At Valtus Alliance, we rely on an international network of restructuring experts, recognising that each country has its own legal framework and restructuring practice. In this interview, Ronald de Zoete, Partner at Valpeo in Amsterdam, speaks with Juan Manuel Gil de Escobar, Managing Partner at Epunto in Madrid, about how restructuring is approached in Spain.
What makes the legal framework for insolvency and restructuring unique in Spain?
“Spain stands out for its unique concept of Probability of Insolvency (Probabilidad de Insolvencia), which serves as the legal trigger to implement a Restructuring Plan up to two years before any actual default.
The current Consolidated Text of the Insolvency Act (Texto Refundido de la Ley Concursal, TRLC) includes the reform of the Law 16/2022, as a result of the transposition of EU Directive 2019/1023.
It establishes that a Probability of insolvency exists when a company is expected to default on its obligations within a two-year horizon, unless a restructuring plan is reached. It serves as a proactive tier, distinct from Imminent Insolvency, which addresses a three-month outlook, and Actual Insolvency, which refers to a current and realized default.
For the Board of Directors and C-level executives, this serves as a strategic benefit, granting a protective shield to negotiate debt without the immediate pressure of asset seizures. However, it is a double-edged sword, failing to invoke this mechanism when financial indicators forecast unviability constitutes a breach of the duty of diligence. This negligence can lead to both criminal and personal financial liability for corporate debts if a future insolvency is declared guilty.”
In your experience, what is the most common mistake companies make in the early stages of a liquidity crisis?
“The most common and fatal mistake is denial, coupled with the attempt to resolve the crisis using the same resources and methods that triggered it. Board of Directors and C-level executives often place their faith in a miraculous market recovery that rarely materializes. They must understand that the probability of insolvency is not an optional rescue route, but a mandatory exercise of diligence. Detecting it requires immediate action to protect the company’s viability and the board’s legal security, though it remains an extremely difficult decision to make.”
At what point, and in what role (e.g., consultant, CFO, CRO), should an external restructuring expert be brought in?
“An expert should be brought in the moment the Probability of Insolvency is detected, without excessive delay. In mid-cap and large-scale enterprises, a traditional consultant is insufficient, as their role is limited to delivering reports. The key figure is the Interim Restructuring Manager acting as a Chief Restructuring Officer (CRO). This professional does not merely advise, they take executive control of the restructuring, providing the necessary authority to implement drastic changes in both operations and capital structure.”
What is your view on the use of protective shield proceedings as part of a restructuring strategy?
“In Spain, the Restructuring Plan is our primary shield. However, if a high-level CRO is brought on board with sufficient lead time, it is often possible to avoid the formal execution of a judicial plan altogether. The viable timing range provides a margin that, when managed by expert hands, allows for a private and agile restructuring, healing the company before the crisis becomes a matter of public record.”
Can you describe your local restructuring network? With whom do you cooperate on a regular basis?
“At EPUNTO Interim Management, a Valtus Alliance member, we operate with an ecosystem of reliable Interim Managers, specialists in operations, finance, and human resources with distinct CRO profiles. These are hands-on executive experts capable of stabilizing cash flow within very short timeframes and leading complex negotiations. They frequently collaborate with top-tier mercantile law firms to ensure that the operational and legal strategies move forward in perfect synchronization.”