Legal Administration & Liquidation
Unfortunately even the best managers sometimes have to admit that the situation of their company is irretrievable, and in those cases more drastic actions need to be taken.
Insolvency law in Spain is changing all the time, but the onerous responsibility of managers remains clear, and if action is not taken within a predetermined time frame the managers themselves may be held personally responsible for their actions.
Corporate law theoretically requires companies to file with the courts for protection from creditors within two months of their not being able to meet their financial obligations, although recent changes allow for the provisional filing for protection to enable the company to negotiate with their creditors and try to reach an out-of-court agreement.
If an agreement is not reached though within a maximum period of four months, the courts will appoint a legal administrator who will initially work with local management to find a solution to enable the company to continue. If this is not possible then the company may be put in to liquidation. The administrator will advise the judge whether the situation is “fortuitous”, or whether the company directors have been “guilty” of negligence or even fraud. If found guilty, the directors will therefore be responsible themselves for making good any losses, and may also be banned from holding directorships for a period of time.
All of this can be a distressing and uncertain process to go through, and with the courts and legal administrators overwhelmed by the number of cases currently before them, the process can be interminable and the outcome to a certain extent aleatory.
Your local lawyers should be able to advise you on the risks incurred and the steps to take, but they will not be able to assist with the day-to-day running of the company during this period. It may therefore be advisable to appoint an independent manager who can coordinate with all involved to make sure that the company meets its obligations to the courts and other parties on a timely and professional basis, thereby ensuring that outside shareholders and directors are protected as much as possible.
can supply the experienced manager you need, and can also help you obtain the necessary legal services if you do not already have a suitable contact in Spain.