1.1 Amicable Phase

1.1.1 General

Accounts Receivable Spain operates with a professional staff that is dedicated to pursuing an amicable collection process with all debtors. It is always our goal to work toward an amicable resolution of the debt, through payment plans, settlement, and investigation of the documents pertaining the amount owed by the debtor. All of our procedures are in-house, and our professionals contact debtors both via telephone contact and written communication delivered via postal mail.

In the event of a dispute, we use documentation supplied by our client to ensure an amicable resolution and payment. Our in-house legal team performs any investigations conducted into the debtor.

1.1.2 Local agent

If we are experiencing difficulties collecting a debt, we will hire a lawyer to visit the debtor in person. The purpose of this visit is to learn more about the debtor’s financial situation and solvency. Our field agent attorneys keep us informed of any developments and are able to receive payments from the debtor to be used toward the debt’s outstanding balance. If this process fails, we will consult the agents and our legal team when deciding on the next course of action.

1.1.3 Interests

Interest is always attached a collection by Accounts Receivable Spain. Our policy is to adhere to any stipulations regarding interest that are set forth in the original contract between the debtor and the creditor. If there are no such stipulations, we will charge an interest rate based on the fixed rate set by the Spanish National Bank.

In Spain, this interest is considered a negotiation tool. Interest may be relieved in order to secure payment of the debt’s balance.

1.1.4 Debt collection costs

Debt collection costs in Spain can be charged to the debtor to cover the costs associated with late payment damage. Regulations pertaining to this charge can be found in the Spanish Civil Code and the Spanish Commercial Code. If the creditor has special contractual terms regarding the coverage of collection costs, those will be used as a guide when determining the fees assigned to the debtor.

Spanish debtors view collection costs as a factor in negotiation, and these costs can be reduced in order to arrange for full satisfaction of the debt’s outstanding balance.

1.1.5 Prescription

The Statute of Limitations in Spain is known as the Prescription Period. This period of time lasts 15 years from the first time a debt has become past due. Transport claims are subject to a shorter period of just six months. After these two periods of time, it is not legal or permissible to collect a debt from a debtor.

A prescription period can be suspended under the following conditions:

- A credit claims payment through the courts
- The creditor files an extrajudicial claim
- The debtor acknowledges the debt

This is considered a renounceable benefit of the debtor. It cannot be set or determined by a court.

1.1.6 Accepted and most common payment methods

Payments toward a debt are made via bank transfer or cheque. Direct debit of accounts is not offered.

1.1.7 Types of companies

There are several types of companies in Spain, with each being subject to different liabilities and regulations. The include:

“Sociedad Limitada,” or S.L.:

A minimum capital level of 3,000.00 EUR is required for these companies.

“Sociedad Anonima,” or S.A:.

This type of company can only be founded with at least 60,000.00 EUR in capital.

For both companies, the shareholders’ assets are not impacted by the company’s debts. It is necessary for the company to prove that bad financial practices has been followed in front of a judge when debts are being pursued.

Community:

This more entrepreneurial type of company is common among sole owners or small groups of partners. Their personal assets can be seized to pay for the debts, and they are personally liable for the company’s debt load.

1.1.8 Sources of information

Information entered into the country’s C&C database is accessible by Accounts Receivable Spain. This information includes financial reports and risk evaluations from companies based in Spain, Portugal, or Brazil. These reports, in combination with information we have obtained from our clients, provide a crucial next step when pursuing debtors, and are used to determine the best course of action.

Information contained in the C&C database makes it easy for us to find those debtors who are still engaged in business and still trading. If it is determined by our professionals that a legal action should be filed, we will send a local field agent to visit the company and determine more information about their finances and their justifications for having not remitted payment.

Private investigators are not used in Span when obtaining this information, as it is possible to find company information using several other services at no additional cost to our staff or our clients. It is possible for us to use the court’s own agencies and information sources if we are engaged in a legal procedure, further enhancing the process. It is doubtful that a private investigator would be more effective than these sources.

1.2 Retention of Title

Retention of Title is common in Spain, but it must often be litigated in court. Specifically, companies need to prove their ownership of goods that have not yet been paid for by the debtor. Often, this initiates a period where the court attempts to trace the whereabouts of the goods, as well as the debtor. It is the job of Accounts Receivable span to then recover those goods if the court deems they are covered under Retention of Title regulations.

