Express insolvency proceedings, expressly foreseen in Spanish Insolvency Law, apply to those companies without realizable assets. We briefly explain below when this type of insolvency applies, as well as its main features.
What is the express insolvency?
Express insolvency is a type of insolvency proceeding applicable, as a general rule, to those companies that have no assets to liquidate or not in enough amount (i.e. residual for liquidation purposes).
The Insolvency Law in Spain thus highlights the inefficiency of initiating the judicial machinery of ordinary insolvency proceedings when there are no assets to liquidate. Under no circumstance will the creditors retrieve their debts since the insolvent company is empty of assets.
In this way, the law avoids a long and torturous judicial procedure, set up in different phases and only suited for companies with a certain asset structure. Not so for companies whose assets do not even cover the costs of the insolvency proceedings itself (court fees, lawyer fees, insolvency administration costs, etc.).
How to process an express insolvency
A priori, any company with no assets in a situation of insolvency and thus obliged to file for insolvency may opt for express insolvency proceedings.
The application procedure must be accepted by the bankruptcy judge and must be presented to the corresponding commercial Court to decide, given the information provided, whether to initiate this exceptional procedure. If the insolvency procedure is admitted as express insolvency, not even an insolvency administrator will be appointed. Instead, the company will be immediately extinguished by the court order.
Nonetheless, the good faith of the business owner will be necessary to opt for this type of insolvency. In other words, if the judge detects any irregularity caused by a lack of diligence from the company directors/managers, he could refuse the request for express insolvency, given that actions of reintegration, contestation or liability of third parties would be possible.
In other words, the approval of express insolvency is subject to a lack of suspicion concerning the company’s bad diligence in the management of the situation.
What are the advantages of the express insolvency?
As long as the procedure meets the appropriate conditions, its main advantages include:
- Cost savings for the company
- The speed and agility of the procedure: the judge will issue the opening and closing of the insolvency proceedings by means of the same resolution, avoiding the phases of the ordinary proceedings
- At the same time, the judge will request the extinction of the company and the closing of its registry sheet.
If you need more information regarding the express insolvency proceedings, do not hesitate to contact us.
Manuel Álvarez-Sala & José María Mesa
This article is not considered as legal advice