Business Bankruptcy in Spain: Common Questions Answered
What is business bankruptcy in Spain?
Business bankruptcy (concurso de acreedores empresarial) applies to companies that can no longer pay debts. It can lead to:
- Restructuring: The business continues operating under a payment plan.
- Liquidation: The company is closed, and assets are sold to repay creditors.
Who can file for business bankruptcy?
- Company directors are legally required to file for bankruptcy within two months of insolvency to avoid personal liability.
- Creditors can also force a company into bankruptcy.
What are the types of business bankruptcy?
- Pre-bankruptcy (Preconcurso de Acreedores): The company seeks time (up to 4 months) to negotiate with creditors before full bankruptcy is declared.
- Voluntary Bankruptcy (Concurso Voluntario): The company voluntarily files for bankruptcy when it cannot meet financial obligations.
- Forced Bankruptcy (Concurso Necesario): Creditors request bankruptcy proceedings against the company after 3+ months of non-payment.
What happens to business debts in bankruptcy?
- If the business is restructured, debts may be renegotiated, reduced, or extended.
- If the business is liquidated, assets are sold to pay creditors.
- If debts remain unpaid, they may be written off unless directors are found personally liable.
Can business owners be personally liable for company debts?
- For limited liability companies (SL, SA): Owners are not personally responsible unless they acted negligently.
- For sole traders (autónomos): Owners are personally liable for business debts.
How long does business bankruptcy take?
- Simple cases (small businesses) can take 1-2 years.
- Larger corporate bankruptcies can take several years, depending on complexity.
- If fraud, mismanagement, or disputes arise, the process can be delayed significantly.
Can creditors still pursue my business after bankruptcy?
- No, an automatic stay prevents creditors from taking legal action once bankruptcy is filed.
- However, secured creditors (e.g., banks with mortgages) may still seize collateral assets if repayment is not made.
What are the alternatives to business bankruptcy?
- Debt restructuring (Acuerdo Extrajudicial de Pagos): A formal plan to adjust payment terms.
- Debt refinancing: New financing to consolidate debts and extend repayment.
- Private creditor agreements: Settlements reached outside of court.
- Company restructuring (Concurso Express or Refinancing Agreements): A fast-track process to avoid full bankruptcy.
How does business bankruptcy affect future financial activities?
- Businesses that have gone bankrupt may struggle to obtain financing unless they prove financial recovery.
- Directors of a bankrupt company may face restrictions on managing new businesses, especially if found personally liable.