Debt-to-Equity Swaps in Corporate Restructuring: How to Avoid Losing Your Company

The question nobody wants to ask: whose company is it?

Imagine your company as a house with a mortgage larger than the property itself. As long as the bank does not call the loan, you carry on living in it, paying the interest, and nobody questions who owns it. But the day the loan matures and the house is worth less than what you owe, the question is no longer "how do I pay?" but a far more uncomfortable one: "whose house is this, really?".

That is where many mid-sized Spanish companies find themselves after years of thin margins, higher interest rates and debt raised in a different cycle. When debt structurally exceeds what the business can generate, extending maturities fixes nothing: it merely postpones the problem and makes it more expensive. At that point one of the most powerful, and least understood, tools in a restructuring comes into play: the conversion of debt into equity.

This article explains what it is, when it makes sense, what Spain's Insolvency Act allows today (more than most business owners realise), how it is taxed and, above all, what a family of owners can do so that the conversion does not end with them outside their own company. Because that is the real difference: a conversion prepared in time saves the company and the family; an improvised conversion saves the company and expels the family.

What a debt-to-equity swap is

A debt-to-equity conversion (a debt-for-equity swap, or simply debt-to-equity) is a transaction in which one or more creditors give up all or part of their claim in exchange for shares in the debtor company. Under Spanish law the ordinary route is the capital increase by set-off of claims under article 301 of the Companies Act (Ley de Sociedades de Capital, LSC); in law-firm shorthand it is known as "capitalisation of claims".

The effect is twofold. Payable liabilities disappear and equity appears. The company stops paying interest on that portion of the debt and the balance sheet regains its footing. In return, the existing shareholders are diluted: their percentage of the capital shrinks, sometimes almost to nothing.

It is worth stressing what a conversion does not do: it does not inject a single euro of cash. It cleans up the balance sheet but does not fill the treasury. A company can emerge from a conversion with impeccable accounts and default again six months later for lack of working capital. We will come back to this, because it is one of the most frequently repeated mistakes.

Why a creditor agrees to become a shareholder

No bank or fund converts out of generosity. A creditor agrees when the value of the business as a going concern, with a cleaned-up balance sheet, exceeds what it would recover by liquidating the company or enforcing its security. If liquidation yields 40 cents on the euro and conversion promises 70 in three or four years, the arithmetic does itself.

There is a second, subtler reason. Compared with a straight haircut, in which the creditor permanently waives part of the claim, a conversion lets the creditor share in the recovery (the upside). If the company turns around, the converted creditor wins. That is why specialist funds almost always prefer to convert rather than forgive.

And there is a third, which economists call debt overhang: when debt is excessive, the company stops investing in profitable projects because all the value they would generate would flow to the creditors. Nobody puts new money into a house that already belongs to the bank. Converting restores the company's capacity to invest, and that is in the creditor's interest too.

"In the money" and "out of the money": who really calls the shots

This is the concept every business owner in difficulty should have engraved in their mind. Picture the value of the company as water cascading down a staircase of buckets. The first bucket is secured debt; the second, ordinary debt; the third, subordinated debt; the last, the shareholders' equity. The water fills the top bucket first and only when it overflows does it reach the next.

The creditor whose bucket receives water is "in the money". The one whose bucket stays dry is "out of the money". If the company is worth 60 and owes 90, the shareholders are out of the money even though the deed says they own 100 %: economically, their stake is worth zero.

From that arithmetic comes the sentence worth remembering: in insolvency, the owner of the value is no longer the shareholder but the creditor standing at the waterline, known in the trade as the fulcrum creditor. That creditor is the one who converts, the one who negotiates and, in practice, the one in charge. We explain this in more detail in enterprise value vs equity value.

Conversion versus the other levers

A conversion almost never travels alone. It is combined with other tools, and getting the mix right is half the job:

Rule of thumb: standstills and refinancing solve problems of time; haircuts, conversions and participating loans solve problems of size. If your problem is one of size and you treat it as one of time, all you achieve is to arrive later and weaker. In corporate debt restructuring: signs your business needs it we explain how to tell one from the other.

The conversion instruments in Spain

Capital increase by set-off of claims (article 301 LSC)

It is the natural and most widely used route. Its requirements depend on the corporate form. In a private limited company (sociedad limitada, SL), the claims set off must be "entirely liquid and enforceable". In a public limited company (sociedad anónima, SA), at least 25 % of the claims must be liquid, due and enforceable, and the remainder must mature within five years. When the general meeting is convened, the board makes available to shareholders a report on the nature of the claims, the identity of the contributors and the amount of the increase; in an SA, an auditor's certificate is added.

