ESSENTIAL FEATURES
- Judicial nature: it is not enough for a company to be economically insolvent; a court ruling is required for legal effect.
- Impact on assets: the company’s assets are allocated proportionally to pay creditors.
- Participation of a trustee: an external administrator oversees the process on behalf of the creditors.
- Public disclosure: the bankruptcy declaration must be registered to be enforceable against third parties.
TYPES OF BANKRUPTCY
- Fortuitous bankruptcy: caused by inevitable circumstances beyond the company’s control.
- Culpable bankruptcy: arises from negligence or mismanagement by the company’s administrators.
- Fraudulent bankruptcy: results from intentional misconduct, such as hiding assets or manipulating financial statements.
Illustrative example: An import company accumulates tax and bank debts that exceed its ability to pay. Its creditors petition the court to declare bankruptcy. A trustee is appointed to oversee the liquidation. The proceeds from the sale of merchandise and other assets are distributed among the creditors according to legally established priorities.
RELATIONSHIP WITH CORPORATE DISSOLUTION
A bankruptcy declaration is one of the most severe grounds for the dissolution of a commercial company. From that moment, the company enters a mandatory liquidation phase, although the law also recognizes alternative mechanisms to preserve business continuity.
If you wish to explore this topic further, we invite you to read our related article: Dissolution of Companies Due to Bankruptcy.
If your company is facing financial difficulties or undergoing a bankruptcy process, our law firm is available to provide specialized legal advice on insolvency, dissolution, and corporate restructuring. Contact us for immediate legal support.
Frequently Asked Questions (FAQs)
Is every insolvency automatically considered bankruptcy?
No. Insolvency must be declared by a judge to have legal effects.
Who can file for bankruptcy?
The debtor, one or more creditors, or in some cases, the judge ex officio.
Does bankruptcy always lead to liquidation?
Not necessarily. It can be avoided if an agreement with creditors is reached or through voluntary restructuring.
What is the difference between culpable and fraudulent bankruptcy?
Culpable bankruptcy arises from negligent management; fraudulent bankruptcy involves intent, such as hiding assets or favoring certain creditors.
What role does the trustee play in bankruptcy?
The trustee oversees the management of the bankrupt entity, controls the assets, and organizes the liquidation to pay creditors.
The content of this article does not reflect the technical opinion of Rigoberto Paredes & Associates and should not be considered a substitute for legal advice. The information presented herein corresponds to the date of publication and may be outdated at the time of reading. Rigoberto Paredes & Associates assumes no responsibility for keeping the information in this article up to date, as legal regulations may change over time.
