Business Debt

Filed under : Commercial Law

Prevention is better than cure, as De Cotta Law explains…

Owning, running and managing a business in Spain is rewarding and can be challenging. Unpaid invoices and accounts can cause immediate cash flow problems and build up longer term issues for small and medium size businesses.

One of the best ways of preventing this from happening is having correctly drafted payment terms, together with proper contractual agreements with your clients and customers. Some agreements don’t correctly define the company or provider and they are therefore difficult to enforce if you have a problem with an account.

For both parties the certainty of knowing payment terms and having copies of invoices and facturas is far better than having to go to court to make a claim. A Spanish lawyer can study the documentation you give to clients to ensure any agreement or contract can be enforced. This applies to everybody from estate agents to hotel owners and a good set of customer or client documents makes it less likely that problems will occur.

Spanish courts do have an accelerated procedure for monetary claims and something similar to a UK summary judgement can be obtained that can be enforced against the debtor if they do not contest it. The current level for these faster proceedings is 6.000€, this is going to be increased to 15.000€ later in the year which is good news.

 For claims with a higher value it is necessary to commence a Civil claim in the courts. The first step is for a ‘burofax’ to be sent to the debtor demanding payment within a fixed number of days. If there is no response then a claim can be made. You will have to pay court costs, procurator fees and legal fees. However if you are successful some of the costs can be recovered from the other party.We always recommend undertaking a property or asset search to see if you are likely to be able to recover the debt. Each case should be decided on its merits so it is wise to get legal advice both prior to entering into contracts and where a customer or client has failed to pay within the statutory period of 30 days.

For more information or to book a consultation please contact De Cotta Law on [email protected] or call + 34 951 315 161. For our Tenerife office telephone +34 922 719520 or email on [email protected]