“Access for the insolvency administrator?”; “Continuation of business?”
When a German parent company runs into a financial crisis or insolvency proceedings are opened over its assets, one question quickly arises: what happens to its subsidiary in Spain?
Can it be continued or sold? May the German insolvency administrator access its bank accounts? Must insolvency proceedings also be filed in Spain? What limits apply to cash pooling, security interests, and intra-group payments?
The most important basic rule is:
The crisis or insolvency of the German parent company does not automatically trigger the insolvency of the Spanish subsidiary.
Both companies are legally independent. The Spanish subsidiary has its own assets, its own contracts, its own creditors, and its own governing body.
The German parent’s insolvency estate generally includes the shares/participations it holds in the subsidiary. The assets of the Spanish subsidiary, however, continue to belong to the subsidiary itself.
The German insolvency administrator and their advisors must therefore reconcile two goals: preserving the value of the shareholding for the German insolvency estate, while at the same time protecting the corporate interest and the creditors of the Spanish subsidiary.
1. Who is authorized to act on behalf of the German parent company?
The first step is to determine which phase the German proceedings are in.
The mere filing of an insolvency petition is not the same as the opening of insolvency proceedings. During the opening phase, the insolvency court may order protective measures and appoint a preliminary insolvency administrator.
If a general prohibition on disposal is ordered, the powers of administration and disposal pass to the preliminary insolvency administrator under Section 22 of the German Insolvency Code (InsO). Upon formal opening of proceedings, these powers pass to the insolvency administrator under Section 80 InsO.
Under debtor-in-possession management (Eigenverwaltung), the powers of administration and disposal generally remain with the debtor company. Its activity is then supervised by a court-appointed monitor (Sachwalter).
Before taking any action in Spain, the following documents should therefore be reviewed:
- the German opening or protective order;
- the point in time from which it takes effect;
- the appointment of the insolvency administrator, preliminary insolvency administrator, or monitor;
- the precise scope of their powers.
Under the European Insolvency Regulation, the German opening decision is automatically recognized in Spain as soon as it takes effect in Germany. No special recognition procedure is generally required for this.
This must be distinguished from the enforcement of individual decisions and the exercise of specific powers in Spain. The German insolvency administrator must observe Spanish law in doing so. In particular, they may not employ sovereign coercive measures without involving the competent Spanish authorities, and may not independently rule on legal disputes.
2. What rights does the German insolvency administrator have over the Spanish subsidiary?
The German insolvency administrator may exercise the rights arising from the shares/participations that form part of the parent company’s insolvency estate.
Subject to Spanish corporate law and the company’s articles of association, the administrator may in particular vote at the subsidiary’s shareholders’ meeting or general meeting, remove and appoint members of its governing body, support capital measures, or sell the shareholding.
This does not, however, mean that the administrator may directly dispose of the subsidiary’s assets.
Solely by virtue of their appointment in Germany, the administrator cannot:
- withdraw money from the subsidiary’s accounts;
- sell the subsidiary’s assets;
- waive the subsidiary’s claims;
- create security interests over its assets;
- order payments to the parent company.
Such decisions remain with the governing body of the Spanish company, the órgano de administración.
Depending on the corporate structure, this governing body may consist of a sole director, several directors acting individually or jointly, or a board of directors.
Its members are not released from their responsibility merely because they carry out instructions from Germany. They must act in an informed, diligent manner and in the corporate interest of the Spanish subsidiary itself.
Under certain conditions, liability may also fall on a de facto governing body — an administrador de hecho under Spanish law. This may include persons who actually manage the company, or under whose instructions the formally appointed directors act. However, not every instance of intra-group coordination already amounts to de facto management. What is required is genuine and sufficiently intensive influence over the management of the business.
3. Must separate insolvency proceedings be filed for the Spanish subsidiary?
The parent company’s insolvency does not trigger automatic group insolvency.
For the Spanish subsidiary, its own economic situation is decisive. The Spanish categories must be applied here, and they do not fully correspond to the German grounds for opening proceedings under Sections 17 to 19 InsO.
Spanish insolvency law distinguishes in particular between:
- current insolvency, insolvencia actual;
- imminent insolvency, insolvencia inminente;
- probability of insolvency, probabilidad de insolvencia, as a precondition for access to preventive restructuring measures.
