Spanish Insolvency Act (Ley Concursal - 22/2003)
The Spanish Insolvency Act provides two paths for the future of the Company:
Creditors agreement:
The agreement lays down measures to guarantee that the debts will be collected by the creditors, for example an extended repayment term, a partial waiver of credit entitlements. These measures are set out in a payments plan. If the enterprise is economically viable, then its economic viability plan is also included.
The agreement must be approved by the creditors representing a specific proportion of the credits to be collected. The insolvency administrators draw up a report on the agreement. Following this, the judge has the last word in issuing approval or otherwise.
Following approval, a further stage begins for implementation of the agreement. This is normally implemented by the business owner. On an exceptional basis, it may be ruled that the insolvency administrators are to implement the agreement.
In order to speed up the procedure, the debtor may propose an agreement to the creditors at the very start of proceedings.
Creditors representing a given proportion of the credits may likewise propose an agreement from the outset.
Liquidation of the Company.
This is considered as a subsidiary solution to the above. In those cases where the enterprise is not economically viable. The debtor or creditors may apply for liquidation at the outset of the proceedings or at any subsequent point. In some cases the judge may rule liquidation ex officio.
The judge approves the liquidation. Liquidation plan is drawn up, and a report on the equity situation of the enterprise. In general, its assets are sold. The money raised is divided among the creditors.
In the sale, preference is given to the transfer of parts of the enterprise, or otherwise the entire business en masse, in order to allow its economic activity to continue.
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