Insolvency occurs when a company is unable to meet its financial obligations to its creditors. Insolvency may be due to fault or fortuity, and may have different consequences for the individuals and companies involved in the process, according to article 185 of the CIRE .
We are faced with culpable insolvency whenever there is a situation created or aggravated by the debtor company or its directors, in the three years prior to the start of the insolvency process:
use of company assets for personal gain;
destruction of part or all of the company's assets;
worsening of losses or reduction in the company's profits.
On the other hand, fortuitous insolvency is considered when line database is no serious fault in the three years prior to the start of the insolvency and the administrators carried out all possible procedures to avoid the insolvency situation.
Who can file for Company Insolvency?
Creditors, insolvency administrators, the insolvent company itself or persons legally liable for the debts may submit an insolvency proposal. According to article 2 of the CIRE , the entities that may benefit from the insolvency process are the following:
Individuals (who operate a company) or legal entities;
Associations without legal personality;
Special committees;
Civil societies;
Commercial companies and civil companies in commercial form up to the date of definitive registration of the contract by which they are established;
Cooperatives, prior to the registration of their constitution;
The individual establishment of limited liability;
Other autonomous assets.
Before initiating insolvency proceedings and if the company is in an economically difficult situation or in imminent insolvency, it is possible to negotiate a special revitalization process with creditors (article 17ºB of the CIRE).
How do you start the Insolvency Process?
The insolvency process is a set of acts and formalities that begin with the filing of insolvency by the debtor or with the filing of insolvency by the creditor, and end with payment to creditors. The CIRE - Insolvency and Corporate Recovery Code - describes the steps that must be taken to initiate and complete the insolvency process.
