Express Contest as a Small Business Settlement Solution
The measures adopted as a result of the health crisis caused by the COVID-19 pandemic have brought a large part of the Spanish and world economy to a standstill. Small and medium-sized companies have seen almost all of their income disappear overnight.
Many small businesses have been forced to cease their activities and despite the expectations of a rapid lifting of the state of alarm, the new economic situation, the measures of distancing to which their business must adapt and the losses accumulated during the state of alarm, make it clear that their old business has ceased to be economically and commercially viable.
The entrepreneur needs to start again and to do so, he must divest himself of the company through which he had been carrying out his activity until that moment as quickly as possible. However, the existence of debts to suppliers, workers, financial institutions and the public administration prevent him from carrying out a rapid and orderly liquidation of his company.
The processing of an insolvency proceeding is seen as a long, costly and above all, very tiring process for the entrepreneur, which prevents him from focusing on what is really important, the new activity that requires all his effort and attention.
The situation of insolvency and the existence of such a plurality of creditors make it necessary to dissolve and liquidate the company by means of the corresponding insolvency proceedings, even in cases where the company has no realisable assets or those assets are not of sufficient value to even cover the costs of the insolvency proceedings.
Many people are unaware that the Bankruptcy Law provides that in certain cases it is possible to process the dissolution and liquidation of this type of company in a quick, effective and inexpensive manner. We are referring to the so-called “express bankruptcies”.
Express insolvency is a form of insolvency procedure that can be used by companies that have no assets to be liquidated or assets whose liquidation value is not sufficient to cover even the costs of the insolvency.
It is known as “express bankruptcy” because in the same judicial resolution by which the judge declares the bankruptcy, simultaneously, the conclusion of the procedure and the extinction of the company is declared, putting an end to the bankruptcy procedure and the life of the company.
In this type of procedure there is no appointment of an insolvency administrator, thus saving the economic cost of the intervention of this figure and all the inconvenience caused by having to provide all the company’s background.
The publicity of the tender is limited to publication in the BOE, the Public Bankruptcy Registry and the Commercial Registry. There is no call for creditors.
When the bankruptcy is declared simultaneously with the declaration, the different phases of the bankruptcy procedure are not opened. There is no agreement or liquidation phase.
In the processing of an ordinary or abbreviated bankruptcy procedure, we always find the phase of qualification of the bankruptcy. In this phase, it is determined whether there are grounds for declaring the bankruptcy proceedings guilty or fortuitous and, if so, to establish the personal asset liability of the de facto or de jure administrators of the bankrupt company.
In express bankruptcy there is no qualification phase. Neither the creditors can make any allegations regarding the qualification of the bankruptcy, nor is the examination of the bankruptcy administrator and the Public Prosecutor carried out regarding whether or not there are grounds for qualifying the bankruptcy as culpable.
The procedure is simple because it is limited to the necessary planning and preparation of the bankruptcy application and its subsequent submission to the court for review by the bankruptcy judge. If this is correct, the judge will simply issue a resolution in which he agrees to declare the bankruptcy and, at the same time, the conclusion of the procedure and the extinction of the company.
It is much cheaper as there is no bankruptcy administrator to pay fees and the intervention of the lawyer is also more limited.
At the same time, it allows the legal obligations of the company’s administrator to be considered fulfilled in the event of insolvency (provided that it is requested within the legally established time limits), thus avoiding personal liability.
