We advise companies, business owners, management bodies and creditors facing situations of insolvency, business crisis and insolvency proceedings, the Spanish “concurso de acreedores”. Experience has taught us that, in this field, the moment at which decisions are taken may matter as much as the decisions themselves. The emergence of financial difficulties does not necessarily lead to insolvency proceedings. Acting early makes it possible to analyse the company's financial and legal position, to assess its viability, to put relations with creditors in order and to examine the various alternatives that insolvency law offers for preserving the business and overcoming the crisis.
That is why our work begins before the insolvency proceedings. We analyse together the financial position, the structure of the debt, the existing security, the position of the principal creditors, the assets available and the real prospects of the business. On the basis of that diagnosis we define the most appropriate strategy with the client, with the twofold aim of protecting the company's viability where that is possible and of anticipating the risks that the situation of insolvency may create for its directors.
Anticipating and restructuring insolvency
Insolvency rarely appears suddenly. Cash-flow strain, financing falling due, the loss of significant contracts, increased indebtedness or difficulty in meeting obligations regularly may give warning of a situation that calls for action before the scope for decision disappears.
At this stage, our first task is to obtain a realistic view of the situation. Knowledge of the financial statements must be combined with a legal analysis of the debt, the security, the contracts, the company's assets and the position of each class of creditors. Only from that overall view is it possible to determine whether the company can overcome the crisis and which instruments are appropriate for doing so.
Where there are reasonable prospects of viability, we advise on negotiations with creditors and on the design and implementation of restructuring plans intended to bring the company's financial and asset structure into line with its real capacity. The aim is to act before insolvency proceedings become the only alternative.
In these situations our cross-cutting view is especially valuable. Decisions taken in an insolvency context may affect contracts, security, assets, corporate relationships and personal liability all at once. Our knowledge of property and contract law, commercial law and company law allows us to analyse those dimensions together and to assess the consequences of each decision before it is carried out.
Insolvency proceedings and insolvency strategy
Where restructuring is not possible or insolvency proceedings are the legally appropriate alternative, the priority becomes approaching the proceedings with a strategy defined from the outset. We advise the company and its management body on the preparation and filing of the petition for voluntary insolvency proceedings. To that end we analyse the financial and legal documentation, the composition of the assets and liabilities, the ranking of claims, the existing security, the contracts in force, the pending litigation and any earlier transactions that may become relevant during the proceedings.
Our involvement covers the conduct of the insolvency proceedings at every stage and advice on the various alternatives that the company's situation allows, whether there is a real possibility of continuity or it proves necessary to undertake an orderly liquidation.
Liquidation should not be understood as an absence of strategy. Where the company's continuity is no longer viable, orderly action makes it possible to preserve the value of the assets, to manage relations with creditors properly and to reduce the risks arising from hasty or belated decisions.
Directors' liability and the classification of the insolvency
A situation of insolvency affects the company, but it may also have consequences for those who make up its management body and for other persons whom the law treats, for these purposes, as specially related parties. The analysis of the directors' potential liability is therefore an essential part of our insolvency advice from the very first moment. We review the decisions taken before and during the insolvency, compliance with statutory duties, the accounting and corporate information, transactions carried out with shareholders or third parties and any circumstance that may become relevant in a possible “sección de calificación” —the stage in which the insolvency is classified as fortuitous or culpable—. Our aim is that the director should know from the outset what their legal position is, what risks exist and what decisions have to be taken in order to manage the crisis as safely as possible.
Where the culpability section is opened, we take on the defence of the directors and of the other persons affected against any claims of liability that may be brought. This particular attention to the personal position of the members of the management body forms part of the way we understand insolvency law; the strategy must protect the company's interests without losing sight of the consequences that the proceedings may have for those who have taken on its management.
Creditors facing the debtor's insolvency
Our insolvency practice also includes acting in defence of creditors affected by the insolvency of their customers or debtors. We analyse the nature of the claim and the security attaching to it, we lodge it with the insolvency practitioner and we defend its proper inclusion and ranking in the proceedings. Where necessary, we take part in the actions and ancillary proceedings intended to preserve the creditor's legal and financial position.
We also advise on whether it is appropriate to petition for creditor-initiated insolvency proceedings —a “concurso necesario”— where the statutory preconditions are met, and on the strategy to be followed in the face of proposals for restructuring, a “convenio” —a composition with creditors—, a sale of assets or liquidation.
