–239 of the TRLC (Texto Refundido de la Ley Concursal — Consolidated Insolvency Act) that allows the insolvency administrator (administrador concursal) to challenge and set aside acts performed by the insolvent debtor in the two years before the insolvency declaration where those acts were prejudicial to the insolvency estate.

Crucially, the rescission action does not require proof of fraud or of the third party’s knowledge of the debtor’s insolvency. This is the critical distinction from the Paulian action (acción pauliana) under Art. 1111 of the Civil Code, which requires the claimant to prove fraudulent intent and — for onerous acts — the third party’s knowledge of the prejudice. Insolvency rescission asks a purely objective question: was the act prejudicial to the creditors of the estate?

Two-Year Retroactive Window and Prejudice Requirement

The rescission action requires two conditions under Art. 226 TRLC:

1. Two-year retroactive window: the act was performed in the two years preceding the date of the insolvency declaration (not the filing date)
2. Prejudice to the estate: the act reduced the debtor’s assets, increased its liabilities, or altered the relative position of creditors unfavourably

Prejudice may be direct — the debtor transferred assets without equivalent consideration — or indirect — the act improved one creditor’s position at the expense of others. An ordinary commercial payment made before insolvency to settle a due and payable invoice can be challenged if it was received when other creditors existed who were not similarly paid.

Presumptions of Prejudice — Art. 228 TRLC

Absolute (Irrebuttable) Presumptions — Art. 228.1

No evidence is required to establish prejudice:

• Gratuitous acts — gifts, debt waivers, transfers without consideration. Presumed prejudicial without more.
• Early payment of unmatured debts — payment of a debt before its contractual due date. Also an irrebuttable presumption.

Against absolute presumptions, the only available defence is to show the act does not fall within the defined category — for example, that the “gratuitous” transfer in fact had real consideration. The presumption itself cannot be rebutted.

Relative (Rebuttable) Presumptions — Art. 228.2

Prejudice is presumed but may be rebutted:

• Onerous acts with parties especially related to the debtor: shareholders holding more than 10%, directors, senior managers, and group companies. The burden of proof is reversed: the defendant must show the transaction was at arm’s length and on terms equivalent to what an independent third party would have obtained.

Expert valuation evidence — independent appraisals of asset values, transfer pricing studies, benchmark analyses of intercompany service charges — is typically determinative in rebutting the relative presumption. Without this evidence, the court has only the administrator’s position and the available documentary record.

The Ordinary-Course-of-Business Exception — Art. 229.1 TRLC

Art. 229.1 TRLC excludes from rescission acts in the ordinary course or traffic of the business conducted on normal terms. This protects routine trading activity:

• Payments to suppliers settling ordinary invoices as and when due
• Purchases of goods or services at current market prices
• Collection of receivables from customers for services rendered in the ordinary course
• Renewal of credit facilities on habitual terms

The boundary between “ordinary” and “extraordinary” is litigated in almost every rescission case. The administrator will seek to characterise any recovery as extraordinary; the defence will seek to establish the act as routine. Historical records of comparable transactions in the period before insolvency are usually the most effective evidence: if the debtor regularly paid that supplier in that way, on those terms, the payment is arguably ordinary.

Group Company Exposure

Intragroup transactions are the highest-risk category in practice. The Art. 228.2 rebuttable presumption applies automatically to all group entities, reversing the burden of proof. The most frequently challenged transactions:

• Intercompany loans — recovery by the group company of a loan made to the insolvent entity, or repayment of a loan from the insolvent entity in the two-year window
• Asset transfers — sale of property, machinery, IP, or client portfolios to group entities at prices the administrator characterises as below market
• Management service charges — intercompany fees for management, administration, or know-how at prices above or below what independent parties would pay
• Guarantees granted — the insolvent entity provided guarantees or indemnities in favour of group entities without receiving equivalent value

Each of these requires a transaction-specific arm’s-length analysis, documented before the administrator requests production of the company’s records.

Preventive Advice Before Filing

For companies where insolvency proceedings are a realistic prospect, a preventive review of the preceding two years’ transactions is one of the most valuable risk-management exercises available. It enables the company to:

• Quantify the rescission risk for each transaction before the administrator has access to documents
• Prepare supporting documentation — market-value evidence, arm’s-length benchmarks — while management still controls the process
• Inform group companies and key counterparties of their potential exposure so they can prepare their defence in advance
• Avoid creating new rescindable acts — even where past transactions cannot be undone, new ones can be structured to minimise rescission risk

This service is coordinated with our restructuring practice (restructuring plan, judicial homologation, and micro-enterprise insolvency) and with the insolvency qualification strategy — acts challenged in rescission proceedings may also ground a finding of culpable insolvency (concurso culpable) against the company’s directors.

This service is part of our insolvency and restructuring practice.