Two practical warnings:

• First: if the claim is not properly evidenced, the capital increase is void; the courts and the Registries Directorate have annulled increases for lack of a capitalisable claim.
• Second, and highly relevant to the family: in a capital increase by set-off of claims there is no pre-emptive subscription right. Under the settled interpretation of the Directorate-General for Legal Certainty and Public Faith, article 304 LSC recognises it only for cash contributions. Shareholders cannot "defend themselves" by subscribing their share unless a parallel cash tranche is agreed, which is exactly what DIA did in 2021: LetterOne capitalised €769 million and set aside a cash tranche of €259 million so that the other shareholders could maintain their percentage. It is the model to copy when a shareholder-creditor or a fund converts and the family wants to stay in.

Good news for those going down the restructuring plan route: when the conversion forms part of a court-sanctioned plan, the Insolvency Act deems the claims liquid, due and enforceable for these purposes (article 632 TRLC), which removes the SL hurdle.

The participating loan: the bridge that has saved the most families

The participating loan (préstamo participativo, article 20 of Royal Decree-Law 7/1996) is the instrument that has resolved the most family restructurings without diluting anyone. Variable interest linked to the company's performance, subordination to ordinary creditors and, decisively, treatment as net equity for the purposes of capital reduction and dissolution. A company whose equity has fallen below half its share capital exits the mandatory dissolution trigger without issuing a single share.

That is why it is so often used as a bridge: the creditor converts its claim into a participating loan with a conversion option that is exercised only if the plan is missed. A recent example is Torrejón Salud, whose plan, sanctioned in 2023 and upheld by the Madrid Court of Appeal, capitalised interest and converted a subordinated loan into a participating loan without the shareholders losing their position. We have a complete guide to participating loans for those who want to go deeper.

Convertibles, warrants, preference shares and tranches

• Convertible bonds or loans: debt that turns into equity at maturity or if certain conditions are met. Prisa (2012) used €334 million of mandatorily convertible bonds.
• Warrants: options to subscribe shares at a set price. They serve to give the creditor a bonus (equity kicker) if the company does well or, conversely, to let the former shareholder recover part of the value if a threshold is exceeded. In Codere (2021) shareholders kept 5 % plus warrants over value above a certain level.
• Non-voting or preference shares: the creditor holds economic rights and priority of payment without taking over governance. It is one of the most useful formulas when the family wants to keep running the business.
• Tranching: the debt is split into a sustainable tranche, which continues to be serviced, and an unsustainable tranche, which is converted, subordinated or turned into a participating loan.

The legal framework: agreed conversion and imposed conversion

If everyone agrees, it is easy. The trouble is they never do

A consensual conversion, outside insolvency, is settled with a shareholders' resolution, the directors' report, the auditor's certificate and a good shareholders' agreement. But in a serious crisis there is always a bank that will not sign, a fund speculating on a blocking position or a branch of the family that refuses to be diluted. That is what the restructuring plan is for.

The court-sanctioned restructuring plan: what changed in 2022

Law 16/2022, which transposed Directive (EU) 2019/1023, introduced restructuring plans into Book II of the Recast Insolvency Act (Texto Refundido de la Ley Concursal, TRLC). Its essential components for a conversion are these:

• Trigger: likelihood of insolvency, imminent insolvency or actual insolvency.
• Classes of creditors: each class approves with more than two thirds of its liabilities (three quarters if secured).
• Cross-class cramdown: the plan can be sanctioned even if a class votes against.
• Shareholders: if the company is in actual or imminent insolvency, the plan can be sanctioned even if the general meeting does not approve it (article 640.2 TRLC), and the sanction order itself is sufficient title to register the capital increase at the Commercial Registry (article 650.2 TRLC).
• Best interest of creditors test: no dissenting creditor may be left worse off than in an insolvency liquidation.
• Absolute priority rule (article 655.2.4.º TRLC): a lower-ranking class, shareholders included, cannot retain value while a dissenting senior class is not paid in full. The exception in article 655.3 allows it "where indispensable to ensure the viability of the business" without unfairly prejudicing creditors. Families that want to keep something cling to that window.
• Contracts (article 618.2 TRLC): contracts necessary for the continuity of the business cannot be terminated merely because the plan entails a change of control. It is the only statutory exception to the change of control clauses that do so much damage in an ordinary sale.
• New money: interim financing and new financing under the plan are protected against clawback and rank ahead in any subsequent insolvency.

