In a company takeover, Spain’s Social Security [Tesorería General de la Seguridad Social – TGSS] has declared the joint and several liability of the acquiring company, regarding the accounts payable involving contributions and surcharges to the Social Security by the transferor company, declared bankrupt.

The view held by the TGSS was that the purchase of a company, when its identity is maintained, is governed by the general rules on company takeovers. However, Spain’s Supreme Court (TS), in its ruling 113/2018, of 29 January, preferentially applies Spain’s Bankruptcy Law [Ley Concursal], as it is a special law for bankrupt undertakings.

According to the TS, the application of article 149.1.1 of the Bankruptcy Law implies that the accounts payable by the transferor to the Social Security are not passed on to the acquiring company

The Supreme Court rules that the strict application of article 149.1.1 of the Bankruptcy Law implies that the accounts payable by the transferor to the Social Security are not passed on to the acquiring company, which means the latter cannot be held jointly and severally liable by the TGSS.

It states that this is the most expedient solution for resolving the dispute arising between the TGSS and the commercial courts, and the one that best responds to the rule’s ultimate purpose, which is none other than to safeguard the company’s viability and enable the takeover to be effected free of burdens.

Accordingly, the TS determines the exclusion of any liability on the part of the acquiring company, which also facilitates the continuity of the undertaking, and whereby the Social Security is to follow the same procedures as all the other creditors, limiting the burden conveyed strictly to the workforce.