GuillermoRosés SRLU

A declaration of bankruptcy will be appropriate if an ordinary debtor becomes insolvent. Insolvency occurs when a debtor cannot meet its obligations as they fall due.

The debtor or any of his creditors may apply for a declaration of bankruptcy.

If the application for a declaration of bankruptcy is made by a creditor, it must be based on the instrument in respect of which an attempt at enforcement or distraint has been made and which has resulted in there being insufficient free assets to pay the debt, or on the existence of one of the following situations:

1.     A general failure on the part of the debtor to meet his obligations as they fall due.

2.     The existence of attachments for pending enforcement actions that have a general effect on the debtor’s assets.

3.     A fraud on creditors or the hasty or disastrous disposal of his assets by the debtor.

4.  A generalised failure to meet obligations of any of the following kinds:  obligations to pay tax debts payable during the three months prior to the application for bankruptcy; obligations to pay social security contributions and other types of joint revenue collection during the same period; obligations to pay salaries and compensation and other remuneration deriving from employment relationships that correspond to the last three months.

The debtor must apply for a declaration of bankruptcy within two months of the date on which he knew or should have known that he was insolvent.

Save where there is evidence to the contrary, the debtor will be presumed to have been aware that he was insolvent if one of the grounds on which an application for compulsory bankruptcy can be made has arisen (compulsory bankruptcy being a bankruptcy for which a creditor can apply).

The bankruptcy will be deemed to be “culpable” if the state of insolvency was caused or aggravated by recklessness or gross negligence on the part of the debtor or his legal representatives, if any, and, in the case of a legal person, its de facto or de jure directors or liquidators.

In all cases, the bankruptcy will be classified as culpable if any of the following situations occurs:

1.     If the debtor who is legally obliged to keep the accounting records commits a material breach of this obligation, is guilty of double accounting or has committed any irregularity in the keeping of the accounting records that is relevant for the understanding of the asset or financial position.

2.     If the debtor is guilty of a serious inaccuracy in any of the documents accompanying the application for the declaration of bankruptcy or any of the documents submitted during the bankruptcy process, or if he submitted false documents with the application or subsequently.

3.     If the start of the liquidation was ordered ex officio due to a breach of an arrangement for a reason attributable to the insolvent party.

4.     If the debtor has fraudulently disposed of all or part of his assets to the prejudice of his creditors or has done any act that delays, hampers or prevents the effectiveness of an attachment in any type of enforcement proceedings that have been started or are likely to be started.

5.     If, during the two years prior to the date of the declaration of bankruptcy, the debtor fraudulently disposed of assets or rights.

6. If prior to the date of the declaration of bankruptcy the debtor carried out any legal act intended to create a fictitious asset position.

Presumptions of recklessness or gross negligence

Recklessness or gross negligence is presumed to exist, save where there is evidence to the contrary, if the debtor, or where appropriate his legal representatives, directors or liquidators:

1.     Has failed to comply with the duty to apply for a declaration of bankruptcy.

2.     Has failed to comply with the duty to collaborate with the judge in the bankruptcy proceedings and the bankruptcy administration, has not provided them with information that is necessary or helpful for the interests of the bankruptcy or has not attended the creditors meeting himself or through an authorised representative.

3.     If the debtor is required by law to keep the accounting records and has not prepared the annual accounts, has not had them audited when he should have done so or has not filed them with the Commercial Registry once they have been approved in any of the three financial years prior to the declaration of bankruptcy.