How can I save my company under the insolvency law?

by | Oct 30, 2021 | Blog

Gemma Atarés – Socia de Figueras Legal

The special procedure for micro-companies in the draft bill for the reform of the Consolidated Text of the Insolvency Law

There is a common denominator of concerns among entrepreneurs – regardless of the size of their company – when they find themselves in a situation of insolvency, which usually translates into the same recurring questions: How can I save my company? How long will the insolvency proceedings take? How much will the whole procedure cost? Can I bid to acquire the production unit and give continuity to the company? Can I prevent my company or its assets from being liquidated for such a minimal value?

Entrepreneurs in general, and especially small and micro-entrepreneurs, usually combine an entrepreneurial nature with sacrifice and dedication to their company, to which they devote their efforts and resources of all kinds, making it their way of life. This is why it is common for anguish to take hold of the entrepreneur who is considering filing for insolvency proceedings when he foresees or appreciates his state of insolvency, given the abyss of procedures, formalities, costs, duration and possible liquidation end that our insolvency regulations contemplate.

As a solution to the aforementioned concerns, the Draft Bill to reform the Consolidated Text of the Insolvency Act, which transposes EU Directive 2019/1023 of the European Parliament and of the Council of 20 June 2019, modernizes the legal system for a vital sector of the Spanish economy, micro-companies, defined in Article 687 of the draft bill as those with an average number of workers of less than 10 (or with total hours worked by the entire workforce equivalent to the hours of 10 full-time workers) and turnover of less than 2 million euros or liabilities of less than that amount.

The explanatory memorandum, based on data from the Ministry of Industry, Trade and Tourism indicating that on 31 August 2020 microenterprises constituted 93.82% of Spanish companies and employed almost 5 million people -31.63% of employment-, considers it essential to release microenterprises from the abbreviated insolvency procedure to which they had to submit in the event of insolvency -less flexible, longer lasting and more costly-, creating a special procedure for them that is much more flexible and allows a very significant reduction in costs.

The special procedure for microenterprises will maintain the possibility of continuing or liquidating the microenterprise, making deadlines and procedures more flexible, with less intervention by the court and professionals, with the consequent cost savings for the debtor. With regard to the sale of production units, without prejudice to all the possibilities offered in Article 710, and the maintenance of the possibility that the debtor himself who meets certain conditions may be the one to succeed and continue his insolvent microenterprise, a factor is introduced for direct sales in order to try to obtain a higher value for the production units, consisting of a bidder being able to award them by offering 15% in addition to the value assigned to them; with the aim of saving more companies and employment and obtaining more value in the liquidations, for the benefit of the creditors affected by the insolvency situation and for the greater satisfaction of the insolvent micro-entrepreneur.

For further information, please contact Figueras Legal.