Prepared by Chanda DeLong (LEG), Manfred Balz (LEG external consultant), and Ignacio Tirado (LEG external consultant).
Despite the overall increase in insolvencies of medium and large firms since the financial crisis, use of the insolvency process by many of Spain’s small enterprises is still rare, averaging only 12 bankruptcy filings per 10,000 firms in 2012. See Garcia-Posada M. and J. Mora-Sanguinetti, 2013, “Are There Alternatives to Bankruptcy? A Study of Small Business Distress in Spain,” Bank of Spain Working Paper No. 1315.
See Central Business Register, National Statistics Institute of Spain.
While the regime also includes a type of pre-packaged plan (convenio anticipado), which may be presented at the time of the debtor’s petition to open an insolvency proceeding or immediately after procedure is declared, together with the written consent of creditors holding at least 20% of total claims to the accelerated and simplified proceedings, this procedure is rarely used.
This limitation would also affect the ability to restructure business activity within a liquidation proceeding.
See the UNCITRAL Legislative Guide on Insolvency Law, pp. 224–226, 235–236, available in the Internet: http://www.uncitral.org/pdf/english/texts/insolven/05-80722_Ebook.pdf
Secured creditors may be bound by the plan if they voluntarily vote in favor and the plan is approved.
While the opening of an OCAP procedure provides the debtor the option of going through a parallel process to reschedule public debt, no write-downs of debt are permitted.
While the Law to Support Entrepreneurs did introduce a very limited discharge, its requirements for full payment of secured claims, all (administrative) claims against the estate and the long list of privileged claims, as well as 25% of ordinary claims in certain cases, make it unlikely that it will benefit many SME debtors, particularly those with the largest amount of debt.
While this note focuses on SMEs, including individual entrepreneurs, a discharge would also be recommended for individual consumers.
See European Commission Recommendation of 12.3.2014 on a new approach to business failure and insolvency.
In Germany, for example, the discharge period was initially seven years, and was subsequently reduced to five and then three.