The Spanish corporate structure is essentially made up of micro enterprises. In December 2022, 93.41 % of companies in Spain were classified as micro-enterprises. This category accounts for 29.83 % of total employment1. Business insolvencies in Spain also mainly affect micro enterprises. However, the procedural rules in force until now have had a significant negative impact on this type of company due to the lack of flexibility, the long duration of proceedings and the high costs, which ultimately led to the liquidation of most micro-enterprises, the destruction of existing assets and a reduction in creditor satisfaction.
In order to avoid this undesirable outcome, Directive (EU) 1023/2019 on preventive restructuring frameworks stipulates that Member States should introduce procedures that meet the specific needs of small businesses. To this end, a specific procedure for micro-enterprises was introduced in Spain with Law 16/2022 of 05.09.2022 on the reform of the Insolvency Code, which entered into force on 01.01.2023.
The Spanish legislator initially wanted to adopt the definition of micro-enterprise set out in Commission Regulation (EU) No 651/20142, but after considerable criticism from various legal and economic experts, finally opted for the definition set out in Directive 2013/34/EU of the European Parliament and of the Council3. This leads to a restriction of the scope of application of the special procedure for micro-enterprises to all natural or juridical persons.
Those who are engaged in a commercial or freelance activity and had fewer than ten full-time employees in the previous year, as well as a turnover of less than 700,000 euros or labilities of less than 350,000 euros.
Use of standardised forms and e-platforms
The new procedure for micro-enterprises is referred to as the »special procedure«, although it will be the predominant procedure due to the number of cases. It is designed as a fast, simple and economical procedure based on the use of standardised forms filled in by the debtor or creditors via internet platforms, which allow communication with the court, thus reducing the duration of the procedure. Similarly, summonses, statements, hearings and other procedural acts must be done by videoconference. The judge can make an oral order at the end of a hearing, which is recorded audiovisually and of which the parties involved receive a copy.
In order to avoid a rapid deterioration of the debtors financial situation, the law provides that all realisation measures must be completed within three months in accordance with a realisation plan submitted by the debtor. The time limit may be extended to four months. The debtor must justify the time schedule and the form of the intended realisation of the assets. The realisation plan must be drawn up via an electronic platform. All assets of the debtor must be listed in detail and pictures of the assets must be uploaded to the platform. Via the platform, the advertising of the sale, the cataloguing and the sale of the assets themselves are organised according to commercial and revenue-maximising criteria. The assets are then sold through regular auctions and, in justified cases also through a direct sale with regulated requirements.
The law stipulates that the debtor itself must send by e-mail (with a copy to the court) all notices to creditors, such as the orders opening the proceedings, admitting a proposal for a continuation plan or opening the liquidation proceedings. This rule, which initially relieves the court of administrative work, can lead to problems and incidents for debtors who do not have sufficient capacity for these activities.
No mandatory appointment of experts (insolvency administrators) in the proceedings
One of the most controversial features of this procedure is that the debtor basically retains the power of administration and disposal and there is no obligation to appoint an insolvency administrator or another expert to monitor the debtor’s actions. The aim of this regulation is to reduce the costs of the proceedings.
Notwithstanding this, the procedure for micro-enterprises provides for the possibility of appointing. an insolvency administrator or another expert at the request of the debtor or of creditors representing at least 20% of the liabilities. Thus, in the case of business continuation, an insolvency mediator may be appointed to assist in the negotiations on the continuation plan. Likewise, a restructuring expert may be appointed who can stop actions of the debtor or take over the debtor’s power of administration and disposal. In the event of liquidation, an insolvency administrator may be appointed to take over the debtor’s power of administration and disposal. It is also possible to appoint an expert for the valuation of the company or the business establishment. In summary, instead of the previous mandatory insolvency administrator, there are now four optional specialists with different designations and functions.
The person to be appointed as mediator, restructuring expert, insolvency administrator or expert for the valuation of the company is determined by an agreement between the debtor and the creditors. Only in the event that no agreement can be reached will the appointment be made by the court. His or her remuneration is also agreed unless the petitioning creditors voluntarily assume his costs; if no agreement is reached, the remuneration shall be determined in accordance with the tariff applicable to insolvency administrators.
Liability proceedings
The reform of the Insolvency Code also leads important changes with regard to the determination of the liability of the debtor or its organs in the special proceedings for micro-enterprises. The insolvency liability procedure will only be opened in these cases if a substantiated application is filed within 60 calendar days of the opening of liquidation proceedings by the insolvency administrator, if one has been appointed; creditors representing at least 10 % of the liabilities; or the partners personally liable for the debts of the company. However, if the debtor has made a serious error in any of the standard forms submitted or has submitted false documents, any creditor may request the opening of the liability procedure
Conclusions
The special procedure for micro-enterprises is ambitious in its goals and represents a radical change. It introduces an ITbased procedure using internet platforms to shorten the duration and cost of insolvency proceedings without the mandatory involvement of an insolvency administrator or other expert. The debtor himself runs the proceedings and the creditors are primarily responsible for safeguarding their own interests, which makes greater participation and monitoring of the proceedings by the creditors essential.
In our opinion, not enough time was spent on discussing the problems or possible undesirable developments of the procedure and on creating and testing the electronic platforms that are essential for the proper functioning of the system in a timely manner. Furthermore, the courts have not been given enough time to implement this procedure. Furthermore, all experts are very skeptical-when it comes: to a positive assessment of the new special procedure for micro-enterprises without the obligatory involvement of insolvency administrators, because the experience and professional competence of insolvency administrators is indisputably of great value for the insolvency process.
