{"id":4293,"date":"2016-02-11T17:50:53","date_gmt":"2016-02-11T17:50:53","guid":{"rendered":"https:\/\/vila.es\/en\/?p=1868"},"modified":"2021-02-11T11:33:57","modified_gmt":"2021-02-11T11:33:57","slug":"credits-estate-compulsory-termination-involvency-proceedings-due-insuficiency-assets","status":"publish","type":"post","link":"https:\/\/vila.es\/en\/bankruptcy\/credits-estate-compulsory-termination-involvency-proceedings-due-insuficiency-assets\/","title":{"rendered":"CREDITS AGAINST THE ESTATE UNDER COMPULSORY TERMINATION OF INVOLVENCY PROCEEDINGS DUE TO INSUFICIENCY OF ASSETS"},"content":{"rendered":"<p style=\"text-align: justify;\">The subject matter of this analysis concerns the rules of payment priority of credits against the estate within the insolvency proceedings, whenever the net worth of the insolvent company is considered not enough to face the existing credits against the estate of the insolvent company. Under such circumstances, <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a176bis\">art. 176 bis of the Spanish Insolvency Act (IA)<\/a><\/span> provides that the insolvency proceedings must come to an end and the assets be liquidated to pay the creditors.<\/p>\n<p style=\"text-align: justify;\">The insolvency administrator (receiver) is in charge of appraising the concurrence of such situation and it will be for him to notify so to the commercial court as soon as he is aware of it. From that moment on, he will be bound to pay the existing credits against the estate in accordance with the following rules,<\/p>\n<p style=\"text-align: justify; padding-left: 40px;\">1<sup>st<\/sup> Salaries corresponding to the last 30 days of effective work.<\/p>\n<p style=\"text-align: justify; padding-left: 40px;\">2<sup>nd<\/sup> Other salaries and labour indemnities.<\/p>\n<p style=\"text-align: justify; padding-left: 40px;\">3<sup>rd<\/sup> Alimony credits (in case of insolvency proceedings for individuals)<\/p>\n<p style=\"text-align: justify; padding-left: 40px;\">4<sup>th<\/sup> Legal and judicial costs incurred as a consequence of the insolvency proceedings (receivers\u2019 fees and alike).<\/p>\n<p style=\"text-align: justify; padding-left: 40px;\">5<sup>th<\/sup> Other credits against the estate.<\/p>\n<p style=\"text-align: justify;\">Notwithstanding that, and in accordance with the general principle on payment priority of credits against the estate provided in <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a154\">art. 154 of IA<\/a><\/span>, before proceeding to pay any credit, the insolvency administrator must pay the existing credits against the estate with the available assets of the company not affected by special privileged credits. Likewise, and pursuant to <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a84\">art. 84.3 of the IA<\/a><\/span>, the said credits against the estate must be paid in accordance with their respective due date.<\/p>\n<p style=\"text-align: justify;\">Apparently, a contradiction can be found between the priority rules set out in articles <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a154\">154<\/a><\/span> and <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a84\">84.3<\/a><\/span> on the one hand and <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a176bis\">176 bis.2<\/a><\/span>, on the other. Nevertheless, this can be overcome by applying each rule depending on the circumstances and the stage of the insolvency proceedings. That is to say, from the moment in which the insolvency proceedings are declared open, the general principle of <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a84\">art. 84.3 of the IA<\/a><\/span> shall apply, thus, credits against the estate will be paid in accordance with their maturity dates. The same shall apply whenever the insolvency proceedings lead to an ordinary liquidation process under the scope of <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a176bis\">176 bis.2<\/a><\/span>.<\/p>\n<p style=\"text-align: justify;\">Hence, the problem seems to be solved, but let us assume that (1) a given credit against the estate matured before the date upon which the insolvency administrator filed the notification of insufficiency of the net worth with the court; and (2) that despite the obligation to have said credit paid pursuant to <a href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a84\"><span style=\"color: #3366ff;\">art<\/span>. <span style=\"color: #3366ff;\">84.3 IA<\/span><\/a><span style=\"color: #3366ff;\">,<\/span> it is not effectively paid by the insolvency administrator.<\/p>\n<p style=\"text-align: justify;\">In that particular case, the Supreme Court has ruled that the credits against the estate matured before the date of filing of said written communication must be paid in accordance with the priority rules set out in <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a176bis\">art. 176 bis.2 IA<\/a><\/span>, and this is without prejudice to the liabilities incurred by the insolvency administrator for not paying the credit when it matured. This general rule affects both the credits against the estate accrued before and after the filing of the written communication by the insolvency administrator. Consistently, the holder of said credits will be entitled to claim for damages against the insolvency administrator, but will not be entitled to collect the money from the insolvent company before the privileged credits against the estate are satisfied. (Judgment of the Supreme Court dated 11<sup>th<\/sup> June 2015).