All about how the new bankruptcy law affects companies

The new law introduces restructuring plans to tackle the limitations of the Spanish insolvency system

The new bankruptcy law is already a reality. After its publication in the BOE of last September 5  of Law 16/2022, of September 5, reforming the consolidated text of the Bankruptcy Law, approved by Royal Legislative Decree 1/2020, of May 5, the regulations introduce restructuring plans and establishes as a basis the objective of attack the limitations of the Spanish insolvency system.

One of the main changes in bankruptcy law are the so-called restructuring plans. These are pre-bankruptcy instruments that seek to avoid the insolvency of companies. These plans seek to modify the composition, conditions or structure of the debtor's assets and liabilities or its own funds.

Companies may benefit from these restructuring plans when they are in a situation of probability of insolvency. Thus, the regulations introduce the state of 'probability of insolvency' to encourage business restructuring with a preventive approach.

With the entry into force of the bankruptcy reform, businessmen will be able to notify the courts that they have started a negotiation process with creditors. Once they have done so, a series of effects will be triggered with respect to the contracts in which the debtor is a party and certain executions will be paralyzed to give time for the restructuring plan to finish.

Insolvencies in microenterprises

Microenterprises will also have a special procedure. This will focus on carrying out a direct procedure with the debtor without mandatorily naming the bankruptcy administrator, although a lawyer must be present in the process. This procedure will enter into force in 2023.

This special procedure for the insolvencies of micro-enterprises aims to channel bankruptcy and pre-bankruptcy situations in such a way that it would be applied in a mandatory manner to debtors who are also classified as micro-enterprises.

On the other hand, the reform of the bankruptcy law includes a more efficient second chance procedure than the one that has been in place up to now. In this new procedure, the list of exonerable debts is expanded and the possibility of exoneration of debts without prior liquidation of the debtor's assets and with a payment plan is introduced. In this way, the person would be allowed to keep their habitual residence and their business assets.