The Bankruptcy Act 22/2003, prior to the amendment of 2011, implied some difficulties when applying it to cases of bankruptcy where there was absence of the debtor’s assets to satisfy the debts to the creditors. In these cases, it was considered that the existence of assets was a prerequisite to start the Bankruptcy proceeding and, therefore, to fulfill the obligations acquired with the creditors.
As a consequence of the referred above, and also due to the high number of bankruptcy proceedings ending in liquidation, it was decided to include a new legal figure, known as “Express Bankruptcy” in the reform in 2011 of the Bankruptcy Act, a figure which is far ,in terms of time and purpose, from the classic concept of bankruptcy.
The Article 176.bis of the Bankruptcy Act 22/2003 refers to the specialties of the conclusion of bankruptcy for reasons of insufficient assets. Nevertheless, it is the Article 176.bis.4 which, specifically includes the figure ‘Express Bankruptcy: “It may be agreed the conclusion due to insufficient assets in the same Bankruptcy notification when the judge clearly appreciate that the debtor’s heritage shall not presumably be sufficient to satisfy the foreseeable credits against the assets of the procedure and, also, they are not foreseen acts of reintegration, challenge or third parties liability “. In addition, it is stated that the conclusion of the bankruptcy (which should be made in the same act than the start is) can be appealed, offering, thus, a road for the creditors to claim in these cases.
What is “Express Bankruptcy”?
From the above it is deduced that in the same notification stating the bankruptcy, the judge may also state, all in the same act, the conclusion of that bankruptcy, proving the reasons which justify the absence of the debtor’s assets. Thus, with the express bankruptcy any of the stages established for regular bankruptcy are not displayed.
For a judge declare the bankruptcy concluded, the debtor must provide all the necessary information and documentation in order to observe that, clearly and convincingly, there is no sufficient assets, if any, to pay the creditors and, at the same time, there is no circumstances regarding the viability of actions related to the challenge or third party liability. Indeed, the company must lack sufficient assets and rights to cover the expenses that govern the bankruptcy proceeding itself. Therefore, it is left to the debtor to demonstrate facts in order declare the express bankruptcy.
Regarding the effects and implication of the express bankruptcy, it should first be noted that, with the statement and conclusion of the bankruptcy in the same act, there is no appointment of the administrative receivers (since there is no need for the control and management of the company during the development of bankruptcy). On the other hand, as a result, do not proceed the bankruptcy qualification phase (which takes place in the ordinary bankruptcy), therefore, the debtor will not be neither liable for the insolvency of the company nor subject to a guilty bankruptcy. Thirdly, once the bankruptcy is concluded, the liquidation and dissolution of the company will take place and, subsequently, the cancellation of its registration in the Mercantile Registry.
Finally, it should be emphasized that once the express bankruptcy occurs, despite the occurrence of rapid liquidation and dissolution of the company, the debtor is not exempt from paying the creditors, as he will be individually responsible for that, having the creditors the possibility to execute actions against him.
We can conclude that the express bankruptcy is a legal figure which saves time and money to the debtor requesting the declaration of bankruptcy, as long as it is demonstrated that there is not sufficient assets for fulfilling the debts, and not even to pay the judicial expenses that a bankruptcy proceeding involves.
At Lexland our team offers you a free no obligation first consultation on starting or dealing with an express bankruptcy, act which offers many advantages for the insolvent companies.