A look at corporate, personal and, where relevant, partnership insolvency proceedings in Spain, with a brief description to explain key features, as part of our Dictionary of Insolvency Terms in EU Member States. In particular, we highlight who controls the procedure and whether it is likely to be accompanied by a moratorium to prevent enforcement.

Procedimiento de negociación pública para la consecución de acuerdos de refinanciación colectivos, acuerdos de refinanciación homologados y propuestas anticipadas de convenio (Procedimientos 5.bis)

Negotiation procedures to seek support for either an out-of-court refinancing agreement, its homologation (approval) of refinancing agreement or an early creditors’ agreement (5.bis procedures)

  • The Spanish Insolvency Act includes a notification system for distressed companies when restructuring negotiations with creditors have begun, which suspends the obligation of the insolvent company to file for insolvency for a period of three months (four months in practice).
  • If the secured assets are necessary for the continuity of business, there is a stay on the ability of secured creditors to enforce their security if a notification has been made. This means that secured creditors who enjoyed priority over assets that might be considered necessary for the company’s business to continue must wait for the three-or four-month period to expire or a restructuring agreement to be reached, before being able to enforce their security.
  • The procedure applies also to partnerships and natural persons.

Acuerdos de Refinanciación (Procedimientos 71.bis)

Out-of-court refinancing agreement (71.bis procedures)

A procedure designed to avoid insolvency proceedings by increasing the credit available to the debtor or modifying its obligations to creditors.

The debtor proposes an arrangement that will allow it to continue to trade, which can take two forms:

  • Collective refinancing arrangement: a general refinancing agreement that requires the approval of 60% of creditors. It must include a viability plan that provides for a significant increase in the credit available to the debtor, or modified liabilities that will allow the debtor to continue to trade. An auditor appointed by the relevant company registry will also need to report on the effectiveness of the arrangement and it must be contained in a public deed.
  • Individual refinancing arrangement: the arrangement must satisfy stringent statutory requirements, eg an increase in the asset to liability ratio so that the value of security held by participating creditors does not exceed 90% of the value of their loans. This is intended to cover bilateral restructuring arrangements.

Acuerdos de Refinanciación (Procedimientos 71.bis)

Out-of-court refinancing agreement (71.bis procedures)

  • These arrangements cannot bind dissenting creditors (whether secured or unsecured). Therefore, dissenting secured creditors can enforce their security.
  • Assets distributed under these arrangements cannot be clawed back in the event that the debtor enters an insolvency process.
  • The procedure applies to companies, partnerships and natural persons.

Procedimiento de homologación de acuerdos de refinanciación

Homologation of refinancing agreement

  • An alternative refinancing option for companies, partnerships and natural persons that requires the sanction of the court for a proposed restructuring arrangement (similar to an English scheme of arrangement).
  • The form and content of the arrangement must be the same as a collective arrangement (see previous section titled Acuerdos de Refinanciación/Out-of-court refinancing agreement) save that it requires the support of only a basic majority of 51% of financial creditors. The court will approve the arrangement if it has met the requirements for a collective arrangement.
  • Dissenting creditors may be bound by the arrangement depending on the level of support for the arrangement among creditors:
    • (i) If it is supported by creditors representing at least 60% of financial debts, it can bind dissenting creditors to principal or interest stay periods (up to five years) and the conversion of financial debt into profit-participating loans (up to five years in length).
    • (ii) The restructuring agreement needs to be supported by creditors representing more than 75% of the financial debt if it includes: longer stays (up to ten years); haircuts; debt for equity swaps; debt for assets swaps; conversion of financial debt into profit participating loans, subordinated debt or any equivalent instrument (up to ten years in length); and/or conversion of the original debt instrument into a different one with different features.
  • Rights of secured creditors may be compromised by these arrangements: where (i) applies, at least 65% of the value of the total security; and where (ii) applies, 80% of the value of the total security.

Procedimiento de acuerdos extrajudiciales de pago

Out-of-court payment agreements

  • Insolvent companies, partnerships and natural persons (with debts of less than EUR5 million) whose insolvency proceedings are not considered to be especially complex can initiate an out-of-court payment agreement procedure, which involves the appointment of an insolvency mediator (mediador concursal) (provided the debtor has sufficient assets to settle expenses inherent to the agreement).
  • In order for the agreement to be accepted, it must be supported by: (i) creditors representing at least 60% of the financial debts affected by the agreement (where the agreement proposes a stay of up to five years and haircuts of a maximum of 25%); and (ii) creditors representing at least 75% of the financial debts affected by the agreement (where, among other criteria, the agreement proposes a stay of up to ten years and haircuts higher than 25%).
  • Out-of-court payment agreements cannot be affected by potential clawbacks in the event the company files for insolvency.


Insolvency proceedings

  • Proceedings for companies and partnerships that may result in either rescue of the debtor (convenio) or liquidation (liquidacion).
  • Can be initiated either by: (i) a creditor filing a petition at court (concurso necesario); or (ii) the debtor itself filing a petition in the Commercial Court of the capital of the province in which the debtor has its centre of main interests (concurso voluntario).
  • In initiating proceedings, a creditor is required to provide evidence of its debt as well as of the debtor’s insolvency, demonstrated by an inability of the debtor to meet its payment obligations as they fall due, or evidence that enforcement proceedings against the debtor have failed because it has insufficient assets.
  • In creditor-initiated proceedings, the court appoints an insolvency officeholder to manage the debtor’s assets and the directors will play no further management role. In debtor-initiated proceedings, the directors remain in control of the debtor company, subject to the supervision of an officeholder appointed by the court.
  • Once insolvency proceedings have been commenced, there is a stay on all execution proceedings or writs against the debtor or its assets, and the debtor may not enter into any further transactions without the authorisation of the appointed officeholder.

