INTRODUCTION
With the enforcement of the Insolvency Act 38/2011, of 10th October, reforming Law 22/2003, of 9th July, it has become common practice in insolvency procedures that the Court, assuming the fact that the company does not have enough assets to face its liabilities, declares simultaneously and in the same act, the opening and the conclusion of an insolvency procedure, agrees the extinction of the company and orders its de-registration at the Companies Registry.
PROBLEMS
For a company with no assets, and which does not form part of any legal relationship, the opening and immediate conclusion of the insolvency procedure seems to be an agile, sensible and effective procedure.
Notwithstanding the above, the Insolvency Act, article 176 bis, does not require the inexistence of any kind of assets, stating that it is enough if “The Court considers that it is evident that the assets of the insolvent debtor shall presumably not be suffice to settle the foreseeable claims against the estate in the proceedings, nor that the exercise of actions for reintegration, to contest, or of a third party liability is not likely”.
Therefore, if we consider the position of a company under insolvency proceedings, with assets in its possession, forming part of legal relationships with third parties, and which has been extinguished and de-registered at the Companies Registry, it is unavoidable that, among others, the following questions arise:
What happens with the assets of the extinguished company? Who is the owner?
What happens with the legal relationships with third parties entered by the company under insolvency proceedings? Should they be automatically extinguished?
What happens with the legal proceedings to which the company under insolvency proceedings is party? Should they be closed due to the supervening loss of legal standing?
Are the creditors of the company under insolvency proceedings able to satisfy their credits against the company with company assets? Shall the payment be effected to those creditors in accordance with the priority of claims established in the Insolvency Act? Or will the first one to claim be the first to receive payment?
CONCLUSION
Unfortunately, there is not a clear and uniform answer to these questions, and the Spanish Supreme Court has not had the chance to address these issues, thus, only some minor case- law and doctrinal opinions exist regarding this matter.
In some cases, the solution has been reached by considering the company, which has been de-registered at the Companies Registry as an irregular company, to which the regulations on civil or collective companies are applied, with all the implications that arise there from, like, for instance, the duty of the directors to liquidate the assets of the company, but without the certainty and security granted by insolvency proceedings, applying the priority the directors assume to be correct, bringing with it the risk of incurring in liability for mismanagement. All of the above taking place in a grey and uncertain legal framework.
Finally, it should be noted that, according to the resolution issued by the Directorate General for Registries and Notaries dated May 17, 2012, in the event that new assets appear in the company, the reopening of the insolvency procedure shall be requested, and these new assets shall not be liquidated outside of the insolvency procedure.
Vilá Abogados
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19th of June 2014
