Insolvency Law Objectives
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Questions and Answers

What is the main characteristic of an insolvent company?

  • Its assets are not enough to cover its debts. (correct)
  • Its assets are greater than its debts.
  • It is in cessation of payment.
  • It is in a state of financial difficulty.

    • What is the difference between a company in difficulty and a company in distress?

  • A company in difficulty may not be in cessation of payment, while a company in distress is. (correct)
  • A company in difficulty is always insolvent, while a company in distress is not.
  • A company in difficulty can never be in distress.
  • A company in difficulty is always solvent, while a company in distress is not.

    • What is a characteristic of a debt in a situation of cessation of payment?

  • It is not quantifiable.
  • It is contested in court.
  • It is due and payable, not contested, liquid, and monetizable. (correct)
  • It is not due and payable.

    • What is the purpose of the law of collective procedure?

    <p>To allow creditors to reunite and get paid from the company.</p> Signup and view all the answers

    What is the primary objective of the Insolvency Law?

    <p>To maintain the continuity of the company's operations and settle debts</p> Signup and view all the answers

    What does it mean when a company has liquidity problems?

    <p>The company has difficulty paying its debts on time.</p> Signup and view all the answers

    What is not a sign of financial difficulty in a company?

    <p>Increase in assets.</p> Signup and view all the answers

    What is the role of the commercial court in the Insolvency Procedure?

    <p>To organize the payment procedure and prioritize creditors</p> Signup and view all the answers

    What can the shareholders of a company decide on?

    <p>The company's identity, operating rules, and transformation options.</p> Signup and view all the answers

    What is the condition that determines whether to adopt amicable procedures or treatment procedures?

    <p>The company's cessation of payment</p> Signup and view all the answers

    What is the role of statutory auditors in internal prevention?

    <p>To inform the owners of the company's difficulties through a registered letter</p> Signup and view all the answers

    What is not a transformation option for a company?

    <p>Appointment of a statutory auditor.</p> Signup and view all the answers

    What is the purpose of amicable procedures?

    <p>To support businesses and prevent social and economic consequences</p> Signup and view all the answers

    What is the first priority of the commercial court in the payment procedure?

    <p>Paying taxes to the government</p> Signup and view all the answers

    What is the consequence of not resolving the problem internally through internal prevention?

    <p>The company is forced to adopt treatment procedures</p> Signup and view all the answers

    What is the primary goal of the treatment procedure?

    <p>To restore the company's financial health</p> Signup and view all the answers

    When can the juridical reorganization procedure be initiated?

    <p>When the company is in a state of cessation of payment that is not irreversibly compromised</p> Signup and view all the answers

    What is the role of the commercial court in the juridical reorganization procedure?

    <p>To supervise the procedure and make decisions</p> Signup and view all the answers

    What is a possible outcome of the juridical reorganization procedure?

    <p>A continuous plan to recover and settle debts</p> Signup and view all the answers

    What is the condition for the business owners to request the juridical reorganization procedure?

    <p>The business owners must request it within 30 days following the date of cessation of payment</p> Signup and view all the answers

    What happens when the juridical reorganization procedure fails?

    <p>The court can decide on the juridical liquidation</p> Signup and view all the answers

    What is the purpose of the documents provided by the business owners when requesting the juridical reorganization procedure?

    <p>To prove the company is in a state of cessation of payment and the reasons behind it</p> Signup and view all the answers

    What is the role of the commercial court in the juridical liquidation?

    <p>To supervise the liquidation process and make decisions</p> Signup and view all the answers

    What is a condition for the court to decide on the juridical liquidation?

    <p>There has been significant deterioration of the company</p> Signup and view all the answers

    Study Notes

    Insolvency Law

    • Insolvency law prevents creditors from taking separate actions against the company and prioritizes payment of debts to various stakeholders.
    • The priorities are: government taxes, social organisms, banks, employees, and other companies and creditors.

    Objectives of Insolvency Law

    • Maintain the continuity of the company's operations
    • Maintain employment
    • Settle debts and pay creditors
    • Restore trust and credibility of the company with its different actors

    Solutions for Facing Company's Difficulties

    • 2 possible solutions: amicable procedures (non-contentious) and treatment procedures (contentious)

    Amicable Procedures

    • 2 prevention procedures: internal prevention and external prevention
    • Internal prevention: company resolves problems internally using its own knowledge
    • Statutory auditors or shareholders must inform owners of financial, economic, social, or legal difficulties within 8 days
    • Company can decide on change of identity, operating rules, or transformation options (e.g., increase/decrease in capital, merge with another company, etc.)

    Insolvency

    • A solvent company is one that can pay its debts through its assets
    • An insolvent company is one where available assets are not enough to cover debts
    • A company in difficulty faces financial, economic, social, or legal difficulties that could compromise its operations
    • A company in distress is in cessation of payment, meaning it cannot pay its creditors due to lack of available assets
    • A company in cessation of payment is not necessarily insolvent, as liquidity does not mean solvency

    Debt Conditions

    • Debt must be: due and payable, not contested, liquid and monetizable, quantifiable, and certain

    Collective Procedure

    • Law of collective procedure: all creditors reunite to get paid from the company

    Juridical Reorganization Procedure

    • Conditions: company is in cessation of payment that is not irreversibly compromised, business owners must request within 30 days, and provide documents proving cessation of payment and reasons behind it
    • Procedure involves application of collective procedure and can lead to continuous plan, transfer plan, or juridical liquidation

    Juridical Liquidation

    • The company ends its activity, and the court can decide on juridical liquidation if juridical reorganization fails or cessation of payment is irreversible

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    Description

    Learn about the objectives and priorities of insolvency law, including maintaining company operations and settling debts with creditors.

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