And the fact almost no family knows: the special regime for SMEs (articles 682 to 684 TRLC), which requires shareholder approval and replaces absolute priority with relative priority, applies only to companies with an average of 49 employees or fewer and turnover or total assets not exceeding €10 million. A family business with revenue of €25, €80 or €200 million is under the general regime. Its shareholders can be crammed down. The new pre-insolvency framework is, for them, a double-edged sword.

The creditor that never converts: the tax authorities

The Spanish Tax Agency and Social Security do not capitalise. Article 616 bis TRLC prohibits a plan from converting public claims into shares, participations or participating loans, and does not allow haircuts either. Public claims can be affected only if the debtor is up to date and the claims are less than two years old; even then they must be paid within fixed periods. In practical terms: tax debt has to be under control before you start, because it is not part of the solution.

The duty to dissolve and the directors' personal liability

When losses push net equity below half the share capital, a mandatory ground for dissolution arises (article 363.1.e LSC). Directors have two months to convene the general meeting and, if they fail to, they are jointly and severally liable for subsequent corporate debts (article 367 LSC). Capitalisation and the participating loan restore the equity balance and switch off that personal risk. For a family director this argument carries as much weight as any other; we develop it in liability of company directors.

Tax and accounting: what the CFO needs to be clear about

Basic rule: capitalising is not taxed in the debtor. Article 17.2 of the Corporate Income Tax Act (LIS) values a capital increase by set-off of claims for tax purposes "at the amount of the increase from a company-law standpoint, regardless of its accounting valuation". The accounting goes a different way: article 33 of the ICAC Resolution of 5 March 2019 records the increase at the fair value of the debt cancelled, and the difference with its book value is financial income. That accounting income is not taxed: it is corrected through a negative adjustment in the tax return (box 01819 of Form 200).

The creditor, however, may be in for a surprise. It includes in its tax base the difference between the amount of the increase attributable to it and the tax value of its claim (article 17.5 LIS). A fund that bought a €100 claim for €40 and capitalises it at €100 may crystallise taxable income of €60 without having collected a cent. That is why these transactions are structured with care, and why the fund negotiates the company-law value of the increase so hard.

Three more points:

• Haircuts: they generate income in the debtor, recognised as the financial expenses of the debt accrue when they derive from the Insolvency Act (article 11.13 LIS); and the limit on offsetting tax losses does not apply to income from haircuts and standstills with unrelated creditors (article 26.1 LIS).
• Tax losses and change of shareholder (article 26.4 LIS): if, as a result of the conversion, someone who held less than 25 % acquires a majority, and certain further circumstances concur (inactivity, change of activity, holding-company status), the tax losses may be forfeited. In an operating business that carries on its activity the risk is usually limited, but it is analysed before signing.
• Related-party transactions: when the family capitalises shareholder loans, the ICAC (Query 1, BOICAC 127/2021) has made clear that issue price, nominal value, book value of the claim and fair value are different things, and that a price inconsistent with real value will not do. Documenting at market value is not optional.

Who converts and how each one behaves

• Spanish banks. They do not want to be shareholders of an industrial company: equity stakes consume far more regulatory capital than a loan, and banks divest as soon as they can. They prefer to sell their position to a fund, accept participating loans or subordinated tranches, or convert and exit early. To understand their logic, read what banks expect to refinance a company's debt.
• Debt funds and distressed funds. They buy debt at a discount with a strategy called loan-to-own: buying the loan to end up owning the company. When a fund buys your debt at 50 cents, it is no longer negotiating an extension: it is building a position. Celsa, Naviera Armas and Telepizza all followed that pattern.
• Suppliers. They rarely convert, but they are critical to continuity. It is almost always wise to leave them outside the plan's perimeter and pay them in full.
• Public bodies. They do not convert (article 616 bis TRLC). The public solvency instruments of the COVID era, such as the fund managed by SEPI or the COFIDES fund, used participating loans and hybrids; their role today must be checked case by case.
• The family itself. Capitalising shareholder loans is the simplest conversion, tax-neutral if done at the tax value of the claim, and it sends a powerful signal to creditors: "we are putting in too". Its limits: the shareholder's claim is usually subordinated and carries little weight against bank debt.

