Types of liquidation and reorganisation processes

Voluntary liquidations

What are the requirements for a debtor commencing a voluntary liquidation case and what are the effects?

The Spanish Companies Act provides for a voluntary liquidation of the company. This process is different from an insolvency process.

A voluntary liquidation is commenced when the company is solvent but a winding-up cause occurs. Winding-up causes can be set out in the company’s articles of association or be triggered under Spanish corporate legislation. For example, a winding-up cause is established where the company’s losses have reduced its equity to below 50 per cent of its share capital (unless the share capital is restored).

If a winding-up cause occurs, directors must call a general shareholders’ meeting to request that a winding-up resolution is passed. Where the directors fail to call the general shareholders’ meeting or the shareholders fail to pass a resolution to wind up the company (and the winding-up cause is not cured) any interested party can, and the directors of the company must, apply to the commercial court to initiate winding-up proceedings.

The effects of the voluntary liquidation resolution will depend on the type of company concerned. Most Spanish companies are either corporations or limited liability companies. The effects of voluntary liquidation on these two entities are broadly the same: the company’s directors will no longer have authority to manage the company and one or more liquidators will be appointed at the general shareholders’ meeting. The liquidators will be charged with, inter alia:

  • collecting the company’s debts and realising the company’s assets;
  • paying the company’s creditors;
  • concluding any outstanding commercial transactions; and
  • entering any new transactions that may be necessary for the company’s liquidation.


The liquidator must also prepare the liquidation balance sheet, which may be challenged by the company’s shareholders. At the end of the period for challenging the balance sheet, if no challenges have been made or if a challenge has been made and a final judgment has been issued, the company’s remaining assets (after payment of all creditors) will be distributed to the shareholders.

Voluntary reorganisations

What are the requirements for a debtor commencing a voluntary reorganisation and what are the effects?

Voluntary reorganisations can take place through ‘restructuring plans’, a powerful tool introduced by Law 16/2022, of 5 September, that replaces refinancing agreements and out-of-court payment agreements.

A restructuring plan can be used not only when the company is in a situation of present or imminent insolvency (the latter when the debtor foresees its inability to regularly and punctually meet its payment obligations within the next three months) but also when the company faces probable insolvency (when it is objectively foreseeable that, if a restructuring plan is not reached, the debtor will not be able to regularly meet its payment obligations that fall due within the next two years).

The debtor can notify the court of the existence of negotiations with its creditors to agree a restructuring plan or of its intention to start them immediately.

The effects of the abovementioned notice to the court, which can be extended up to six months in certain circumstances, are, among others:

  • suspension of the debtor’s insolvency application at the request of the restructuring expert or of creditors representing more than 50 per cent of the debt affected by the restructuring plan. The suspension shall be lifted if the creditors have not filed the application for court sanctioning (homologation) of the restructuring plan within one month;
  • suspension of the legal duty of the debtor to liquidate as a result of negative net equity;
  • ineffectiveness of any contractual clause that establishes the amendment of terms or conditions, including acceleration, as a result of the notice or the homologation (with some exceptions);
  • suspension of any enforcement over assets or rights necessary for the debtor’s business activity;
  • suspension of enforcement over any assets of the debtor or against one or several creditors or classes of creditors (at the request of the debtor);
  • suspension of the enforcement of guarantees or security interest granted by another group company (at the request of the debtor with evidence that enforcement could lead to the insolvency of both guarantor or security provider and debtor); and
  • suspension of the enforcement of public claims over assets or rights necessary for the continuity of the business activity.


A restructuring plan is a notarised agreement that may consist of changes to the composition, conditions or structure of the debtor’s assets and liabilities or its equity, including transfers of assets, business units or of the entire company, as well as any necessary operational change, or a combination of these elements. A certification issued by an auditor or by the restructuring expert (if one has been appointed), certifying that the legal majorities to support the plan have been reached, is required.

The scope of a restructuring plan is very wide and, in addition to financial debt, public nature claims (to a limited extent and in certain circumstances) and commercial debt may also be subject to it.

Creditors will be grouped into classes based on the existence of a common interest. There is a common interest among claims with the same ranking within insolvency proceedings. Different classes may be formed within the same ranking if advisable, for instance on the grounds of the financial or commercial nature of the claim, conflicts of interest or the impact of the restructuring plan.

