Insolvency proceedings
Insolvency proceedings are a legal instrument aimed at resolving the liquidity problems of businesses that cannot meet the current payment of their obligations, either by closure and orderly cessation of the business or by organizing their debt and activity. Insolvency proceedings are designed for the presentation and negotiation of an Agreement that allows the creditors to be paid and at the same times enables the continuation of the company.
Insolvency proceedings can be commenced either voluntarily by the insolvent party or else at the request of any of the affected parties, and the aim is to organize the resources of the insolvent party so that the largest number of creditors can be paid as much as possible. If the debtor voluntarily files the insolvency application it does not lose its powers of management, but if the debtor does not voluntarily request the proceedings, they can be requested by the debtor’s creditors and the debtor loses the powers of management, which are passed over to a receivership.
Any natural person or legal entity, except for the Public Administration, can voluntarily submit to or be non-voluntarily subject to these proceedings, and the responsibility for declaring and handling the proceedings falls to the Commercial Court judge in the territory where the debtor has its main center of operations.
The most important effect is that new resources obtained by the company can be allotted to the continuation of the business and not to paying the debt accrued up to declaration of the proceedings, which must be paid in the way and by the time stipulated in the Agreement.
The phases are as follows: 1. Declaration of insolvency, with adoption, if appropriate, of provisional remedies; 2. Receivership, designation of administrative receivers and accountability; 3. Determination of the assets, listing the goods and rights that comprise them, and also included in these assets are the credits needed for the business and that should be the first to be liquidated; 4. Determination of the liabilities (debtor’s debts), with communication, acknowledgement, ranking and classification of credits; 5. Agreement or, as the case may be, liquidation; and 6. Qualification and effects of the proceedings.
Insolvency is qualified as culpable if there has been fraud or gross negligence by the administrators on discharging their functions at the head of the company.
In view of the complexity of the proceedings and all the legal and economic relations that arise during insolvency proceedings, IURIS Corporate proposes the joint action of professionals (lawyers from different specialties and economists) who together can satisfactorily respond to the needs and interests of the insolvent party, both prior to the declaration and throughout the proceedings.
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