Real cases: what they teach

• Celsa (2023). Barcelona Commercial Court No. 2 sanctioned on 4 September 2023 the plan submitted by the creditors of the steel group, without the support of the Rubiralta family. It was the first sanction of a plan without the agreement of the debtor or its shareholders, with capitalisation of claims and the complete exclusion of the shareholders. The battle was one of valuation: the family's adviser put the value at around €6 billion; the independent expert at €2.8 billion, against debt close to €4 billion. The judge reasoned that "the amount of the debt is far greater than the value of the company". Lesson: if the independent valuation falls below the debt, the family is out of the money and its opinion no longer counts.
• Naviera Armas (2023-2025). The plan cut debt from €483 million to €193 million through capitalisation, with an "accordion" operation (reduction to zero and simultaneous increase). Bondholders took 94 % and ceded 6 % to the Armas family. The banks challenged the plan for breach of absolute priority and the Las Palmas Court of Appeal upheld the sanction in March 2025. Lesson: the family can keep something, but usually because the creditor in the money gifts it, not because the law reserves it.
• Telepizza / Food Delivery Brands (2023). Bondholders capitalised roughly half the debt, injected €60 million of financing and took control; KKR and its partners were diluted. Lesson: whoever provides the new money is in charge.
• Codere (2014-2016 and 2021). In the first restructuring, bondholders converted some €636 million into 97.78 % of the capital; the founding family, which held 63.7 %, was left with around 2 % and a right to invest in up to a further 19.58 %. In 2021, bondholders took 95 % and shareholders 5 % plus warrants. Lesson: buy-back rights and warrants are the family's bargaining currency.
• DIA (2021). Conversion by the shareholder-creditor with a cash tranche for minority shareholders. Lesson: where there is a dominant shareholder-creditor, a parallel cash tranche makes the deal defensible for everyone.
• Abengoa (2016-2017). Creditors could choose between capitalising 70 % of their claim in exchange for 40 % of the capital or accepting a 97 % haircut. New investors and creditors came to control 95 %. The company ended up in insolvency in 2021. Lesson: converting without fixing the business only buys time. That is the thesis of why companies fail.
• Single Home (2023) is the counterpoint: €156 million of claims with a five-year standstill and two years' interest holiday, with no conversion. Lesson: when the problem is one of time and the business plan is credible, there is no need to give up equity.

According to Informa D&B, 276 restructuring plans were sanctioned in Spain in 2025, down from 329 in 2024, and mid-sized companies accounted for only 16 %. The tool exists, but the mid-market uses it little and, frequently, late.

Valuation: the real battleground

In a conversion everything comes down to one figure: what the company is worth. On it depends who is in the money, how much equity each creditor receives and whether the family keeps anything. In non-consensual plans, the restructuring expert's report on going-concern value is the central piece; the usual method is discounted cash flow, cross-checked against sector EBITDA multiples. For the best interest test, liquidation value is calculated separately.

The sensitivity is enormous: one more point in the discount rate or 10 % less normalised EBITDA can push the family from in to out of the money. Hence the order of the negotiation matters so much. The most common mistake is to negotiate first "what percentage the banks get" and then look for a valuation to justify it. The correct order is the reverse: enterprise value, sustainable debt, equity value, recovery by class and, only then, percentages. The exchange ratio is the result of the valuation, not its starting point.

A worked example

A company with normalised EBITDA of €8 million and financial debt of €90 million. At 7.5x, going-concern enterprise value is €60 million; in liquidation, creditors would recover about €40 million. The plan sets sustainable debt at €35 million (4.4x EBITDA). The remaining €55 million is converted. Post-restructuring equity value is 60 − 35 = €25 million. The family contributes €5 million of new money at the same price, so equity value after the increase is €30 million.

If in four years EBITDA returns to €12 million and debt falls to €20 million, equity value rises to 90 − 20 = €70 million. The creditors' 83.3 % is worth about €58 million which, added to the €35 million of debt repaid, exceeds the original €90 million. The family's 16.7 % is worth about €11.7 million against the €5 million it contributed. And with an agreed buy-back option over the creditors' stake, say at 1.5 times their entry value, the family could recover 100 % for around €37.5 million, financed with debt or with a minority partner.

Everyone does better than in liquidation, and the family keeps a way back. Indicative figures, of course, but the mechanics are exactly these.

