Bankruptcy proceedings: advice and procedures for companies

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As the number of defaults and delays in payments continues to mount due to the economic freeze , hundreds of Spanish companies will begin to resort to bankruptcy proceedings , a legal formula that is not very common in our country due to the perceived concept of insolvency.

Bankruptcy Law 22/2003 of July 9 establishes the mechanisms and legal framework that entrepreneurs can follow in the event of not being able to meet their debts. The coronavirus will make this law a very common recourse among severely affected organizations in the coming months.

Taking advantage of the situation, at MÁSMÓVIL Negocios we want to review what is included in the BOE, in order to resolve doubts and clear up uncertainty.

It is nothing more than the minimum guarantee response in the south korea number data event of suspension of payments and bankruptcy . The bankruptcy proceedings allow the owner of the company in such a situation to formalize the closure of his business by reaching an agreement of equivalent interests with the creditors.

In this way, those who are entitled to claim their money can receive a proportional share of what is owed, and those who must pay can put an end to a phase of their life without having to deal with difficult-to-solve financial and legal problems.

According to article 1.1, both natural persons and legal entities may be subject to the competition . And according to article 1.2, as an exception, inheritances accepted for the benefit of inventory may also be subject to the competition.

However, not all competitions are caused by the same reasons, nor do these causes always end up leading to a consensus aimed at ending contractual economic relations.



Voluntary competition
This occurs when the natural person or legal entity requests the procedure . If they have information regarding the future (and almost certain) bankruptcy of the business, they would be obliged to communicate it in the same way.

Failure to do so could result in substantial fines , which in serious cases could lead to criminal charges if the judge identifies illicit interests in the bankruptcy itself.



Necessary competition
In the event of disagreements between the partners, the creditors may expressly request that the bankruptcy proceeding be carried out. In this case, a judge would have the final say.

Furthermore, " those entitled to request the debtor's bankruptcy must base their request on one of the facts that the law states as presumed indicators of insolvency ," the consolidated text recalls.

This includes everything from " singular unsuccessful execution to general or sectoral dismissal, depending on whether it affects the set of obligations or one of the classes that the law considers especially sensitive in the debtor's liabilities, among other assessed facts ."



What and who is involved in the process?
To start the proceedings for a bankruptcy proceeding, what is known as a "declaration order" must be submitted ; a type of application that is submitted to the Commercial Judge of the province where the bankruptcy proceeding is to be carried out.

For this type of process, there are specialists in the field, who know every detail of each case. But they are not alone. To navigate the bureaucracy, the role of the Insolvency Administrator is also necessary .

The latter is a control figure who mediates between the owner and the creditors to agree on the clauses of the bankruptcy. In Spain there are about 12,000 administrators in practice , who process more than 5,000 bankruptcies a year .

With the update of the law carried out in 2015, this figure has increasingly fallen into disuse, being completely irrelevant in cases where the applicant no longer has any assets to distribute. We would thus be talking about "zombie companies" or cases open to sanctions.



Purpose of bankruptcy proceedings
The ultimate goal of a bankruptcy proceeding is to distribute the capital and assets owed in order to close a business without leaving any legal issues unresolved. However, not all of these processes result in the closure of companies.

When we talk about voluntary bankruptcy, there may be two very different motivations:

Presentation of agreement : in this case the company continues to operate and maintains its bankruptcy administration bodies. The Administrator intervenes in the debtor's operations and resolves the disagreements.

Liquidation : in the most common case, the Administrator is responsible for carrying out the process to liquidate the assets and pay the creditors. The corporate management bodies of the business are subsequently replaced by the Administrator himself.

The latter is replicated in cases of compulsory bankruptcy ; the intervenor directly suspends the bodies and begins to perform their functions while the bankruptcy is being executed.