<\/p>\n<p style=\"text-align: justify;\">With this in mind, it is reasonable to conclude that where there is insufficiency of the net worth, all credits against the estate (different from those first four set out in <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a176bis\">art 176 bis.2<\/a><\/span>) matured and pending payment at the moment of filing the aforesaid written communication will be demoted to the fifth place of priority. The judgment of the Supreme Court dated 10<sup>th<\/sup> of June 2015 dealt with this particular and concluded that the date upon which the written notification is filed with the commercial court marks a \u201cbefore and and after\u201d concerning the enforceability of the credits against the estate: as from said date the holder of the credit against the estate will have to follow the payment rules set out in <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a176bis\">art. 176 bis.2<\/a><\/span>, although this statement is subject to an exception: whenever the holder of the credit files an incidental procedural plea for collecting the due amounts not paid in accordance with the maturity rule set out in <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a84\">art 84.3 IA<\/a><\/span> and said plea is filed before the written communication of the insolvency administrator. In this case, the payment priority rules set out in <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a176bis\">art. 176 bis.2 IA<\/a><\/span> shall not apply and this credit shall be paid in accordance with the general priority payment rule.<\/p>\n<p style=\"text-align: justify;\">Given that, it is advisable for the holder of a credit against the estate to protect his position and credit priority by filing the insolvency procedural plea for the collection of said credit as a preventive measure against a potential or probable notification of insufficiency of net worth to match the credits against the estate. And the said way of claiming the credit is of essence as seen in the aforementioned judgment; a mere private claim, whether verbally or in writing will not suffice to escape from the special payment priority rule of <span style=\"color: #3366ff;\"><a style=\"color: #3366ff;\" href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a176bis\">art. 176 bis.2<\/a><\/span>. Conversely, the claim must (a) be channelled by way of an incidental plea provided in <a href=\"https:\/\/boe.es\/buscar\/act.php?id=BOE-A-2003-13813&amp;p=20151002&amp;tn=1#a194\"><span style=\"color: #3366ff;\">art. 194<\/span> <span style=\"color: #3366ff;\">IA<\/span><\/a>; and (b) be filed always prior to the written communication of the insufficiency of the net worth.<\/p>\n<p style=\"text-align: justify;\">From the insolvency administrator\u2019s perspective, it will not be enough for him to deny the payment of a due credit against the estate on the basis of his knowledge about the insufficiency. In our opinion, the denial is unjustifiable as long as the written communication with the commercial court has not been formally filed. This rule has been confirmed by a judgment issued by the Provincial Appeal Court of Barcelona dated 17<sup>th<\/sup> September 2015, declaring that the insolvency administrator is bound to file the communication \u201cat once\u201d upon learning about such circumstance, hence the payment of a matured credit against the estate is not justifiable whenever the insolvency administrator is aware of or presumes that there will not be enough net worth to face all the credits against the estate. However, he is only legally entitled to deny the payment of the matured credit on the grounds of insufficiency of net worth provided the written communication to the commercial court has already been filed at that moment.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>Eduardo Vil\u00e1<\/p>\n<p>Vil\u00e1 Abogados<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">For more information, please contact:<\/p>\n<p style=\"text-align: justify;\"><a href=\"mailto:va@vila.es\"><span style=\"color: #3366ff;\">va@vila.es<\/span><\/a><\/p>\n<p>&nbsp;<\/p>\n<p>11<sup>th\u00a0<\/sup>February 2016<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The subject matter of this analysis concerns the rules of payment priority of credits against the estate within the insolvency proceedings, whenever the net worth of the insolvent company is considered not enough to face the existing credits against the estate of the insolvent company. Under such circumstances, art. 176 bis of the Spanish Insolvency  [&#8230;]<\/p>\n","protected":false},"author":4,"featured_media":4730,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[81,89],"tags":[],"class_list":["post-4293","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bankruptcy","category-restructuring"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>CREDITS AGAINST THE ESTATE UNDER COMPULSORY TERMINATION OF INVOLVENCY PROCEEDINGS DUE TO INSUFICIENCY OF ASSETS<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/vila.es\/en\/bankruptcy\/credits-estate-compulsory-termination-involvency-proceedings-due-insuficiency-assets\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CREDITS AGAINST THE ESTATE UNDER COMPULSORY TERMINATION OF INVOLVENCY PROCEEDINGS DUE TO INSUFICIENCY OF ASSETS\" \/>\n<meta property=\"og:description\" content=\"The subject matter of this analysis concerns the rules of payment priority of credits against the estate within the insolvency proceedings, whenever the net worth of the insolvent company is considered not enough to face the existing credits against the estate of the insolvent company. 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