The Spanish government has just implemented changes in the bankruptcy law. They aim to benefit numerous small and medium enterprises and self-employed individuals experiencing financial difficulties. The latest changes give more say to creditors, speed up proceedings and reduce costs for companies with fewer than 10 employees and the self-employed.
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Light at the end of the tunnel
Spain has introduced significant changes to insolvency proceedings via new legislation that comes into effect on 26 September 2022. The business world has welcomed the modifications, seen by many as “light at the end of the tunnel”, particularly in today’s challenging economic times.
The 16/2022 Law is designed to facilitate the process from the creditor’s point of view. In addition, it places the final decision in hands of a judge.
Changes in bankruptcy law
The new law provides creditors with different tools when they’re involved in a client’s or supplier’s bankruptcy proceedings as follows:
Creditors gain more power in the decision-making process
One of the biggest changes in the new bankruptcy law affects the role of creditors in insolvency proceedings. Previously, debtors and creditors were obliged to come to an agreement.
In practical terms, this obligation often meant that some bankruptcy administrators threatened creditors with insolvency proceedings if they did not agree.
The new law gives more say to creditors because it removes the obligation to reach an agreement. As a result, the final decision is up to the judge in charge of the proceedings.
As a result, creditors may take actions even if the administrators oppose them and can initiate insolvency proceedings if they wish.
Read more: Business Debts and Debt Recovery
The new law gives creditors more leverage in bankruptcy proceedings:
- It allows them to defend their interests and claim their debts.
- It also gives them more negotiating power and protection, both at the pre-bankruptcy stage and once proceedings have started.
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Creditors gain access to company capital
The latest reform also facilitates access to company capital for creditors. Previously, creditors were the party required to make most sacrifices when it came to making a business viable. The new law reverses this situation.
The new law forces administrators to make sacrifices too.
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Proceeding for micro-companies
One of the most interesting aspects of the new law is the tool it has created for so-called micro-companies. They are businesses run by self-employed individuals or companies with fewer than ten employees.
The new law has created a mechanism specifically for this type of company by simplifying proceedings as much as possible. It also reduces their costs.
A small company or entrepreneur running a viable business has a greater chance of continuing.
Shorter bankruptcy proceedings
The new law also brings good news for all other companies (i.e. with ten or more employees). Bankruptcy proceedings can now take no longer than a year from start to finish. This change represents a continual reduction since previously, the insolvency process took four or five years.
As well as taking less time, bankruptcy proceedings have now been unified into a single procedure.
Help with bankruptcy in Spain
Whether you’re a creditor or debtor, our expert team at Costaluz Lawyers can help you navigate the new law. Get in touch for a no-obligation consultation now.