WHAT IS AN INSOLVENCY PROCEEDING?
An insolvency proceeding is a public interest procedure in which the intention is to prevent a trader in a state of insolvency from fully breaching his obligations and causing greater damage to his creditors.
In this sense, for a trader to be declared in an insolvency proceeding, three requirements are required:
- The existence of a merchant, that is, a natural or moral person who makes commerce his ordinary occupation.
- The general non-performance of the trader in the payment of his obligations, for this purpose, must be due.
- A plurality of creditors of the merchant, since, if it cannot be proven, the creditor must demand performance through the individual action.
However, the insolvency proceeding consists of three indispensable stages; the first is the filing of an application for a commercial competition before a competent judge, which may be submitted by the trader himself, any creditor or the Public Prosecutor’s Office, However, the documents that must accompany the application for an insolvency proceeding declaration are different depending on who submits the insolvency proceeding application.
The second stage is that of conciliation between the trader and his creditors, the purpose of which is to achieve THE CONSERVATION OF THE TRADER’S COMPANY THROUGH AN AGREEMENT SIGNED BETWEEN THE TRADER AND HIS RECOGNIZED CREDITORS.
As a result, if the trader so requests, or he and his creditors fail to reach a successful reconciliation, the stage of bankruptcy begins, the purpose of which is the sale of the trader’s business, of its production units or of the assets comprising them for payment to creditors.
However, it is important to mention that an insolvency proceeding is complex, has many peculiarities and requirements that must be met, on which depends the recognition, graduation and priority of creditors’ claims so that they do not exclude them from reasonable recovery from the insolvency estate; or if the trader is in a position to reconcile with his creditors so as not to lose his entire business.
Therefore, if you are a potential merchant or creditor in a particular insolvency proceeding situation, Come with us, in Bandala | Díaz | García we have lawyers with great experience and professionalism who can solve all your doubts and give you timely follow-up to the case in particular, creating the best strategy for you and your needs.