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The protection of the insolvent company in the pre-insolvency proceedings in Spain

The pre-insolvency (art. 5 bis Insolvency Law 22/2003, from 9th July 2003) enables the debtor, natural or legal person, to notify the court that he is in an insolvency situation and has entered into preliminary negotiations with the creditors. Once a debtor has entered into pre-insolvency, the so-called „protective umbrella-proceeding“, the creditors cannot initiate insolvency proceedings against the debtor during the pre-insolvency pursuant to art. 15.3 of the insolvency law.

Frustrated business man hold his head in his hands.

However, insolvency law says nothing about initiating other types of judicial procedures against the debtor (e.g. small debts and civil proceedings, etc.). Hence, creditors who have not yet filed a claim will be able to initiate proceedings after the pre-insolvency proceedings is open.

The mere presentation of a pre-insolvency does not suspend enforcement actions promoted by creditors; these actions will be continued in accordance with the legislation in force.

Once the court has granted the application for pre-insolvency, the debtor has three months to reach an agreement with the creditors, obliging himself to fulfil the content of the settlement. If he fails to arrive at an agreement, insolvency proceedings will be initiated and it remains to be seen whether an arrangement can be reached with the creditors or liquidation will be ordered by the court. Like in any insolvency proceeding, there is no guarantee that the creditors can recover their claims entirely, partly or not at all.

Should you need any further assistance on the matter, please do not hesitate in contact our law offices in Madrid, Barcelona, Marbella, Gran Canaria or Mallorca.

Leticia Lozano Uclés – Dr. Frühbeck Abogados Barcelona

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