How insolvency (concurso de acreedores) works for a small company

Key rules

• Filing deadline: You must file for insolvency (concurso) within two months of knowing, or when you should have known, that the company cannot pay its debts as they fall due.
• Microenterprise limit: The fast procedure is only for companies with fewer than 10 employees and turnover below 700,000 euros or liabilities below 350,000 euros.
• Restructuring plan: Microenterprises cannot use a restructuring plan; they must use the special procedure.
• Director risk: A culpable concurso can bar directors for 2 to 15 years and make them pay part of the shortfall.

When you must file

You must file for insolvency (concurso de acreedores) within two months of knowing, or when you should have known, that the company cannot pay its debts as they fall due. This is called current insolvency (insolvencia actual).

You may file earlier. If you foresee that the company will not be able to pay debts falling due in the next three months, it is in imminent insolvency, and you can file then too. Creditors can only force a concurso on grounds of current insolvency, and they need evidence, such as an unsuccessful attempt to collect the debt.

Gaining time to negotiate

If you want to negotiate a restructuring plan, you can notify creditors that you are doing so. This gives you three months of protection, plus a further period, and the duty to file is suspended while it runs. If the talks end without an agreement, you have one month after the period ends to file for concurso. The timeline below shows the order.

The microenterprise procedure

A small company can use a faster, digital procedure if it counts as a microenterprise. It qualifies if it has fewer than 10 employees and either annual turnover below 700,000 euros or total liabilities below 350,000 euros. These figures are those set when the rules were enacted in 2022. The test uses the accounts of the last closed financial year.

The procedure starts with a standardized electronic application and its supporting documents, usually filed by the company. The court examines it, and a simplified stage for creditors follows. There is no formal ranking of creditors. Total times are measured in months, not years. An insolvency administrator is appointed only where needed.

You then choose between two routes:

• Continuation: you agree a quick plan with creditors and the business keeps trading.
• Liquidation: the business is sold, ideally as a going concern, in a fast sale phase. The administrator sells the assets and the company is then closed.

Restructuring plans for other companies

If the company is not a microenterprise, a restructuring plan is open to you when you are in probable, imminent or current insolvency. Probable insolvency means you can objectively foresee being unable to pay debts falling due in the next two years. Microenterprises cannot use restructuring plans. Banks, insurers and other regulated financial firms cannot either.

The plan is agreed with the affected creditors by classes and approved by a majority. A court may then confirm it (homologación) if needed. Ask a lawyer to assess whether this route fits your company.

What can happen to directors

After a concurso, the judge classifies it as culpable or not. Culpable means gross negligence or fraud contributed to the insolvency. Filing late makes culpability likely. Having no accounts, falsifying documents or hiding assets are treated as serious breaches.

If the concurso is culpable, the judgment can:

• bar directors from managing others' assets or representing others for 2 to 15 years;
• strip them of their rights as creditors in the concurso;
• order them to return assets taken and pay damages;
• order them to pay all or part of the shortfall owed to creditors, if the company is liquidated. This needs a causal link with the culpable conduct, and the judge decides.

The checklist below helps you work out where your company stands.

Timeline and deadlines

• File early if you foresee you will not be able to pay debts that fall due in the next three months: As soon as you foresee it; this is optional and only the company can do it

• Notify creditors that you are negotiating a restructuring plan, which suspends the duty to file: Before the filing period runs out; this gives three months' protection, plus a further period

• File for concurso if the negotiations end without an agreement: Within one month after the negotiation period ends

Checklist

• Check whether the company can regularly pay its debts as they fall due; if not, it is in current insolvency.

• Check whether you foresee being unable to pay debts falling due in the next three months, which counts as imminent insolvency.

• Count your employees and compare them with the limit of fewer than 10 employees.

• Compare turnover with 700,000 euros and total liabilities with 350,000 euros, using the accounts of the last closed financial year; you need turnover below the first or liabilities below the second.

• If you qualify as a microenterprise, choose between continuation with a plan agreed with creditors and liquidation by selling the business as a going concern.

• Prepare the standardized electronic application and its supporting documents for the microenterprise procedure.

• If you are not a microenterprise and expect problems only within the next two years, ask a lawyer about a restructuring plan.

What to watch out for

• Filing late makes culpability likely: If you do not file in time, the court presumes the concurso is culpable, unless you can prove otherwise. Culpable means the judge finds fraud or gross negligence contributed to the insolvency. Note the date you first knew the company could not pay its debts, and file or start creditor negotiations within the deadline.

• Directors can be barred for 2 to 15 years: A culpable ruling can disqualify administrators, including de facto ones and liquidators, from managing other people's assets or representing others for 2 to 15 years. They also lose their rights as creditors in the concurso. Keep acting in the company's interest and take advice early, before the situation worsens.

• You may pay from your own pocket: The judge can order administrators to return assets taken, compensate damages and pay all or part of the deficit, the shortfall of creditors' claims, when the company is liquidated. The deficit requires a link to the culpable conduct. Do not move assets out of the company, and keep a clear record of every decision.

• Missing accounts or false documents count as serious breaches: Having no accounting, falsifying documents or hiding assets means culpability is presumed with no way to rebut it. Not cooperating with the court also raises a rebuttable presumption. Keep up-to-date accounts, give the court and the administrator full and truthful information, and never hide assets.

Frequently asked questions

Can a small company use a restructuring plan instead of concurso?

Yes, a small company can use a restructuring plan (plan de reestructuración), unless it is a microenterprise, which must use the special procedure instead.

Can a creditor force my company into concurso?

Yes, a creditor can apply for concurso, but only on grounds of current insolvency, backed by evidence such as unsuccessful enforcement of a debt. Creditors cannot apply because insolvency is only imminent. Only the debtor can file in that earlier situation.

Does the microenterprise procedure always involve an insolvency administrator?

No, the court appoints an insolvency administrator in the microenterprise procedure only where needed. The procedure is digital, has no formal classification of creditors, and takes months rather than years.