Act 16/2022, which implements the EU Restructuring Directive [Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019], significantly reforms Spain’s insolvency law.
The approval of the Draft Law on the Reform of the Consolidated Text of the Insolvency Act (RCTIA) introduces, among others, the following changes:
- Replacement of refinancing arrangements and out-of-court payment agreements with restructuring plans. These plans are enforceable when there is a legal possibility of the company becoming insolvent.
- Introduction of the concept of probability of insolvency. Alongside the existing categories of current and imminent insolvency, objectively foreseeable insolvency is now recognized. It refers to situations where there is an expectation that the company will be unable to meet its obligations on a regular basis over the next two years.
- Arrangement of creditors based on a common interest. The debtor can separate creditors of the same rank into different categories to achieve the required majority to approve the restructuring plan. Justification of the classification and approval of the resulting plan are necessary.
- Reduction of the debtor’s payment plan from five to three years. The payment plan commences upon confirmation by the court. However, under specific circumstances, such as when creditors have made significant concessions or efforts in favour of the debtor, or when there is a high risk of payment default, the plan is potentially extendable for up to a maximum of five years.
- Introduction of new proceedings for micro-enterprises. These insolvency mechanisms, tailored to meet the unique needs of micro-enterprises, display optimal procedural simplification.
Micro-enterprises are companies meeting one of the following criteria:
- A workforce of fewer than ten employees
- An annual turnover of less than 700,000 euros, or
- Liabilities of less than 350,000 euros.
The proceedings operate through a settlement platform run by the Ministry of Justice. SMEs are entitled to free legal assistance.
- Public credits, including debts owed to the Social Security or the Public Treasury, receive preferential treatment, ensuring higher protection
- Introduction of the restructuring expert as an advisor to companies experiencing insolvency and formally requiring guidance.
Act 16/2022, on the reform of the Insolvency Law, aims to enhance the insolvency framework in Spain, facilitating a smoother and more streamlined process for dealing with insolvency cases while fostering a greater focus on restructuring and preserving viable businesses.
Álvaro Gómez Fernández
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