I. Introduction
The reform of the Bankruptcy Act of 2011 (LC) expressly addresses the termination of insolvency proceedings deriving from lack of assets to satisfy creditors against the bankruptcy assets (art. 176.1.3 and 176 bis LC). The term “insufficiency of assets” should be understood as the complete lack of assets, rights, amounts receivable, claims resulting from actions against third parties (e.g. reinstatement actions).
II. Features
1. Compulsory declaration of insolvency. Although sufficient assets did not exist from the beginning, the judge must declare bankruptcy.
2. Legitimacy: It is the insolvency administration that must inform the court of insufficient assets.
3. Time of notification: As from the bankruptcy declaration and throughout the bankruptcy proceedings, provided the proceedings are not under the qualifying section and no reinstatement or third party liability claims are pending.
4. Distribution of insolvency assets: As from the communication to the court of insufficiency of assets, the payment of claims against the insolvency assets should be made under the order established in art. 176 bis 2 of the insolvency act.
5. Report to the Court. The insolvency administration must submit a report explaining that no reinstatement, challenge, or third party liability actions are foreseen, and that the insolvency proceedings shall be classified as fortuitous.
6. Order terminating the insolvency proceedings. The opposition to the judicial order declaring the termination of the proceedings for lack of assets shall be dealt with as a bankruptcy incident. The same judicial order shall declare the termination of the legal personality and the registry cancellation.
III. Possibility of simultaneous declaration-conclusion of the insolvency proceedings. If from the beginning of the proceedings there are no assets to defray the ordinary expenses of the proceedings, and it is not expected that any type of asset enter into the bankruptcy assets, the Judge may, in the same resolution declaring the insolvency, agree to terminate the proceedings.
IV. Effects. The payment of the remaining unpaid credits remains the responsibility of the debtor and the initiation of individual enforcements the responsibility of creditors, as long as the reopening of the proceedings is not agreed or a new procedure is not declared.
Vilá Abogados
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4th of July 2013
