Lawyers Marbella: insolvency proceeding
The first question we have to answer is: what is the insolvency proceeding? This is a legal procedure designed to resolve the insolvency and illiquidity problems of a particular business.
This procedure pursues two fundamental objectives: on the one hand, that creditors can collect and, on the other hand, that they can find solutions to avoid bankruptcy of the business and ensure its continuity.
Lawyers Marbella would like to remind you that this procedure is open to both individuals and legal entities. Self-employed workers, SMEs and large companies can do the same.
In short, it is a system that allows insolvent persons to articulate an orderly mechanism for the payment of their debts.
But what is insolvency? In this sense, the Law is clear in defining insolvency as the impossibility of a person or company to meet its credit obligations.
Having said that, what types of applications are there? The voluntary application and the compulsory application:
The voluntary one occurs when the application is made by the individual or responsible person of the corresponding company, who will have the obligation to present it in the Mercantile Court that corresponds within a maximum period of two months from the date of becoming aware of the insolvency situation.
In the case of a compulsory application, it occurs when the creditors are insolvent as a result of a request from a creditor or one of the company's partners, if there are several.
Having said that, what documentation will I need to provide with the application?
- The Declaration of Legitimacy to file the Request for Procedure.
- Debtor's Economic Report.
- The Debtor's Inventory of Goods and Rights.
- The List of Creditors (in alphabetical order).
And finally, what will happen if the application is successful and the Court approves the Creditors' Contest? This will be published in the Official State Gazette, from which time creditors will be able to file in the Court the application and justification of debts, and it is up to the Judge to determine which ones are truly justified and consequently which ones are included and which ones are not included in the bankruptcy process, as well as to appoint between one and three Administrators.
And what role or functions will the above-mentioned Administrators have? Its main function will be to negotiate debt with suppliers to seek to extend repayment periods, as well as to achieve debt reductions and removals where appropriate.