What assumptions of Social Security liabilities occur on a transfer of undertakings in Spain?

A transfer of undertakings occurs when the ownership of a business, a work establishment or a production unit is transferred. For this to be the case, the economic entity transferred must retain its identity, understood as an organised grouping of resources with which to carry on an economic activity, whether principal or ancillary.

This change of ownership does not, in itself, terminate the employment relationships in the transferring business. Accordingly, employment contracts continue without interruption, and the transferee is subrogated to the transferor’s employment and Social Security rights and obligations.

As a general rule, subrogation in Social Security matters entails the transferee’s joint and several liability for all Social Security debts of the transferor. This liability can extend to all contributions and benefits owed in respect of the entire workforce.

Transfers of undertakings in an insolvency context

Where the transfer takes place within insolvency proceedings, because the business unit being sold retains its identity, a specific legal framework applies. These special rules are set out in article 224 of Royal Legislative Decree 1/2020 approving the recast Insolvency Law (Insolvency Law).

The general rule is that the purchaser does not assume claims against the insolvent debtor that remained unpaid prior to the transfer, unless a legal provision so provides, the purchaser expressly assumes them, or there is a transfer of undertakings. In the latter case, the new employer does assume the insolvent debtor’s employment and Social Security rights and obligations, except for wages and severance previously taken on by the Wage Guarantee Fund, or FOGASA, pursuant to the Workers’ Statute.

The role of the insolvency judge

The insolvency judge has exclusive competence to declare that a transfer of undertakings exists and to define the assets, liabilities and employment relationships comprised within it.

In this regard, the Supreme Court, in its recent judgment 1166/2025 of 23 September (Third Chamber, Contentious‑Administrative, Section 3, Appeal 6037/2022), reiterates that where the commercial court, by means of a final order, sets a quantitative cap on liability for Social Security debts, that cap is externally binding on the General Treasury of the Social Security (TGSS) and on the contentious‑administrative courts. This prevents the TGSS from pursuing amounts in excess of the subrogated liabilities and requires it to respect the cap set by the commercial court.

Practical implications: buyers

• Conduct thorough due diligence on Social Security debts and contingencies (contributions, benefits, surcharges and penalties).
• Structure the bid so that it is conditional on a court order expressly delimiting the perimeter of Social Security liabilities and their amount.
• Ensure the order becomes final and that the TGSS has been properly involved in the insolvency proceedings.

Practical implications: transferors

• Ensure transparent identification of employment and Social Security liabilities.
• Promote clear rulings on the existence of a transfer and the delimitation of liabilities to provide certainty in a competitive sale process.
• Factor in the objections of public creditors within the insolvency.

At Osborne Clarke, we assist our clients throughout the process: assessing employment and Social Security risks, structuring the transaction and the terms of the sale, liaising with the TGSS, and defending your interests in the insolvency forum and before the contentious‑administrative courts.