Spain: Key new legislation introduced by the Insolvency Reform Law
Distressed companies in Spain have tended to shy away from formal insolvency mechanisms, leaving them to the very last minute, when it was already too late. This was very clearly the case when the nineteenth century bankruptcy law and the “suspension of payments” law providing standstill protection from the 1920s, were in force. The introduction of more stringent provisions on directors’ liability towards the end of the 20th century did nothing to reverse this inaction.
Then, in 2004, the new Spanish Insolvency Law came into force, the fruit of hard grafting in parliament. Aware of the importance of their task, groups of all political persuasions created a new insolvency framework from scratch, aimed squarely at modernising the treatment of insolvency in Spain. So intent were the lawmakers on giving insolvency proceedings the importance they deserve that they decided to create a new type of court – the Commercial Courts – tasked first and foremost with conducting insolvency proceedings (which, therefore, remained predominantly judicial in nature).