Corporate governance after the conversion

Becoming a minority shareholder in your own company requires a change of mindset: the shareholders' agreement becomes the most important document in the company. Its usual content: board composition with independents, reserved matters and vetoes (budget, borrowing, investments, dividends, related-party transactions), a management incentive plan and exit provisions (drag-along, tag-along, put and call options, liquidity timetable). Our guide to the shareholders' agreement for SMEs walks through each one.

Two pieces of advice you will not find in the textbooks. First: the converted creditor is not a shareholder for ever; it wants to exit within three to five years, and that horizon shapes the whole strategy, from investments to a possible sale. A family that knows this negotiates its pre-emptive buy-back right from day one; one that ignores it discovers the drag-along the day the fund finds a buyer. Second: when several banks and funds convert at once, the cap table becomes fragmented and nobody is in charge; it is worth insisting on an aggregating vehicle or a syndication agreement so you know who you are talking to.

A case from the Spanish Levante (fictional, but recognisable)

A case built with indicative figures for illustrative purposes.

Hortofrutícola del Segura is a family group in the Vega Baja and the Region of Murcia: €95 million of revenue, some 400 employees, two packing centres and a processing subsidiary. Between 2019 and 2022 it invested in a third plant and in the acquisition of a competitor, both financed with bank debt.

Then came several seasons of drought, soaring energy costs and the loss of a retail customer. EBITDA fell from €12 million to €8 million and financial debt stood at €90 million: more than 11x EBITDA. One bank in the pool sold its €25 million position to a debt fund at a discount. The accounts showed equity below half the share capital. The tax authorities, fortunately, were up to date thanks to a deferral signed in time.

Five alternatives were analysed and discarded. A longer-dated refinancing: with €90 million of debt and €8 million of EBITDA, the numbers did not work even over ten years. A straight haircut: the banks would not forgive without sharing in the recovery and the fund preferred equity. Selling the new plant: it recovered €15 million, below book value, and left the business without capacity. Selling the group: indicative offers from industrial buyers valued the company below its debt and the family walked away with nothing. Insolvency: it destroyed the relationship with retail customers and with the growers who supply the business.

The solution was to file the notice of commencement of negotiations (article 585 TRLC) to gain three months of protection, commission an independent review of the business plan, fix a valuation of €60 million and design a plan in three tranches: €35 million of sustainable debt with the banks, over six years with one year's grace; €20 million converted into a convertible participating loan, which counts as equity and converts only if EBITDA falls below plan for two consecutive years; €35 million capitalised by the banks and the fund in non-voting preference shares with a preferred dividend; and €5 million of new money from the family in ordinary voting shares.

Outcome: the family retained a majority of the voting rights and the chairmanship, on a seven-member board with two creditor directors and one independent. The creditors obtained a majority of the economic rights, a veto over reserved matters and an agreed exit after five years by way of a buy-back at a fixed price, with a drag-along if the family did not exercise it. The agricultural suppliers were left outside the perimeter and paid in full. Without this preparation, the realistic scenario was a plan submitted by the creditors themselves and sanctioned without the general meeting, as in Celsa.

Roadmap for not losing the company

Step 1. An honest diagnosis. A viability plan and, where the financing is material, an IBR (independent business review). Calculate sustainable debt: what normalised EBITDA can service after investment and tax. And a 13-week cash flow forecast, because a conversion cleans the balance sheet but does not pay wages: if necessary, a fractional CFO to stabilise cash in 90 days.

Step 2. A creditor map. Who holds what, with what security, who has sold their position and who is in the money.

Step 3. Instrument design. How much stays as debt, how much is subordinated or turned into a participating loan, how much is converted and with what protections for the family: cash tranche, non-voting preference shares, warrants, buy-back.

Step 4. Temporary protection. The notice of commencement of negotiations (article 585 TRLC) suspends enforcement against essential assets and the duty to file for insolvency for three months, extendable by a further three (article 607 TRLC). Six months sounds like a lot and it is not. If you are unsure whether you are already at that stage, review the early warning financial indicators.

Step 5. Negotiation by class and court sanction, always with the restructuring expert and the valuation at the centre. And afterwards, a turnaround plan with KPIs for the first 24 months, because the converted creditor will be looking at them every quarter.