Secured creditors will be grouped in a single class, unless there are differences between the charged assets and rights that justify secured claims being grouped into two or more classes. Public nature claims will be grouped in a separate class alongside other classes of the same rank. A separate class is established for creditors that qualify as SMEs when the restructuring plan involves relinquishing more than 50 per cent of their claim.

The debtor and creditors representing more than 50 per cent of the affected liabilities may request judicial confirmation on the correct formation of the classes prior to the submission of the restructuring plan for court sanctioning (homologation). If the court approval to class formation is obtained, the restructuring plan may not be challenged on this ground.

All creditors whose claims may be affected by the restructuring plan are entitled to vote, and for its approval more than two-thirds of the liabilities of each class must support it, and if there are secured creditors a minimum of three-quarters of the liabilities of this class is required for approval.

In the case of syndicated creditors, the contractual regime shall apply if it contains lower majorities than those stated above.

If the restructuring plan contains measures affecting the equity holders such as a debt capitalisation or a sale of essential assets, their consent will be required, following the procedure in accordance with the debtor’s legal structure (with certain specific rules). The restructuring plan can be court sanctioned without the consent of the equity holders if the company is under current or imminent insolvency. Equity holders will not have pre-emptive right over new shares in the event of restructuring plan homologation being filed for under current or imminent insolvency.

A restructuring plan must be court sanctioned (homologated) to:

  • extend the effects of restructuring plans to creditors or creditor classes who had not voted in favour of the restructuring plan or to the equity holders;
  • terminate contracts for the benefit of the restructuring;
  • protect and upgrade the ranking of the interim financing and the new financing contemplated in the restructuring plan; and
  • protect the acts, transactions or business carried out in the context of the restructuring plan against clawback actions (only when 51 per cent of the total liabilities are affected by the restructuring plan).


The grounds for challenging a court-sanctioned restructuring plan have been substantially expanded, including, among others:

  • ‘that the reduction in value of the debt is manifestly greater than what is necessary to ensure the viability of the company’. An important limitation is that this may not be alleged if the reduction imposed by the restructuring plan is less than the discount at which the debt was acquired;
  • failure to comply with the 'best interest of creditors test’: when the debts are adversely affected by the restructuring plan in comparison with their treatment in case of liquidation within insolvency proceedings, whether individually or as a business unit. In order to calculate the insolvency liquidation value, the effective payment shall be deemed to take place two years after the execution of the restructuring plan; or
  • lack of observance of the ‘absolute priority rule’: in the case of homologation with dissent, no class ranking below the dissenters shall receive anything unless each member of the dissenting class has been paid the full face value of its outstanding claim​.


To homologate a restructuring plan, it must be approved by all creditor classes and, if it affects the rights of equity holders and the debtor is facing probable insolvency, by the equity holders who are legally liable for the corporate debts (if any). However, if there are no equity holders legally liable for the corporate debts, approval must be given at the general shareholders’ meeting.

Cross-class cram-down is possible in the case that a restructuring plan has not been approved by all creditor classes to bind dissenting creditors (individual creditors, entire classes and the equity holders of the debtor company) if the restructuring plan:

  • has been approved by a simple majority of classes, provided that within such majority there is at least one class of claims that within insolvency proceedings would have ranked as special/general privileged claims; or
  • has been approved by at least one class that within insolvency proceedings would have obtained, presumably, some payment following a going-concern valuation (in-the-money class). This requires a report from the restructuring expert on the value of the debtor as a going concern.


The appointment of the expert is mandatory where the homologation binds dissenting creditors or equity holders (or both).

Once a company has requested the court to sanction a restructuring plan (homologation), that company must allow one year to elapse before making the same request to the court.

Law 16/2022, of 5 September, approved special rules applicable to debtors (1) with an average of no more than 49 employees, and (2) with an annual turnover or annual balance of €10m or less.

Additionally, neither the foregoing nor the general insolvency regulations will apply to debtors (1) with an average of fewer than 10 employees on their staff, and (2) with a turnover below €700,000 or liabilities of less than €350,000 in the financial year prior to the pre-insolvency notice. Instead there is a new regime, which aims to reduce costs and to simplify formalities. This new proceeding combines those aspects of the insolvency and restructuring plan procedures that best suit microenterprises.

Successful reorganisations

How are creditors classified for purposes of a reorganisation plan and how is the plan approved? Can a reorganisation plan release non-debtor parties from liability and, if so, in what circumstances?