Insolvencia actual exists when the company can no longer regularly meet its due obligations.
Insolvencia inminente exists when the company expects that it will not be able to meet its obligations regularly and on time within the next three months.
Probabilidad de insolvencia covers an earlier risk stage, in which — absent a restructuring plan — obligations are expected not to be met regularly within the next two years.
These concepts must not be equated without qualification with illiquidity, imminent illiquidity, or over-indebtedness under the InsO.
As soon as the parent company restricts or halts its financing, an independent liquidity plan should be drawn up for the Spanish subsidiary. In practice, a rolling period of at least 13 weeks is advisable.
In particular, wages, taxes, social security contributions, bank liabilities, key suppliers, customer payments, intra-group receivables, and actually available credit lines should be reviewed.
Non-binding letters of comfort or general financing commitments must not be treated as available liquidity. What matters is whether the commitment is legally binding, was given by the person with authority to do so, and whether the funds are actually available.
Operational independence must also be assessed. The subsidiary may be liquid in the short term and still not viable as a going concern if it cannot operate without brand rights, software, licenses, databases, insurance, supply chains, or central services provided from Germany.
Where a current insolvency situation exists, the governing body must generally file for the opening of Spanish insolvency proceedings within two months of becoming aware of it, or of failing to be aware of it through negligence, unless an admissible pre-insolvency procedure is initiated in time.
4. Which court has jurisdiction over the Spanish subsidiary?
For international jurisdiction, the subsidiary’s own center of main interests is decisive — the so-called COMI.
The COMI is located where the company habitually manages its interests, in a manner ascertainable by third parties. For companies, it is presumed that the COMI is located at the registered office. The court seized must examine and give reasons for its international jurisdiction of its own motion.
If the subsidiary has its operational management, employees, accounting, bank accounts, customers, and creditors in Spain, a Spanish main insolvency proceeding will regularly have jurisdiction.
Corporate control by the German parent alone is not sufficient to shift the COMI to Germany.
According to the case law of the European Court of Justice, the presumption in favor of the registered office can only be rebutted by objective factors ascertainable by third parties.
Closer scrutiny is required where the Spanish subsidiary exists only formally in Spain, while contracts, payments, accounting, and actual management are controlled entirely from Germany.
The Spanish subsidiary’s proceedings are generally not secondary proceedings to the German proceedings. Main and secondary proceedings concern the same debtor, whereas parent and subsidiary are two separate legal entities.
5. What solutions exist for the subsidiary in Spain?
If the Spanish subsidiary is solvent and operationally independent, it can be continued outside any Spanish insolvency proceedings and sold as a shareholding.
A share deal preserves the company’s legal personality as well as, generally, its contracts, employment relationships, and permits. The buyer, however, also assumes its liabilities and risks.
A transparent presentation of the financial situation and of intra-group relationships is therefore decisive for the achievable purchase price.
If the company is economically viable but financially burdened, restructuring under Spanish law may be considered. Options include new financing, bringing in an investor, debt-to-equity conversion, deferrals, debt waivers, or an operational separation from the parent company.
Where a current insolvency situation has already arisen, it must be assessed whether the company itself can be restructured, or whether only the operating business should be preserved.
The sale of shares/participations transfers the company including its liabilities. The transfer of an operating unit under Spanish insolvency law — a unidad productiva — can, by contrast, enable the business to continue under a new legal entity.
The unidad productiva is a distinct Spanish insolvency-law category and must not be equated without qualification with a German business or a transfer of undertaking.
If financing, buyers, and a realistic continuation perspective are lacking, an orderly liquidation may be economically more sensible than artificially continuing a loss-making business.
6. Red lines for cash pooling and intra-group transactions
The following limits do not only apply once German insolvency proceedings have been opened. They must already be observed once concrete doubts exist about the parent company’s ability to finance itself or to repay.
No withdrawal of liquidity solely for the parent’s benefit
Money or other assets of the Spanish subsidiary must not be transferred to Germany merely because the parent company needs liquidity.
Properly due payments under valid contracts may be permissible. Extraordinary advance payments, gratuitous transfers, or transactions without adequate consideration, however, require independent justification in the interest of the subsidiary.