1.3 Safeguarding measures

Our goal during the amicable phase is to obtain a signed document form the debtor that recognizes the existence of the debt. This document does not require verification by a notary, but is enforceable in any legal claim as long as it bears the signature of the debtor. The debtor is able to securitize debt using anything from mortgages to debt assignment, in order to ensure eventual payment. Assignment of debts or assets must be done contractually, while securitization with a mortgage requires only notarization.

1.4 Legal Procedures

1.4.1 General

Relations between a citizen and the state are governed by public law in Spain, while civil law applies to relations between companies or individuals. It is possible to initiate legal proceedings against a debtor without notifying them before the proceedings begin, but this is typically not done, as legal proceedings in Spain are slow and expensive — even during disputes lodged by the debtor. For this reason, amicable collections should always be pursued before legal actions.

1.4.2 Legal System

Any legal cases involving unpaid debts, or outstanding balances, are handled by the civil courts.

During the first phase of the legal process, the case will be heard in the court of first instance. It’s during this phase that a decision will be issued regarding the debt, clearing its way for appeal to a higher court. This is known as the Regional Court in Spain, and it will be sent to the regional court nearest the debtor’s last known physical address or corporate headquarters.

Any claims that do not meet the criteria of the Regional Court will be sent to the court of third instance. Claims that do not meet that court’s criteria will be rejected entirely. Taxes must be paid on the legal process in order to pursue legal action against the debtor. This amount is based on how large the outstanding balance of the debt currently is.

1.4.3 Required documents

In order to begin the legal dunning procedure, Accounts Receivable Spain will need the following documentation:

- Original versions of the contract
- Original versions of invoices
- Original versions of account statements, including payments and credits toward the debt

If a lawsuit is filed against the debtor, these documents must be supplemented with the following documentation:

- Original versions of the complete contractual agreement
- Copies of orders, delivery notices, and confirmations
- Copies of conversations and correspondence between the debtor and creditor
- Evidence of oral agreements made between the parties

1.4.4 Legal dunning procedure

The legal dunning procedure only applies to monetary debts less than 250,000.00 EUR, and only when that debt is past due and immediately payable to the creditor. The court that handles legal dunning is the court of first instance. During legal dunning, the debt is not disputed and the court is required only to officially declare the creditor’s right to the funds. The court will encourage the debtor to pay through an official correspondence, and include any interest or fee payments. If there is any objection on behalf of the debtor, legal action will start immediately. Any ensuing proceedings will take place in the court of first instance, though this court cannot make a decision about the debt’s validity. For that decision, the case will escalate to the court of second instance.

1.4.5 Lawsuit

Lawsuits begin when amicable collection has failed and the debtor has been declared solvent enough to pay the debt’s balance in full. A pre-procedure document is written and distributed. The creditor and debtor exchange opinions with the court via postal mail until the judge has collected enough evidence to launch a trial. At that time, a hearing date will be set and the two parties will be required to attend that hearing.

After the hearing, the judge will set a date for publication of the judgment. Both parties will be informed about the outcome by the court where the hearing took place. The judgment can be executed immediately.

1.4.6 Appeal

It is possible to appeal a judgment, which will send the case to the court of second instance. A further appeal to the court of third instance is possible, though this appeal will serve only to determine whether or not laws and statutes were properly applied.

1.4.7 Costs

Accounts Receivable Spain uses the C&C lawyer network, resulting in a significant reduction in the costs charged to creditors while pursuing legal action against a debtor. The costs incurred during the legal phase will depend on the outstanding balance of the debt. Costs are calculated based on a percentage system. Fees applicable during the legal process include court costs, lawyer fees, document fees, and other costs. It is difficult to predict the exact costs of legal proceedings, and Accounts Receivable Spain will provide an estimate only on a case-by-case basis.

1.4.8 Expected timeframe

A final decision on can take anywhere from three months to several years to be issued by a judge, based on the case’s complexity, size, and which court is deciding the matter.

1.4.9 Interests and costs in the legal phase

The costs associated with taking legal action against a debtor will be included in the final judgment amount handing down by the judge and due for payment. This amount will include interest, collection costs, court fees, and penalty fees. Spanish Civil Code dictates that the losing party will bear the full cost of a legal procedure, but this can be overridden by the judge if he or she feels the debtor should not be responsible for a portion of the costs incurred by the creditor during legal proceedings. In the event of a settlement, both parties are responsible for their own costs.

