Micro-Enterprise Insolvency: Digital, Fast, and Without an Insolvency Administrator

The micro-enterprise special procedure is an insolvency instrument created by Law 16/2022, which reformed the Texto Refundido de la Ley Concursal (TRLC — Consolidated Insolvency Act), for companies with fewer than 10 employees and annual turnover below €700,000 or total liabilities below €350,000. It is processed entirely digitally through the Servicio Electrónico de Microempresas (SEM — Electronic Micro-Enterprise Service) of the Ministry of Justice, without an insolvency administrator, which reduces the cost by between 60% and 80% compared with standard insolvency proceedings and shortens the timeline to 3–6 months. It offers three routes: continuation of business activity with a payment plan, an arrangement with write-down and deferral, and orderly liquidation; in all cases the business owner retains control of ordinary management. Law 1/2025 has simplified access by removing the obligation to attempt a prior out-of-court agreement in most cases involving individual non-business persons.

Is the micro-enterprise procedure the solution for your company?

The micro-enterprise special procedure is an insolvency instrument created by Law 16/2022, which reformed the TRLC, and which entered into force on 1 January 2023. Its purpose is to address a real problem: standard insolvency proceedings are so expensive and slow that micro-enterprises simply do not use them.

Before the reform, a company with 5 employees, €200,000 of debt, and no liquidity had two options: declare insolvency proceedings that would cost more than it had, or effectively close down and leave the debts unresolved. The second option left the director exposed to personal liability for failing to file for insolvency in time. A trap with no way out.

Can your company access the procedure? The thresholds are:

• Fewer than 10 employees
• Annual turnover below €700,000 or total liabilities below €350,000

Both legal entities (limited companies, public limited companies) and individual business owners and self-employed persons with business activity may access the procedure. If these thresholds are exceeded, the applicable instrument is standard insolvency proceedings with a pre-insolvency restructuring plan.

The three routes: continuation, arrangement, and liquidation

The procedure is not merely a closure mechanism — it is an instrument with three possible outcomes, and the correct choice at the outset determines the result.

Continuation of business activity. Designed for companies with a viable business but an unsustainable liquidity or debt problem. The business owner presents a plan including operational and financial measures to stabilise the company and a payment schedule for creditors. If creditors approve the plan, the company continues operating. Requires that the business genuinely has the prospect of generating sufficient cash flow.

Arrangement route. The business owner proposes a write-down (reduction of the amount), deferral (extension of the payment period), or a combination of both. If creditors with the required majorities vote in favour, the arrangement is approved and is binding on all, including dissenting creditors. The appropriate route when the company needs to reduce its debt burden to operate but does not require complex operational measures.

Liquidation route. Enables orderly closure, realising assets to pay creditors in priority order. Unlike an effective closure without proceedings, liquidation within the procedure protects the director from personal liability, discharges debts to the extent possible, and — most importantly — allows individual business owners to access the second chance mechanism for residual debts. The Supreme Court decisions of February 2026 have significantly expanded the discharge of public debt in the second chance: penalties, interest, and surcharges are discharged at 100% as subordinated claims.

Real cost: comparison with standard insolvency proceedings

For a micro-enterprise with €200,000 of liabilities, the difference can determine whether the restructuring process is financially viable at all. The special procedure makes economically possible what was previously an inescapable trap.

The trade-off is greater involvement by the business owner: without an insolvency administrator managing the process, the business owner must actively participate in documentation, negotiations, and monitoring of deadlines. Our team takes on the operational management to minimise this burden, but the business owner’s availability and co-operation are essential.

Full digital processing on the SEM platform

Access to the SEM requires a digital certificate or Cl@ve. The platform is available through the Ministry of Justice portal and is the sole channel for all procedural steps.

Documentation required for the application:

• Financial statements for the last two financial years (balance sheet and profit and loss account)
• Explanatory memorandum of the current financial situation
• Full list of creditors with amounts and due dates
• Inventory of the company’s assets and rights
• Employee headcount and status of employment contracts
• Draft plan (if opting for continuation or arrangement)

The explanatory memorandum is the most important document: it requires a coherent narrative justifying the chosen route and generating creditor confidence in the viability of the plan. A poorly drafted memorandum can impede approval even when the figures are favourable.

Once the application is filed, the SEM automatically notifies all creditors and opens the relevant period. Creditors may challenge the micro-enterprise classification or file objections within the prescribed deadlines. Digital processing eliminates most of the deadline uncertainty of standard proceedings.

Simplification under Law 1/2025: It is no longer mandatory to go through an insolvency mediator or attempt a prior out-of-court payment agreement in most cases. This eliminates a step that was often purely formalistic, reduces costs, and shortens the timelines for accessing the procedure.

Regulatory framework: TRLC Arts. 685–720 and Law 16/2022 insolvency reform

The micro-enterprise special procedure is the most significant innovation of the Spanish insolvency reform of 2022, designed specifically for the majority of Spain’s business population.

TRLC Arts. 685–720 (Title XIV, introduced by Law 16/2022): Defines the scope (micro-enterprises with fewer than 10 employees and liabilities below €700,000 or assets below €350,000, Art. 685 TRLC), the digital and simplified procedure (Art. 686 TRLC: fully electronic processing through the Portal de Acceso Concursal — Insolvency Access Portal), the absence of an insolvency administrator (replaced by the Mercantile Court as the process director), the continuation or liquidation plan proposal (Arts. 699–708 TRLC), and the unsatisfied liabilities discharge regime (EPI) for individual business owners (Arts. 709–720 TRLC).

Law 16/2022, of 5 September, reforming the TRLC: Transposed EU Directive 2019/1023 (the Restructuring and Insolvency Directive) and introduced the micro-enterprise procedure as its central innovation. The reform also removed the out-of-court payment agreement as a prerequisite for many cases, simplifying access to the procedure.

EU Directive 2019/1023: On preventive restructuring frameworks, debt discharge, and disqualifications. Establishes the principle that honest entrepreneurs who fail should have access to a second chance within a maximum of three years from the declaration of insolvency. The Spanish transposition through Law 16/2022 implemented this principle with the unsatisfied liabilities discharge (EPI) as the general regime.

Sources and Regulatory Framework

• BOE — TRLC Arts. 685–720
• BOE — Law 16/2022 reforming the TRLC
• EUR-Lex — EU Directive 2019/1023 on restructuring and insolvency

This service is part of our insolvency and restructuring practice.