The debtor can make a settlement proposal aiming for a type of ‘pre-packaged’ reorganisation, which can be filed from the date when the debtor applies for insolvency until fifteen days after the receivers submit their report to the court. Creditors holding at least one-fifth of the total debt can also make a settlement proposal that can be filed as from the insolvency declaration.

Settlement proposals may consist of:

  • a delay in the maturity of debts or a waiver for the company’s debts;
  • structural changes (merger, demerger or global assignment of assets and liabilities of the debtor);
  • alternative proposals to all or some classes of creditors except for public creditors, such as the conversion of the debt into equity; or
  • proposals for the sale of certain assets or business units, but not the winding-up of the company.


Settlement proposals must include a plan for the payment of the debts and, if they foresee the continuation of the business, a business viability plan. The Royal Legislative Decree No. 1/2020, of 5 May (the Recast Insolvency Act) prohibits any proposals for settlement that amend the priority of the creditors and limits the assignment of assets to the creditors to cases where those assets are not necessary for the debtor’s business and have a fair value (calculated according to the Recast Insolvency Act), equal to or less than the value of the credit extinguished. The Recast Insolvency Act does not regulate whether the settlement proposal can include a release of third-party liability. Settlements must be approved by a majority of creditors. The majorities required for the approval of settlement agreements and their extension to dissenting and abstaining creditors are as follows:


To bind non-privileged creditors 

To bind privileged creditors 

Full payment of ordinary claims within a term of up to three years 


Supporting creditors’ liabilities exceeding non-supporting creditors’ liabilities* 



60 per cent of claims within the same class** 

Immediate payment of any due and payable ordinary claims with a discharge lower than 20 per cent and payment of the remaining claims on their due date 

Discharge up to 50 per cent 


More than 50 per cent of ordinary claims 


60 per cent of claims within the same class** 

Moratorium up to five years 

Any other content different from the abovementioned*** 

65 per cent of ordinary claims 

75 per cent of claims within the same class 

* Excluding subordinated claims and special related parties claims that have acquired an ordinary or privileged claim after insolvency declaration. 

** This majority is also needed to bind privileged creditors when the settlement proposal includes conversion into profit participating loan (PPL) for a term of up to five years (except for public or employee claims). Privileged creditors are divided into four classes: employee creditors, public creditors, financial creditors and other creditors.  

*** Moratoriums and conversion into profit participating loan (PPL) can only be up to 10 years. 


The following rules apply to the calculation of majorities:

  • in the case of syndicated debt, all syndicated creditors are deemed to have supported the settlement agreement if creditors representing at least 75 per cent do so (unless the relevant syndication arrangements contemplate a lower majority, in which case the lower majority applies);
  • in the case of creditors with a special privilege (ie, secured creditors), majorities shall be calculated by comparing the proportion that the aggregate value of the security held by all the secured creditors supporting the settlement proposal represents with the total value of the security granted in favour of creditors pertaining to the same class; and
  • in the case of creditors with a general privilege, majorities shall be calculated in light of the proportion that the privileged claims supporting the settlement proposal represents compared to the total amount of the privileged claims of the creditors pertaining to the same class.


The Recast Insolvency Act includes several rules for the calculation of the value of secured assets (which are similar to those for restructuring plans). The portion of secured claims exceeding the value of the underlying secured assets does not qualify as specially privileged.

Upon approval of a settlement, the court grants creditors who have not supported the settlement proposal the opportunity to oppose it. The settlement supported by the relevant majority of creditors and accepted by the court will be binding on the creditors that approved it, on any ordinary and subordinated creditors and on privileged creditors when the majorities set out in the table above are met.

With regard to the release of non-debtor parties, there is no express provision in the Recast Insolvency Act, and so the general regime applies. Therefore, if a creditor agrees to a settlement that foresees a release of a certain amount of debt, such release could also extend, in certain circumstances, to the potential liability of third parties (eg, personal guarantees).

Once a two-year period has elapsed since a settlement agreement has entered into force, the debtor can file for an amendment when there is a risk of breaching the settlement agreement and the amendment is necessary for the continuity of the company.

Involuntary liquidations

What are the requirements for creditors placing a debtor into involuntary liquidation and what are the effects? Once the proceeding is opened, are there material differences to proceedings opened voluntarily?