1.5 Enforcement

1.5.1 Enforcement in debt

The creditor can enforce debts by blocking the debtor’s bank account, holding their tax claims, or blocking life insurance claims. Business or corporate shares can also be withheld up to the value of the balance due, and wages can be fully or partially garnished in the interest of enforcing the judgment. All of these measures are quite effective and have been known to prompt debtors into making payment arrangements or a full satisfaction of their obligation to the creditor. In the interest of reducing costs, creditors can optionally choose to enforce only part of the judgment.

1.5.2 Provisional Enforcement

Provision enforcement allows for the enforcement of a judgment even while the debtor is appealing that judgment in court. This must be requested by filing a writ with the court that issued the original judgment.

1.5.3 Enforcement of a definitive judgment

After a judgment has been declared definite, the debtor has 20 days to pay the balance or risk the enforcement process. After 20 days have elapsed, the creditor can ask for the judgment to be enforced by the courts.

Enforcement takes place by seizing the assets of the debtor up to and including the value of the debt owed to the creditor. The debtor’s location, if not known, will be requested from the court, who will search for them using bank records, company records, and documents from public organizations. Assets will be auctioned and the proceeds will be delivered the creditor as payment and satisfaction of the judgment. The cost of enforcement will be the responsibility of the debtor.

1.5.4 Expected timeframe

Enforcement is hard to estimate, as it varies widely based on the debtor’s ability to be located, as well as the value of their assets. Patience is the key to a successful enforcement procedure in Spain.

1.6 Insolvency Proceedings

1.6.1 General

Abbreviated, ordinary, and necessary insolvency are all permitted in Spain, and are viewed as a collective enforcement of the debts owed to a company’s creditors. At the start of an insolvency procedure, all individual enforcements against the debtor are suspended; this suspension is not lifted until the insolvency process is complete.

The goal of insolvency in Spain is to determine the value of a company’s assets, liquidate those assets, and return the value of those assets to creditors as a dividend payment. In bankruptcy, the goal is to collect enforceable income from a debtor after declaring them bankrupt.

1.6.2 Proceedings

Insolvency proceedings begin when either the debtor or creditor has filed an insolvency motion with the court of first instance. At that time, the debtor’s records will be analyzed to determine whether or not their have a verifiable claim to insolvency. If they do, the court will appoint a Trustee of Bankruptcy. This council of administrators carries out the procedure, to some extent, and verifies that it produces results. It is comprised of the following members:

- One lawyer
- One economic expert
- One of the debtor’s largest creditors

The insolvency itself will be published in Spain’s Official State Gazette. The date of publication starts a 30-day period where creditors seeking a dividend payout of the liquidated assets can lodge claims against the debtor. The Trustee of Bankruptcy will review all claims and decide whether or not to accept or reject them. Rejected claims can be re-filed one time for secondary consideration.

Credits will be shown a plan that includes the size of the dividend issued from the company’s assets, and they have the right to approve or reject that plan on a majority-rule basis. With 50 percent agreement, the court will approve the plan. Without such an agreement, liquidation will proceed with an equal payout to each creditor.

1.6.3 Required documents

To lodge an insolvency claim, we need the following documentation:

- Original Power of Attorney
- Copies of invoices
- Copies of account statements
- Original contract
- Copies of orders, deliveries, and confirmations
- Copies of conditions of sales, if relevant
- Copies of correspondence that will verify the claim

1.6.4 Expected timeframe and outcome

Insolvency takes between five and ten years to complete, on average. Claims must be lodged within 15 to 30 days of the publication of the insolvency in the Official State Gazette.

1.7 Arbitration and Mediation

Arbitration and mediation are available to creditors and debtors who agree to seek an out-of-court solution to the debt. It is generally far quicker and more cost effective than a traditional legal proceeding, but those participating in arbitration or mediation will have no way to appeal the outcome. These hearings are done by the Chamber of Commerce and other outside organizations, and are managed by third-party professionals who maintain an unbiased approach to the process and outcome of proceedings.

To get started today, call us at321-710-3530 to speak with an associate
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