Do not continue cash pooling automatically
Cash pooling can no longer be treated as an ordinary transaction once serious doubts exist as to whether the parent company will be able to repay funds transferred to it.
Automatic sweeps should then be reviewed and, if necessary, stopped. The subsidiary must retain sufficient liquidity to pay, in particular, wages, taxes, social security contributions, and key suppliers.
No new security interests without a benefit of its own
The subsidiary should not grant guarantees, mortgages, or pledges for the parent’s debts unless it receives its own demonstrable and adequate benefit.
Security interests granted for pre-existing liabilities are particularly critical. For certain types of security granted in respect of pre-existing obligations, Spanish insolvency law presumes prejudice to creditors.
Do not waive claims against the parent without review
Claims arising from loans, deliveries, services, or cash pooling form part of the Spanish subsidiary’s assets.
They should not be waived, reduced, transferred, or set off without legal and economic review. An intra-group accounting entry alone is not sufficient to establish a valid set-off or an economically justifiable waiver of claims.
No new debts without solid financing
The subsidiary must not enter into new obligations if there is no realistic basis for fulfilling them.
Temporary continuation of business may be sensible if it enables restructuring or a sale. It is problematic, however, if losses are merely shifted onto new creditors while an uncertain solution is awaited in Germany.
7. What rules apply to transactions within the group?
Intra-group transactions involving a conflict of interest are subject to specific corporate-law rules in Spain.
Under Article 231 bis of the Spanish Companies Act, the shareholders’ meeting or general meeting must in particular approve transactions that fall within its competence by law, or whose value — individually or under a framework agreement — exceeds 10 percent of the company’s total assets.
Other transactions may generally be resolved by the governing body.
Where directors connected to the parent company cast the decisive votes, it must be possible, in the event of a dispute, to demonstrate that the transaction was in the corporate interest and that the required duties of care and loyalty were observed.
From the perspective of the Spanish subsidiary, these rules generally apply even where the German parent holds all of its shares.
Ordinary transactions may be delegated to delegated bodies or members of management where they are concluded in the ordinary course of business, on market terms, and subject to an internal review procedure.
Not every intra-group transaction is therefore suspicious or voidable. The group’s activities may continue, provided they are ordinary, on market terms, and justifiable for the subsidiary.
Extraordinary transactions, or those particularly favorable to the parent, must, by contrast, be comprehensively documented.
8. Spanish insolvency avoidance actions: which transactions can be reversed?
The Spanish insolvency avoidance action, acción rescisoria concursal, is functionally comparable to German insolvency avoidance (Insolvenzanfechtung), but follows its own requirements and legal consequences.
Under Spanish law, acts detrimental to creditors carried out within the two years prior to the insolvency petition can generally be challenged and reversed. Fraudulent intent is not necessarily required for this.
For certain gratuitous transactions, payments made before they fell due, transactions with specially related persons, and security interests for pre-existing obligations, special rules on evidence or presumptions apply.
Ordinary transactions carried out in the normal course of business and on normal terms are, by contrast, generally excluded from avoidance.
The practical rule is:
The more extraordinary, premature, or favorable to the parent a transaction is, the more precisely its benefit to the subsidiary, its conformity with market terms, and its effects on the subsidiary’s solvency must be documented.
9. Claims between parent and subsidiary
The Spanish subsidiary should identify its claims against the German parent at an early stage and file them within the relevant deadlines in the German insolvency proceedings.
This concerns, in particular, cash-pool balances, loans, outstanding invoices, advances, damage claims, and claims arising from security interests that have been enforced.
Conversely, the German insolvency administrator may file the parent’s claims in any Spanish insolvency proceedings that may arise.
The existence, amount, and insolvency-law ranking of these claims are assessed under Spanish law. Group membership may, in particular for financing claims, affect their ranking.
The European Insolvency Regulation facilitates cross-border filing of claims. It also provides for cooperation between courts and insolvency administrators of different group companies.
This cooperation does not, however, lead to a pooling of the insolvency estates. The Spanish insolvency administration, administración concursal, must protect the interests of the Spanish insolvency estate and its creditors.
10. Liability risks for directors and de facto managers
Liability risk does not arise solely from the German parent company’s insolvency. What matters is how the Spanish subsidiary is managed once the crisis occurs.
