You have filed for pre-insolvency protection — or you are about to. The clock is ticking. This guide explains your real options in plain language: from a creditor restructuring plan to selling to an investor who can move now.
If you are reading this, it is probably because you have already filed a pre-insolvency communication with the commercial court — or because you are considering doing so in the coming days.
The first instinct is to focus on the legal procedure: which forms, which deadlines, which court. That matters. But the more important question is not legal — it is strategic: what do I do with the three months I have?
This article answers that question. It is not a guide to Spanish insolvency law — that is what lawyers are for. It is a practical explanation of the real options available to a business owner in pre-insolvency, written from the perspective of someone who buys and restructures companies in exactly these circumstances.
Filing a pre-insolvency communication under Article 583 of the Consolidated Insolvency Act (TRLC — reformed in 2022 to transpose the EU Restructuring Directive) grants a three-month moratorium during which creditors cannot initiate or continue individual enforcement proceedings. It buys time to negotiate.
The 2022 reform updated and strengthened this mechanism, incorporating the new European preventive restructuring framework. But the essence has not changed: pre-insolvency is borrowed time. What you do with that time determines whether the business survives.
The uncomfortable truth is that three months feels like a lot and is very little. In that window, you need to diagnose the situation, design a plan, negotiate with creditors, and — if sale is the chosen path — find a buyer, complete due diligence, and close the transaction. There is no margin for indecision.
The option most business owners reach for first: reaching agreement with creditors — primarily financial ones — on new payment terms. This can include extended maturities, haircuts on principal, debt-to-equity conversion, or a combination of the three.
The reformed TRLC offers the court-approved restructuring plan mechanism (Articles 617-682), which allows a plan to be imposed on dissenting creditors if the required majorities are met and the court approves it. This is the most powerful instrument for situations with complex debt structures.
When it works. When the problem is primarily financial — the company generates positive EBITDA but cannot service its debt — when financial creditors are few and can negotiate in a coordinated way, and when the owner has a credible business plan that convinces creditors that a haircut today is worth more than a liquidation tomorrow.
When it does not work. When the problem is not just financial but also operational — margins are deteriorating, the company is losing money operationally — when creditors are numerous and heterogeneous, when the relationship with the banks is severely damaged, or when there is insufficient time to negotiate. A well-articulated restructuring plan can take longer than the pre-insolvency window allows.
What the business owner must understand: creditors are not obliged to accept terms that do not suit them. To negotiate successfully, the plan must demonstrate that creditors recover more under the agreement than without it.
In some cases, the solution is to replace existing debt with new debt on better terms: a long-term loan replacing short-term credit lines, asset-secured financing, or working capital from a new lender that allows the most urgent obligations to be met.
This option requires either assets that can serve as collateral or a sufficiently compelling business plan to convince a new lender to take on the risk.
The limitation: in a pre-insolvency situation, obtaining new bank financing is extraordinarily difficult. Banks have early-warning systems that flag distressed companies, and their first reaction is typically to reduce exposure, not increase it. Alternative financing — debt funds, private credit platforms — can be a route, but it is expensive and requires solid collateral.
This is the option that fewest business owners consider initially and that, in many cases, produces the best outcome for all parties.
A specialist investor in distressed situations — a family office with restructuring experience, a special situations fund — can acquire the company during the pre-insolvency period. The transaction can be structured in different ways:
Full acquisition of the equity. The investor acquires 100% of the company, takes over management, injects the necessary capital, and negotiates with creditors to restructure the debt. The price reflects the difficulties — typically well below what the company would have been worth in normal conditions — but the owner avoids formal insolvency, limits personal liability, and preserves the company’s continuity.
Majority stake with capital injection. The investor subscribes a capital increase that gives it a controlling position, and the funds raised are used to stabilise the company and negotiate with creditors. The owner retains a minority stake with the option of recovering value if the restructuring succeeds.
Why this option can be the best one. For the owner: it avoids the stigma and personal consequences of formal insolvency, keeps the company operating, preserves employee jobs. For creditors: they recover more than in a formal insolvency liquidation (where historically 20-40% of claims are recovered). For employees: the business keeps running.
What must be understood about the price. A company in pre-insolvency does not sell at the price it would have achieved three years earlier. The price reflects the current situation: the uncertainty, the risk the buyer is taking on, the cost of the restructuring they will have to execute. Comparing that price to the company’s historical value is emotionally understandable but strategically destructive.
At Blue Mountain, when we assess a company in pre-insolvency, we move quickly: we can do an initial evaluation in days and advance to a proposal in weeks. Because in these situations, time does not wait.
The last option — the one nobody wants, but that is sometimes unavoidable — is allowing the situation to proceed to formal insolvency (concurso de acreedores) when the pre-insolvency period has not produced agreements.
The facts here need to be stated clearly: 90% of Spanish insolvency proceedings end in liquidation. The company ceases to exist. Employees lose their jobs. Creditors recover a small fraction of their claims. And the owner may face personal liability if the insolvency is declared culpable.
Formal insolvency is not the end of the world, and it is sometimes unavoidable. But allowing a situation to reach that point when alternatives were available — without having explored them — is the greatest strategic mistake a distressed business owner can make.
When business owners say “we have three months,” they actually have much less. Here is how time is consumed in a sale scenario:
That assumes everything goes smoothly. If there are complications — incomplete information, difficult creditors, discovered contingencies — the process extends, and three months may not be enough.
This is why the first day of pre-insolvency is the moment to act, not to wait.
If sale or investor entry is the option that makes most sense for your situation, there are things you can do right now to maximise the chances of success:
Prepare the basic information. Three years of financial statements, a 13-week cash flow forecast, a complete debt map (who, how much, maturities, collateral), and a list of key client and supplier contracts. This is the first thing any serious investor will ask for.
Be transparent about the problems. The investor will conduct due diligence and will find what is there. If problems are concealed, trust is destroyed and the transaction fails. Transparency from the outset does not slow the process — it makes it possible.
Define your priorities. What matters most to you? Price? Business continuity? Employment preservation? Your own participation in the recovery? Knowing your priorities allows you to evaluate proposals more effectively.
Get proper advisors. An M&A advisor specialised in distressed situations, an insolvency lawyer, and if possible a financial restructuring advisor. The cost of this advice is real, but the alternative — managing the process alone in a situation of maximum complexity — rarely ends well.
Pre-insolvency is one of the hardest situations a business owner can face. The exhaustion, creditor pressure, uncertainty about employees’ futures, the sense of failure — all of that is real and should not be minimised.
But it is also a moment that defines a legacy. Business owners who act decisively at this point — who seek help, who are transparent, who make hard decisions quickly — are the ones who achieve better outcomes for everyone: their employees, their creditors, themselves.
Time is the only resource that cannot be recovered. If your company is in pre-insolvency today, the question is not whether to act. It is how to act, and with whom.
Speak with us. We analyse situations confidentially and without obligation. And if we can help, we will move with speed.
Further reading: alternatives to insolvency, viability plan for distressed companies, selling a company with debt, out-of-court payment agreement, and investment in distressed companies.
By Blue Mountain Capital
By Blue Mountain Capital
By Blue Mountain Capital
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