Declaration of insolvency of the natural or legal person
(Second Chance Law)
Application regulations:
- REGULATION (EU) 2015/848 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 May 2015 on insolvency proceedings (recast).
- REGULATION (EU) No 1215/2012 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 12 December 2012 on judicial jurisdiction, the recognition and enforcement of judicial decisions in civil and commercial matters (recast.
Regulation 2015/848, of May 20 on insolvency procedures, defines in its article 2 section 4) that insolvency proceedings shall be understood in accordance with the procedures listed in Annex A for each State. In the particular case of Spain, these procedures are:
- Contest,
- Procedure for approval of refinancing agreements,
- Procedure for extrajudicial payment agreements,
- Public negotiation procedure for achieving collective refinancing agreements, approved refinancing agreements and advance agreement proposals.
Now, recital (7) of Regulation 2015/848, of May 20, clarifies that bankruptcy, agreements between the bankrupt and creditors and other similar procedures, as well as those related to these procedures, are excluded from the scope of application of the Regulation. Regulation 1215/2012 of the European Parliament and of the Council, relating to jurisdiction, recognition and enforcement of judicial decisions in civil and commercial matters. These procedures must be subject to the Regulation. To the greatest extent possible, the interpretation of this Regulation should avoid regulatory gaps between both instruments. However, the mere fact that a national procedure is not listed in Annex A to this Regulation does not mean that it is subject to Regulation (EU) 1215/2012.
3. Royal Legislative Decree 1/2020, of May 5, which approves the Revised Text of the Bankruptcy Law. (Entry into force from September 1, 2020).
Subjective budget
The declaration of bankruptcy will proceed with respect to any debtor, whether natural or legal person. Entities that make up the territorial organization of the State, public organizations and other public law entities are exempt from the declaration of bankruptcy.
Target budget
The declaration of bankruptcy will proceed due to the insolvency of the debtor. This may be current or imminent.
- In current insolvency is someone who cannot regularly fulfill their required obligations.
- A debtor who foresees that he will not be able to regularly and punctually fulfill his obligations is in imminent insolvency.
External foundations revealing the state of insolvency
1. The existence of a prior judicial or administrative declaration of insolvency of the debtor, provided it is firm.
2. The existence of a title by which an order of execution or enforcement has been issued without the seizure having resulted in sufficient known free assets for payment.
3. The existence of embargo for executions in progress that generally affect the debtor's assets.
4. The generalized dismissal in the current payment of the debtor's obligations.
5. The general suspension of payment of tax obligations payable during the three months prior to the bankruptcy request; that of social security contributions and other concepts of joint collection during the same period, or that of salaries and compensation to workers and other remuneration derived from employment relationships corresponding to the last three monthly payments.
6. The uprising or hasty or ruinous liquidation of his assets by the debtor.
Legitimacy to request the declaration of bankruptcy
The following are entitled to request the declaration of bankruptcy:
- The debtor
- Any of your creditors
If the debtor is a legal entity, the administrative or liquidation body will be competent to decide on the presentation of the application.
The creditor who, within the six months prior to the submission of the application, had acquired the credit through inter vivos acts and in a singular capacity, after its maturity, is not legitimized.
To request the declaration of bankruptcy of a company, partners who are personally responsible for the company's debts are also entitled.
The duty to request the declaration of bankruptcy
The debtor must request the declaration of bankruptcy within two months following the date on which he knew or should have known the current state of insolvency.
Unless proven otherwise, it will be presumed that the debtor has known that he is in a state of insolvency when any of the events that may serve as a basis for a request from any other legitimate party has occurred.
From the debtor's request
The debtor who requests the declaration of bankruptcy itself must express in the application the current or imminent state of insolvency in which it is found and attach all the documents it considers necessary to prove the existence of that state.
Required general documentation
Attached to the request for declaration of bankruptcy, the debtor must attach the following documents:
1. A memory expressive of the economic and legal history of the debtor; of the activity or activities in which it has been dedicated during the last three years and of the establishments, offices and holdings of which it is the owner; of the causes of the state of insolvency in which it is found, and of the considerations it deems appropriate regarding the patrimonial viability.
- If the debtor is a married person, he or she will indicate in the memory the identity of the spouse, the date of the marriage, the economic regime by which it is governed and, if it has been agreed, the date of the marriage agreements. If the debtor has a registered partner, he or she will indicate in the report the identity of the partner and the date of registration in the corresponding registry.
- If the debtor is a legal entity, it will indicate in the report the identity of the partners or associates of which it has evidence; the identity of the administrators or liquidators, the general directors and, where applicable, the auditor; if it has securities admitted to trading on the official secondary market, and if it is part of a group of companies, listing those that are part of it.
2. An inventory of assets and rights that make up your assets, with an expression of the nature they have, the characteristics, the place where they are located and, if they are registered in a public registry, the registration identification data of each of them. the related assets and rights, the acquisition value, the applicable valuation corrections and the estimate of the current value. The rights, encumbrances, works and charges that affect these assets and rights, in favor of the creditor or third party, will also be indicated in the inventory, expressing their nature and, where applicable, the identification data. registry.
3. The list of creditors, in alphabetical order, with expression of the identity, domicile and electronic address, if any, of each of them, as well as the amount and maturity of the respective credits and guarantees personal or real constituted. If any creditor has judicially claimed payment of the credit, the corresponding procedure will be identified and the status of the proceedings will be indicated.
4. The workforce, if applicable, and the identity of the members of their representative body, if any.
Accounting and complementary documents
1. If the debtor is legally obliged to keep accounting records, the following documents will also accompany the application for declaration of bankruptcy:
1. The annual accounts and, where applicable, the management reports and audit reports corresponding to the last three years ending on the date of the request, whether or not said accounts are approved.
2. A report of the significant changes that occurred in the assets after the last annual accounts formulated, approved and deposited.
3. A report of the operations carried out after the last annual accounts formulated, approved and deposited that, due to their purpose, nature or amount, would have exceeded the debtor's ordinary business or traffic.
2. If the debtor is part of a group of companies, as a dominant company or as a dominated company, it will also accompany the annual accounts and the audit report corresponding to the last three corporate years ending on the date of the request, whether approved or not. said accounts, as well as an expressive report of the operations carried out with other companies in the group during that same period and until the bankruptcy request.
3. If the debtor is obliged to communicate or send interim financial statements to supervisory authorities, the request for declaration of bankruptcy will also be accompanied by the financial statements prepared after the latest accounts that accompany the request.
When the debtor does not accompany the application with any of the required documents or if any of the data or requirements established by law are missing, the debtor must express the cause that motivated it in the request for declaration of bankruptcy.
It is important to keep in mind that, once the bankruptcy proceedings are concluded due to liquidation or insufficient assets, the natural person debtor will be responsible for the payment of unsatisfied credits, unless they obtain the benefit of exoneration of unsatisfied liabilities.
Creditors may initiate individual executions, as long as the reopening of the insolvency proceedings is not agreed upon or a new insolvency proceedings are not declared. For such executions, the inclusion of your credit in the definitive list of creditors will be equivalent to a final sentence of conviction.
Notwithstanding the above, the natural person debtor may request the benefit of exoneration of unsatisfied liabilities. The debtor must present to the bankruptcy judge the request for exoneration of the unsatisfied liability within the hearing period granted to the parties to formulate opposition to the request for conclusion of the bankruptcy.
