When a company goes bankrupt and sees no way out of its situation, it can file for express bankruptcy. This is a quick solution to settle your debts and that your partners have the opportunity to start from scratch, without going bankrupt along with the company, and without having to wait months and months to obtain a resolution to dissolve the company.
Borja Pardo, lawyer specializing in bankruptcy law and partner at Lexben Advocats, highlights the need to declare bankruptcy from the very moment the company becomes insolvent: failure to do so may lead to the Treasury initiating a derivation of liability, that is, , that administrators have to respond with their personal assets to the debts of the company. With it we review what an express creditor contest is, how it differs from a normal contest and when it is convenient to request it.
What is an express contest?
The express contest is the creditors' contest that opens and concludes in the same resolution -judicial order- due to the insufficiency of the active mass; that is, in those cases in which the assets and rights of the company declared insolvent are not sufficient to meet, even, the expenses of the procedure itself.
In what cases is it more convenient than a normal contest?
The express contest is the appropriate modality for those companies that have been inactive for a long time or that have recently lost their activity, for example, as a result of the crisis generated by the COVID-19 pandemic. It is a modality expressly designed for insolvency proceedings with creditors who no longer have assets, activity or workers,
How long does an express contest take, on average, and what is the main difference from a conventional contest?
The big difference between an express contest and a conventional contest lies, fundamentally, in its duration. In a conventional procedure, different phases follow one another and can last at least one year. In the case of express insolvency, provided that the advice has been correct, the same judicial order that declares the insolvency, agrees on its conclusion and the dissolution and extinction of the legal person, so that, at a stroke of the pen, the insolvent company “disappears ”.
How many companies in bankruptcy have you helped through an express contest?
After the pandemic we are preparing and presenting many express contests; it is being a very clean way of liquidating insolvent companies without generating liability for their administrators.
Could you tell me what is the percentage of success in an express contest?
The success of the express contest is precisely that it is processed as such. In other words, when an issue that can be processed as an express contest arrives at the office, we have to work on it so that it ends up being declared like that and not as a conventional contest. This will save a lot of time, since the conventional contest would have lasted more than a year and allows to end up with a single resolution with an insolvent company.
What are the novelties that lie ahead with the reform of the bankruptcy law?
In the reform of the Bankruptcy Law, more powers are granted to creditors so that it can be reviewed if the contest should be processed as express (that is, quickly and without responsibility for the administrator) or, through a conventional contest, in in which a Bankruptcy Administrator will delve into the day-to-day running of the company, the history of the insolvency and the way in which the company's accounting has been carried out.
What are the risks of not requesting the contest on time or even before the new law?
The risk of not requesting bankruptcy on time - that is, within two months of the insolvency situation appearing - is the aggravation of the risk of the company's administrative body. Their inaction in the face of insolvency may entail their liability for the company's debts, which, on many occasions, results in the initiation by the Treasury or Social Security of liability derivation files.
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