The process comprises two stages:

  • The officeholder investigates the debtor’s assets and liabilities. Creditors must notify the officeholder of their claims within one month of the proceedings being commenced. The officeholder must produce a list of creditors in the appropriate order of ranking (as discussed further below), which can be challenged in court by a creditor
  • Secondly, either convenio de acreedores, or liquidación (see below).

Once the debtor is declared insolvent, the enforcement of security interests over assets owned by the debtor and used for its professional or business activities will be stayed until the occurrence of either: (i) approval of a creditors’ agreement (unless the content has been approved by the secured creditor, in which case it will be bound by whatever has been agreed); or (ii) one year has elapsed since the declaration of insolvency without liquidation proceedings being initiated (whichever is earlier).

Concurso (convenio de acreedores)

Insolvency proceedings (creditors’ agreement)

  • There are two types of in-court composition solution that can be made between a company or partnership debtor and its creditors: (i) the early creditors’ agreement (convenio anticipado); and (ii) the ordinary creditors’ agreement (convenio ordinario).
  • If the (ordinary or early) creditors’ agreement is approved by the creditors, the court will formally approve the agreement and lift any limitations imposed on the debtor during the insolvency proceedings.
  • Different voting rights are vested in each group of creditors. Privileged creditors have the right to abstain from voting. If a creditor abstains, it will not be bound by the creditors’ agreement. If the creditor votes, it will be bound by the agreement. Ordinary creditors are entitled to vote and will be bound by the decision of the majority, whether or not they vote or abstain. Subordinated creditors cannot vote. In general, the approval of creditors representing at least 50% of the total amount of ordinary claims is required to approve a composition agreement (65% is required for a stay between five years and ten years, and haircuts higher than the 50% of the claims).
  • A creditors’ agreement will include a detailed repayment schedule, in addition to limited deferral proposals, debt reductions or a combination of the two. It may also include the conversion of loans into shares or participating loans. It will include a viability plan if the repayment plan is based on the debtor’s future cash flow.

Concurso (liquidación)

Insolvency proceedings (liquidation)

  • If neither the debtor (being a company or a partnership) nor a creditor proposes a creditors’ agreement, or if the proposal is not approved by the requisite majority at the creditors’ meeting or by the court, the court will declare the liquidation of the debtor.
  • The effects of liquidation include:
    • The debtor’s management being replaced by an administrator.
    • The court declaring the dissolution of the debtor (which would have otherwise required the approval of the shareholders).
    • Deferred claims being accelerated.
    • The court deciding whether or not anyone is to blame for the debtor’s insolvency; those found to be culpable may be required to make good deficiencies in the debtor’s assets (concurso culpable) or not (concurso fortuito).

Special considerations for insolvency proceedings concerning natural persons

  • Where insolvency proceedings concern a natural person and result in a shortfall of assets to meet liabilities, the proceedings can exonerate the debtor from their unpaid liabilities provided they act in good faith and certain requirements are met.
  • The requirements include: the debtor is not considered to be culpable for their demise, nor convicted by a final judgment of an economic crime; the debtor has sought to enter into a payment agreement and has paid the claims of preferential creditors and at least the 25% of the claims of ordinary creditors. Few natural persons are able to meet these requirements.

Secured creditor enforcement procedures

  • Secured lenders are generally prohibited from appropriating collateral without the supervision of either the court or a notary public.
  • The enforcement action that a lender can take will depend on the type of asset and security held.
  • A secured lender may adopt either judicial proceedings or extrajudicial proceedings to effect a sale of a property to repay a secured debt. In the former, the court supervises the sale of the asset, and in the latter the sale is supervised by a notary public. In both cases, the property is auctioned, and if no sale is achieved, the lender may take control of the asset in exchange for 50-70% of the appraisal value of the asset. However, the holder of a real estate mortgage may not initiate extrajudicial proceedings without an express right in the mortgage deed. As a general rule, the average time from the occurrence of an event of default to obtaining the property through judicial proceedings is between 6 and 18 months but could be less in the case of the extrajudicial proceedings.

Anticipated changes in the next two years

The EU Directive on Restructuring and Insolvency1 requires Member States to incorporate minimum common standards into their national restructuring and insolvency laws by 17 July 2021. The intention of the Directive is to reduce barriers to the free flow of capital stemming from differences in Member States’ restructuring and insolvency frameworks, and to enhance the rescue culture in the EU.

Notable features required to be included in Member States’ national laws include:

  • An effective preventive restructuring framework to enable debtors experiencing financial difficulties to restructure at an early stage, with a view to preventing insolvency and ensuring their viability.
  • A stay of up to four months extendable to up to 12 months to support negotiations of a restructuring proposal, which should prevent individual enforcement action and include rules preventing the withholding of performance, termination, acceleration or modification of essential contracts.
  • An ability to cram down dissenting classes of creditors.
  • Adequate protection for financing needed to allow the business to survive or to preserve the value of the business pending a restructuring, and for new financing necessary to implement a restructuring plan.
  • Provision for honest, insolvent entrepreneurs to have access to a procedure that can lead to a full discharge of their debts (subject to limited exceptions) within three years.

Contact: Álvaro Cid-Luna

1 Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132.