How to restructure the workforce when a business becomes insolvent
Despite numerous efforts to weather the crisis that has beset Spain in recent years, many business owners have found themselves heading towards insolvency, unable to pay the amounts owed to their creditors and facing the dreaded moment of filing a petition for an insolvency order with the commercial courts or waiting until one of their dissatisfied creditors makes the first move.
Many business owners fear that this will signal the end of years of hard work and effort, but is everything truly lost? Often what is required is a change of business model that allows for adaptation to the new circumstances of a market that appears to be on the slow road to recovery.
However, no one says this will be easy. The company will probably be forced to dismiss professionals who have worked for it for many years, driven to a collective layoff procedure that will enable it, at least, to safeguard some jobs and guarantee the future viability of the business.
But when should this procedure start? Before or after the insolvency order? Logic might lead us to conclude that the workforce would more easily understand the drastic situation of the company and the need to implement restructuring measures once the insolvency order has been made, but is this the right strategy?
Many factors must be evaluated before taking this decision: the financial situation of the company; the potential classification of the workers’ claim (severance) depending on when the procedure is begun; the involvement in the procedure of third parties not related to company managers (the commercial court, the insolvency managers, the wage guarantee fund, etc.); the urgency of the adoption of termination measures; whether the company forms part of a group of companies; the correctness of the decisions taken by directors, and so on.
It is not a decision to be taken lightly and the right legal advice from insolvency and labor law experts will enable businesses to approach the process with the proper legal guarantees.