The mistakes that cost the most

• Negotiating late. Every month of deterioration shifts value from the family to the creditors.
• Presenting a business plan that is not credible. In Celsa, the judge described the consistency of the company's plan as "scant".
• Failing to understand that in insolvency the shareholders no longer own the value. Negotiating as if they did only hardens the creditor.
• Neglecting critical suppliers and starving working capital during the negotiation.
• Forgetting public claims, which are neither converted nor forgiven.
• Confusing a cleaned-up balance sheet with a viable company. Without cash and an operating plan, the conversion merely changes the owner's name; if the situation is already critical, consider the options of distressed M&A in time.

Conclusion: a tool, not a defeat

Converting debt into equity is not the end of the family business. It is, very often, the condition for its survival. What changes the outcome is timing and preparation. Prepared in time, with a credible plan, a defensible valuation, some new money and a well-negotiated shareholders' agreement, it allows the family to keep a meaningful stake, governance and a route back. Improvised, it leaves the family outside.

At Maraz Corporate Finance we support mid-market family businesses, especially in the Valencia and Murcia regions, in these negotiations with banks, debt funds and private equity funds: from the diagnosis and the valuation to plan design and the restructuring and refinancing of the debt. Our experience is always the same: the family that anticipates negotiates; the family that waits ends up accepting whatever it is offered. If your company is at that point, let's talk before the calendar decides for you.

Javier de Rojas Roca de Togores

Partner - Maraz Corporate Finance

FAQs on debt-to-equity swaps in corporate restructuring

What is a debt-to-equity swap?

It is the transaction by which one or more creditors give up all or part of their claim in exchange for shares in the debtor company. In Spain it is normally executed through a capital increase by set-off of claims (article 301 LSC). The debt leaves the liabilities side and becomes equity; the existing shareholders are diluted in proportion to the equity the creditors receive.

When does converting debt into equity make sense rather than refinancing?

When the problem is one of size, not time: the debt structurally exceeds what the business can repay even if maturities are extended. The rule of thumb is to compare the debt with sustainable debt (normalised EBITDA multiplied by a prudent multiple). If the gap is large and the business is viable, a conversion, alone or combined with a participating loan and new money, is usually the only solution that closes the problem rather than postponing it.

Can creditors convert debt into equity without the shareholders' consent?

Yes, since Law 16/2022. If the company is in actual or imminent insolvency, a restructuring plan can be sanctioned even if the general meeting does not approve it (article 640.2 TRLC) and the sanction order is sufficient to register the capital increase at the Commercial Registry. Only companies under the special SME regime (fewer than 50 employees and under €10 million of turnover or total assets) need the shareholders' favourable vote. Celsa in 2023 was the first case in which creditors took 100 % against the will of the owning family.

What is the difference between a haircut, a participating loan and a conversion?

A haircut reduces the principal of the debt with nothing in return and the creditor does not share in the recovery. A participating loan turns the debt into a subordinated claim with variable interest that counts as equity for dissolution purposes, without diluting the shareholders. A conversion exchanges debt for shares and dilutes. In practice they are combined: a sustainable tranche kept as debt, an intermediate tranche as a participating loan (sometimes convertible) and an unsustainable tranche capitalised.

How is a debt-to-equity conversion taxed?

For the debtor company it generates no taxable income: article 17.2 of the Corporate Income Tax Act values the increase for tax purposes at its company-law amount, even though the accounts record income for the difference between the fair value of the debt and its book value; that income is corrected through a negative adjustment. For the creditor, the difference between the amount of the increase and the tax value of its claim is included in its tax base, which mainly affects funds that bought the debt at a discount. The effect on tax losses should also be reviewed if the majority shareholder changes (article 26.4 LIS).

How can the family keep control after a conversion?

With four tools, all negotiable only if you get there in time: contributing new money, because whoever provides capital gains weight; agreeing a parallel cash tranche that lets shareholders maintain their percentage, as DIA did in 2021; structuring the creditors' stake as preference or non-voting shares, so that they hold the economic rights but not governance; and agreeing warrants and a buy-back (call) option that allows the family to regain the majority if the business plan is delivered.

How long is there to negotiate before it is too late?

Less than it seems. The notice of commencement of negotiations (article 585 TRLC) protects the company from enforcement for three months, extendable by a further three. Within that period you need the diagnosis, the valuation, the creditor map, the plan design and the majorities by class. That is why we recommend starting the financial work (IBR, sustainable debt, 13-week cash forecast) months before filing the notice, not after.