Express Competition

Ordinary insolvency proceedings are the judicial procedure to which companies and individuals who are insolvent and unable to pay their creditors must resort. During the process, the judge appoints an insolvency administrator who analyses in detail all the economic data of the applicant and verifies whether or not it has complied with its legal obligations, and may be held liable if it is proven that there has been mismanagement.

This procedure is very long and costly. In most cases, companies lack sufficient liquidity to pay their creditors, as well as to pay court costs and the insolvency administrator's fees. To avoid this problem, in 2015 the Insolvency Act 22/2003 was amended and Article 176 bis (470 in the Consolidated Text) was introduced, which regulates express insolvency proceedings.

What is Express Insolvency?

Express bankruptcy is a judicial procedure that allows the judge, in the same order that the bankruptcy is opened, to agree to the termination of the bankruptcy and the immediate extinction of the company in cases where the company has no assets. Through this procedure it is not necessary to liquidate the company's assets or appoint an insolvency administrator.

Requirements for Express Insolvency Proceedings

Any company or entrepreneur who lacks assets to meet the debts of its creditors and the costs of an ordinary insolvency proceeding can apply for express insolvency proceedings.

In addition to being insolvent, it is also necessary that the company lacks assets that it can liquidate in order to continue its activity.

Other requirements that must be met are that the judge considers that the company's assets are insufficient to meet the costs of the proceedings, that it is not foreseeable that the company will bring actions for reinstatement or third party liability and that it is not foreseeable that the insolvency proceedings can be classified as culpable.

Process and phases of the express arrangement with creditors

The express insolvency proceedings begin with the application by the interested party. The documentation that must be submitted is similar to that of ordinary insolvency proceedings and consists of the following:

• Report containing the debtor's economic history: activity over the last three years, offices and establishments, cause of insolvency and data concerning the debtor's financial viability.
• When the debtor is married, the report must include the identity of the spouse, the date on which the marriage was contracted and the economic regime of the spouses.
• In the case of legal persons, the report must include the identity of all partners, directors and managing directors. It should also state whether the company is part of a group of companies and whether it has securities admitted to trading on the market.
• In addition to the Annual Report, an Inventory of the assets and rights that make up the company's assets must also be provided, with details identifying them, their location, characteristics and updated value. The encumbrances weighing on these assets and their identification in the register must also be indicated.
• List of creditors, in alphabetical order, which shall also identify their address and e-mail address, as well as the amount of their claims and the maturity of the same. In the event that any creditor has made a legal claim, the corresponding proceedings and the status thereof shall be stated.
• List of the company's employees and the identity of those who form part of the representative body.
• In the case of debtors obliged to keep accounts, the documents relating to the annual accounts for the last three financial years, a report on the changes made after the last annual accounts and a report on the operations carried out subsequently that have exceeded the ordinary business of the debtor must also be attached.

The main difference between this procedure and ordinary insolvency proceedings lies in the fact that, in this case, it is not necessary to appoint an insolvency administrator. The insolvency administrator is in charge of analysing all the documentation referred to above, as well as controlling and administering the company that has filed for insolvency during the entire duration of the insolvency proceedings.

As there is no insolvency administrator in this case, the judge will be responsible for examining the documents provided with the application. Once all the documents have been examined, the judge may issue an order in which, together with the opening of the insolvency proceedings, he declares the termination of the proceedings on the grounds that the assets of the company or the company is not sufficient to satisfy the debts against the insolvent party's assets or the costs of the proceedings.

The order issued by the judge will be published in the Official State Gazette (BOE). Creditors who do not agree with the order may challenge it. When the order terminating the insolvency proceedings is final, it will be entered in the Commercial Register and the company will be declared extinct.

What are the advantages of the Concurso de Areedores Exprés?

The main advantage of this procedure lies in the fact that it prevents the administrator of the company from being liable for the debts of the company he represents. This is because the Capital Companies Act establishes that in the event that a company is insolvent and does not declare insolvency proceedings within two months, the administrator must be jointly and severally liable for the debts. By declaring express insolvency proceedings, the administrator fully complies with his legal obligations.

Moreover, express insolvency avoids lengthy and costly court proceedings in cases where the company lacks the assets to pay creditors or the costs and fees arising from ordinary insolvency proceedings.