Particularly critical are delayed reactions to the subsidiary’s own insolvency situation, unjustified payments to the parent, transfers of assets without adequate consideration, waivers of claims, defective accounting, and the continuation of a permanently loss-making business without realistic financing.
Responsibility may fall not only on formally appointed directors but also on a de facto governing body, an administrador de hecho.
Personal liability of German advisors does not follow automatically from this. It depends on their specific mandate, their actual influence, and the applicable professional and contractual duties in each case.
Every material decision should therefore document:
- what benefit it provides to the Spanish subsidiary;
- whether it is on market terms;
- which corporate body was responsible;
- how it affects liquidity and viability as a going concern.
11. Immediate measures for insolvency administrators and advisors
In the first few days, the Spanish subsidiary’s corporate records, banking powers of attorney, financial data, and key contracts should be secured.
At the same time, liquidity, cash pooling, intra-group loans, security interests, mutual claims, and dependence on German services should be reviewed.
Until this review is complete, extraordinary payments and asset transfers out of Spain should be avoided.
On this basis, a decision must be made as to whether the subsidiary should be:
- continued independently;
- sold as a shareholding;
- restructured under Spanish law;
- transferred as an operating unit (unidad productiva);
- or placed into Spanish insolvency proceedings.
Conclusion
For the German insolvency administrator, the Spanish subsidiary is at once an asset and a legally independent company.
Control over the shares/participations must not be confused with direct control over the subsidiary’s assets.
Anyone who reviews liquidity, corporate powers, cash pooling, claims, and operational dependencies at an early stage can often preserve the subsidiary’s value and limit liability risks.
Particularly dangerous are informal instructions from Germany, automatic withdrawals of liquidity, new security interests for old group debts, and undocumented intra-group transactions.
Frequently Asked Questions
Does the insolvency of the German parent automatically lead to the insolvency of the Spanish subsidiary?
No. The subsidiary must be assessed according to its own financial and operational situation.
May the German insolvency administrator access the subsidiary’s bank accounts?
Not solely by virtue of their appointment in Germany. Decisions over the subsidiary’s assets generally remain with its own governing body.
Can the Spanish subsidiary be sold despite the parent’s insolvency?
Yes. The German insolvency administrator can generally sell the shares/participations held by the parent. Implementation is governed by Spanish corporate law.
When must Spanish insolvency proceedings be filed?
Generally when the Spanish company can no longer regularly meet its due obligations. The governing body must generally file the petition within two months of becoming aware of this — or of failing to be aware of it through negligence — unless an admissible pre-insolvency procedure is used.
Which transactions are particularly risky?
Above all, extraordinary cash-pool payments, security interests for the parent’s existing debts, waivers of claims, gratuitous asset transfers, and new obligations without secured financing.
Contact Unai Mieza, RBS Legal
If you wish to enforce a German or Austrian judgment in Spain, need to review a debt-collection file with a connection to Spain, or require a solid legal assessment at the intersection of enforcement, insolvency, and director liability, Unai Mieza is your point of contact at RBS Legal.
Unai Mieza advises on and represents clients in Spain in the enforcement of foreign titles, in cross-border debt-collection matters, in restructuring- and insolvency-related disputes, and in the assessment of personal director liability.
Contact the Spanish lawyer Unai Mieza of RBS Legal if you need a procedurally solid, economically sound, and practically workable strategy for your case in Spain.
Are you looking for a Spanish lawyer to enforce German or Austrian titles? Unai Mieza of RBS Legal supports law firms, debt-collection companies, and creditors in enforcement proceedings in Spain — from the demanda ejecutiva (enforcement action) to the assessment of insolvency and director-liability matters.
Inquiries from Germany and Austria, debt-collection cases, and mandates connected to Spain are reviewed and handled by Unai Mieza, RBS Legal, as legal counsel.
If you are dealing with cross-border enforcement between Germany and Spain and would like an assessment tailored to your case, we will gladly review your situation and develop the appropriate strategy with you. For further information on our work in this field and on relevant publications by Unai Mieza, you may consult his professional profiles and specialized legal platforms, or contact us directly through our contact form or by e-mail.
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