Creditors can apply to the court to place a debtor into an insolvency process. For creditors to apply for insolvency they will need to:

  • satisfy the court with evidence that they have unsuccessfully attempted execution proceedings against the debtor’s assets (and have found it impossible to attach any assets from which to obtain payment);
  • satisfy the court with evidence of a previous judicial or administrative final declaration of insolvency; or
  • provide evidence that:
    • the debtor has generally ceased making payments;
    • the debtor’s assets have been seized;
    • the debtor is selling its assets rapidly or in a detrimental way; or
    • there has been a breach of certain payment obligations (ie, taxes, social security wages or salaries) for at least three months.


If a creditor files an application for the debtor’s insolvency with the court, the debtor can either agree to the creditor’s request or reject the creditor’s request within five working days. If the debtor rejects the request, it is required to deposit the amount of the debt owed to the creditor applying for insolvency (if it is due and payable) with the court. If the debtor refuses to deposit the amount with the court, the judge will hear representations from the parties on whether the insolvency declaration is appropriate. The parties will then be called to a hearing, after which the court will render a decision on whether to declare the insolvency.

The effects of the creditor initiating insolvency proceedings are broadly the same as where the directors file for insolvency.

A certain percentage (50 per cent) of the debt owed to the creditor applying for insolvency will hold a general privilege (provided that such debt does not qualify as subordinated). This may constitute an incentive for an unsecured creditor to apply for involuntary reorganisation of the debtor as it elevates 50 per cent of their debt to privileged rank.

Involuntary reorganisations

What are the requirements for creditors commencing an involuntary reorganisation and what are the effects? Once the proceeding is opened, are there any material differences to proceedings opened voluntarily?

Creditors cannot commence an involuntary reorganisation. Creditors can, however, initiate insolvency proceedings.

Expedited reorganisations

Do procedures exist for expedited reorganisations (eg, ‘prepackaged’ reorganisations)?

Procedures do not exist for expedited reorganisations. Nevertheless, the Recast Insolvency Act provides in certain circumstances for summary insolvency proceedings where procedural terms are reduced to 50 per cent. There are, however, separate proceedings dealing with a ‘prepackaged’ sale of the business or assets, introduced by Law 16/2022, of 5 September.

Unsuccessful reorganisations

How is a proposed reorganisation defeated and what is the effect of a reorganisation plan not being approved? What if the debtor fails to perform a plan?

Failure to approve a settlement agreement (or the absence of a settlement proposal) will trigger the commencement of the liquidation phase. The purpose of the liquidation phase is to liquidate all the assets of the debtor according to a liquidation plan filed by the insolvency receiver.

The debtor and the creditors can comment on the proposed plan. Also, a debtor’s breach of the settlement agreement duly approved by the court triggers the commencement of the liquidation phase upon a request being made by the creditors to the insolvency court.

Corporate procedures

Are there corporate procedures for the dissolution of a corporation? How do such processes contrast with bankruptcy proceedings?

All commercial entities may be dissolved for any of the following reasons:

  • expiry of the term fixed by the shareholders or partners in the by-laws;
  • completion of the corporate purpose for which the commercial entity was set up; or
  • loss of capital.


Most Spanish companies are either corporations or limited liability companies. These companies may be dissolved in the following circumstances:

  • it is no longer possible to accomplish the purpose for which the company was incorporated or, as a result of the paralysis of the management bodies of the company, its continued operation becomes impossible;
  • the losses have reduced the equity to an amount below 50 per cent of its share capital unless:
    • the share capital is restored to the necessary amount; or
    • the debtor notifies the court of the existence of negotiations or the intention to initiate negotiations with its creditors to agree a restructuring plan;
  • the share capital is reduced to below the legal minimum amount;
  • there is a merger or split of the company; or
  • any other cause established in the by-laws.
Conclusion of case

How are liquidation and reorganisation cases formally concluded?

Insolvency proceedings are always concluded by an order issued by the relevant court in the following circumstances:

  • an appeal against the insolvency order is successful;
  • there is only one remaining creditor;
  • the debtor has fully complied with the court-approved settlement;
  • all claims have been paid or creditors have been fully satisfied;
  • there is evidence that there are no available assets to pay the creditors;
  • all creditors waive the outstanding claim; or
  • the debtor has merged with another company or companies; or has been absorbed by another company; or there is a total spin-off of the debtor; or the assets and liabilities of the debtor have been assigned globally.