What the new special insolvency procedure for microenterprises involves.

Law 16/2022, of September 5, amending the consolidated text of the Insolvency Law (Ley Concursal), approved by Royal Legislative Decree 1/2020, of May 5, was enacted to ensure the continuity of companies and businesses that are viable but are experiencing financial difficulties that may threaten their solvency and lead to the ensuing insolvency proceedings (concurso de acreedores). The reform of the Insolvency Law includes a special procedure for microenterprises.

This has given rise to the insolvency platform for micro-SMEs and self-employed workers, designed to provide swift access to the procedure, minimize the system’s fixed costs, and make it easier to adopt a continuation plan or, if that is not possible, to liquidate the business.

Communications may be made through official standardized electronic forms available online free of charge. This will allow information to be received in real time.

Who can access the insolvency platform?

The special procedure for microenterprises applies to debtors, whether natural persons or legal entities, who carry on a business activity and meet the following criteria:

• They employed an average of fewer than 10 workers during the year preceding the application.

• They have an annual turnover of less than €700,000 or liabilities of less than €350,000 according to the most recent accounts closed in the financial year preceding the filing of the application.

The special procedure will cover all of the assets and rights forming part of the debtor’s estate on the date on which the special procedure is opened, as well as any assets and rights restored to the estate, except for assets and rights that are legally exempt from attachment.

The special procedure for microenterprises may be conducted as:

• A continuation procedure.
• A liquidation procedure, with or without the transfer of the business as a going concern.

It will apply to microenterprises in a situation of probable insolvency, imminent insolvency, or current insolvency.

When did the Insolvency Law come into force?

This new procedure came into force on January 1, 2023, but has only been accessible since the 9th of this month.

Accordingly, since January 9, self-employed workers and microenterprises with fewer than 10 employees have had access to a platform that enables them to communicate directly with the courts, should they need to file for insolvency proceedings.

Liquidation of goods and services

Another of the new features of Law 16/2022, of September 5, concerns the liquidation of assets and rights.

It introduces the possibility of selling microenterprises’ assets, both through direct sale via third-party access by customers to the catalog and through periodic electronic auctions.

In both cases, this will be done through the creation of a liquidation platform, which will be a public electronic portal with free and universal access.

Restructuring plans

The Insolvency Law introduces restructuring plans to prevent insolvency and to help overcome it. The current pre-insolvency instruments are thereby abolished.

Restructuring plans make it possible to take action at an earlier stage than the pre-insolvency instruments, without being linked to insolvency proceedings and with features that enhance their effectiveness.

Their introduction will lead to earlier restructuring with greater chances of success, and will help to ease the burden on the courts and make insolvency proceedings more efficient.

Companies will be able to use restructuring plans in a situation of probable insolvency, before the imminent insolvency that is required in order to use the current instruments.

In addition, the content of restructuring plans is broader, and creditors are free to establish whatever measures they deem appropriate to halt the debtor’s solvency crisis.

Creditors affected by the restructuring plan will have to be grouped into classes according to their common interest.

Creditors whose claims rank equally in insolvency proceedings will form part of the same class and may be separated only where there are justified reasons for doing so.

The figure of the restructuring expert is also introduced. The restructuring expert may intervene in the pre-insolvency phase at the request of the debtor or of creditors representing more than 50% of the liabilities that could be affected, or where court approval (homologación) is sought for a plan that has not been approved by the classes of creditors or the shareholders.

In addition, the term of the debtor’s payment plan is reduced from 5 to 3 years.

Pre-pack insolvency procedure

The pre-pack insolvency procedure will allow companies to sell one or more business units (unidades productivas) in order to raise funds and meet their debts before filing for insolvency proceedings.

Right to a second chance

The new Insolvency Law amends the second-chance procedure: it expands the list of dischargeable debts and introduces the possibility of a discharge without prior liquidation of the debtor’s assets and with a payment plan.

This will allow debtors to keep their current home and, if they are self-employed, to continue their business activity.

In other words, the formalities are simplified, and the prior liquidation of the debtor’s assets will no longer be required for their debts to be forgiven.

Furthermore, the discharges previously provided for, of up to €1,000 in respect of debts owed to the tax authorities and a further €1,000 in respect of debts owed to Social Security, are increased to €10,000 for individuals.