Buying Assets and Companies in Bankruptcy

Purchase of assets and companies in bankruptcy

According to the Statistical Yearbook of insolvency 2014, published by the Association of Registrars of Property, Chattels and Mercantile of Spain, in the year 2014, 92.47% of insolvent companies began the next phase they did to enter in liquidation. It is very similar to that observed in the 2006-2013 figure (ie, since no official records). This confirms that the bankruptcy liquidating still a marked trend. However, the sale of bankruptcy assets not only take place at the seat of the liquidation phase (alternative to the Convention Creditors or consecutive to it in case of being breached) but can also be given “direct sales” of the company as a whole or of productive units and other profitable assets in any state it is in competition, in order to prevent the continuation of business activity damaging or malbarate the value of the assets to be transmitted.

The sale of assets in the liquidation phase is aimed at the realization of assets of the insolvent for the most liquid possible in order to satisfy creditors, according to the legal priority of payment. essential document to this effect is the “Settlement Plan” to be prepared by the Bankruptcy Administration. In basic lines, it will be sent to the Inventory of Assets and Rights to determine both the assets to liquidate as the value thereof and regulate the procedure of “realization”. Once approved by the Bankruptcy Judge, it is made available to those interested in the Judicial Office (creditors are not notified personally, unless they are personates in bankruptcy proceedings). Its function is to determine the guidelines of “realization” (mainly for sale) of the bankruptcy assets, under the principles of seeking greater value and conservation of the company.

Whenever feasible, shall consider the unitary disposition (collectively) of establishments, farms and any other productive units of goods and services insolvent. However, if so deemed in the interest of the contest it may involve the disposal of all isolated elements or components of some of them. You must have enough detail, and what no provision shall apply supplementarily legal settlement rules under the Bankruptcy Act.

The latest reforms of the Bankruptcy Act operated under liquidation advocate promote the sale “block” of the company, or its autonomous production units, favoring the buyer continue the activity for the benefit of the company, of employees, workers and the economy in general.

This alternative is especially attractive to companies that want to expand business or entrepreneurs who are to start its journey under the support of organized business structure and thinking.

Now, the promises of an eventual acquisition at a price below market should not lead to forget the importance of taking appropriate precautions. It is highly advisable to carry out a due diligence of the company, as comprehensive as circumstances permit. That is, undertake a review of the state debt, to monitor and inventory assets, checking the actual state of the same, the existence of the infringing goods and the eventual inclusion in the lot of assets subject to the payment of credits with special privilege ( eg mortgage loans) that could lead subrogation by the acquirer in the debtor’s obligation and from the labor standpoint, determining the template to pass and the state and circumstances of wage and social debts unpaid, among others aspects.

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