The Spanish government has extended measures to support companies and individuals from bankruptcy as part of its response to the economic crisis caused by the coronavirus pandemic. This blog explains how the change in Spain to bankruptcy protection.
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The bankruptcy moratorium will now expire on June 30th, 2022. It protects certain foreign investments from insolvency proceedings in Spain. It also exempts debtors from their duty to declare bankruptcy and allows companies, that would usually be viable under normal conditions, to maintain their activity and employment.
As part of this response, the Spanish government is trying to update its insolvency regime by creating new ways for viable companies to restructure their debts and help entrepreneurs to speed up insolvency proceedings. This is the key part of the change in Spain to bankruptcy protection.
Expansion of the Lines of Guarantees – Spain and Bankruptcy Protection Explained.
Self-employed workers and companies will be able to access guaranteed financing through the Lines of Guarantees until June 30th, 2022 to cover their needs or finance their investment projects.
The Official Credit Institute has created these guarantees and they have been critical for guaranteeing otherwise viable companies during the most tough moments of the pandemic.
Since the Liquidity Guarantee Facility started in March 2020, more than 1.1 million companies received guarantees and secured their futures until November 18th, 2021. This helped many in Spain avoid bankruptcy protection.
Around €102 million has been used to protect these companies. The guarantees are one of the most widely used lines in Europe. It’s also one of the largest examples of a public – private collaboration.
The extension is expected to be the final one and the protection program will end in June 2022. After this, companies are expected to begin filing for bankruptcy. This will lead to an explosion of insolvency cases and will be tricky for both service providers and those who bought services. It’s important to understand this if you are in Spain and considering bankruptcy protection.
What is Spain’s Bankruptcy Protection process?
You can either request voluntary bankruptcy or a creditor makes a claim for an unpaid debt. This can lead to involuntary bankruptcy.
Typically, there are five steps in bankruptcy protection in Spain.
- Admission and declaration of insolvency: Once the request for voluntary or involuntary bankruptcy has been filed, a judge will analyze it. The judge will then issue a resolution declaring the insolvency.
- Communicating the claims: Once the insolvency declaration is made, the creditors must tell the Insolvency Manager. They have 30 days to communicate their claims.
- Determinating the active and passive assets and preparing the list of creditors: Once the claims period elapses, the Insolvency Manager will draw up an inventory of the active and passive assets
- Challenging the list and inventory: The creditors can challenge the decision of the Insolvency Manager. But only if they disagree with the contents of the inventory or with the amount.
- Anticipated agreement proposal: It’s possible to reach an agreement if the legally established majority of the creditors approve it. This will end the procedure without further to do. Otherwise, the agreement or liquidation phase will start.
What happens at the end of bankruptcy
The final phase of bankruptcy is the qualification, which can be “fortuitous” or “guilty”. This is a key moment in Spain and bankruptcy protection.
Bankruptcy is “fortuitous” when there has been no serious fault of the debtor. Whereas “guilty” occurs when there was fraud or gross negligence by the debtor.
If a judgment is issued and states that the insolvency proceedings are guilty, a series of measures will be introduced. For example, the debtor can be disqualified from administering the property of others for two to 15 years.
What can I do about bankruptcy protection in Spain?
If your company is facing trouble, we recommend getting legal support as soon as possible. You can lower your liabilities with the right legal help. If you are owed services, funds, or products, the right legal help will help you recoup your losses.
Lexidy LegalTech Boutique works with both sides of the bankruptcy story. We are here to ensure your rights are protected and deliver the best outcome. Speak with Lexidy about Spain and bankruptcy protection.