To be or not to be, that is the question, what happens when a company in crisis tries to subsist but does not see the exit, banks do not grant them a credit line, credit balances do not stop increasing and demand is not reactivated? The company turns into a state of capital insolvency because it does not have sufficient assets to meet those debts, or it doesn’t have the treasury to meet its current payment commitments.
That a company in Spain is insolvent does not necessarily mean that it has a capital deficit, but simply that it does not have sufficient treasury to fulfil its obligations in general, and the Spanish law (which everyone should comply with) obliges administrators of the companies to voluntarily request the bankruptcy of the company when the Spanish trade company they administer is insolvent, under penalty of being declared liable for the corporate debts generated after the date on which the company became insolvent if they do not request the creditor’s meeting within 2 months after the date in which they should have known this situation, or request the dissolution if the company has a net worth of less than half of the share capital.
But why do many companies in Spain urge the bankruptcy? Why do they not extinguish the company? Because the only way to extinguish a company in Spain according to the current legislation requires the payment of their creditors. If not, the Registrar of the Companies House will not authorize the cancellation of the company’s registration. Thus, the only alternative to extinguish a Spanish company with debts is requesting the creditor’s meeting. But why extinguish it? Why not let the company ‘die’? (The concept of letting it ‘die’ is to stop filing declarations with the Spanish Tax Office and the Companies House), because as a general rule, that “evicted” company will present a negative net equity, and creditors could file a liability action against their administrators.
The Spanish bankruptcy is not the panacea to fix the problems of a company that presents financial or equity insolvency, but it is the only mechanism that can be used because the law “forces” companies to do it this way and this obligation is the liability of the corporate administrators, under penalty that the creditor starts other ways to claim debts to the administrators.
The bankruptcy procedure in Spain is the way that the legislator has arranged so that companies can have a future but that, due to any circumstance whatsoever, do not have liquidity to meet the regular payment of their current obligations, but it is also the only way to dissolve companies with debts.
Creditors can do little when faced with a bankruptcy procedure in Spain , except to pray the can collect part of their debts or that the appropriate circumstances arise in order to be able to use the provisions of the current law of capital companies, and claim their debts to the administrators of the company.