Insolvency: the supposed objective of the declaration of bankruptcy

It must be taken into account that when we talk about insolvency in the bankruptcy process, we are referring to a legal concept, not a financial one. Insolvency is understood as the impossibility of regularly complying with obligations, and it is not possible to calculate said impossibility according to a financial formula.

It is important not to equate this situation with a capital imbalance in the financial sense. Instead, understand it as the situation in which a company finds itself when its assets are below half of its social capital. Likewise, insolvency is not incompatible with a positive balance sheet.

Within the bankruptcy procedure, the law refers to two types of insolvency: current and imminent.

• Current insolvency, the debtor who cannot regularly fulfil his obligations is in a state of current insolvency.
• Imminent insolvency, a state in which the debtor is projected to be unable to meet its obligations within the next three months, underscores the urgency of the bankruptcy procedure.

Finally, we must refer to a new insolvency situation introduced after the entry into force of Law 16/2022, the so-called probable insolvency, regulated in article 584.2 of the TRLC.

This type of insolvency does not meet the requirements to be considered an objective budget for the bankruptcy proceedings; instead, it is an objective budget to resort to pre-bankruptcy budgets. Specifically, it is deemed to exist when it is objectively foreseeable that, if a restructuring plan is not achieved, the debtor will be unable to regularly meet its obligations that fall due in the next two years.

In either case, both current and imminent insolvency, the debtor plays a crucial role in establishing and proving the existence of this, empowering them to request the declaration of bankruptcy.

Section 4 of Article 2 of the TRLC includes a series of external facts revealing the state of the insolvency. These circumstances, when proven, are irrefutable, providing a sense of certainty and allowing creditors to request the necessary bankruptcy:

• A prior judicial or administrative declaration of insolvency of the debtor must exist as long as it is firm.
• The existence of a title by which a writ of execution or demand has been issued without the seizure has resulted in sufficient known free assets for payment.
• The existence of embargoes for executions in progress generally affects the debtor’s assets.
• The generalized dismissal in the current payment of the debtor’s obligations.
• The general suspension of payment of tax obligations due during the three months before the bankruptcy request; that of social security contributions and other concepts of joint collection during the same period, or that of salaries and compensation to workers and other remuneration derived from employment relationships corresponding to the last three monthly payments.
• The uprising or hasty or ruinous liquidation of his assets by the debtor.

Therefore, it is imperative to carry out joint work with the client in the investigation phase prior to the presentation of the claim. This inclusion is crucial to be able to explain the causes and state of insolvency in a coherent manner and to accredit this correctly in the application and report. economic and legal of the competition. (Source E&J)