Among the many changes introduced by the recent Reform of the Insolvency Act, today we are going to highlight those related to insolvency liability. That is to say, the liability that can be derived from the administrator. Because the new law now establishes a series of actions and breaches by the administrator in order to classify the insolvency proceedings as culpable.

The first important change is that now the judge must always, in all cases, classify the insolvency proceedings as fortuitous or culpable. Until now there were exceptions. This opens the door to greater power on the part of creditors to have the insolvency proceedings declared culpable.

As a result of his declaration of guilt, the administrator of the company in insolvency proceedings may be ordered to cover the deficit and to pay damages. He may also lose any rights he has in the insolvency proceedings.

When an insolvency proceeding is classified as culpable

In the event of classifying the insolvency proceeding as culpable, the judge must specify the cause or causes on which this classification is based.

The insolvency proceedings are classified as culpable and, therefore, the insolvency liability of the administrators may be declared when in the generation or aggravation of the company’s insolvency situation there has been fraud or gross negligence on the part of the debtor, its administrators or liquidators, de jure or de facto, general directors and those who, within the two years prior to the date of the declaration of insolvency proceedings, have held any of these conditions.

What actions may lead the classification of bankruptcy as culpable bankruptcy

The law specifies a series of actions and breaches that the administrator may commit and that justify the classification of the insolvency proceedings as culpable when the debtor:

  • Has taken all or part of his assets to the detriment of his creditors.
  • Delays, hinders or prevents the effectiveness of an attachment in any kind of enforcement which has been or is likely to be initiated.
  • Perform any legal act aimed at simulating a fictitious asset situation prior to the declaration of insolvency.
  • Submitting false or seriously inaccurate documents in the application for the declaration of bankruptcy or during its processing.
  • Is in material breach of the obligation to keep accounts, is guilty of double bookkeeping or commits any irregularity which makes it difficult to understand its assets and liabilities or financial position.
  • Where assets or rights have been fraudulently removed from its assets in the two years preceding the date of the declaration of bankruptcy.
  • When the opening of the liquidation has been agreed ex officio due to non-compliance with the agreement due to a cause attributable to the insolvent party.

Presumption of guilt

Similarly, the new Insolvency Act also provides for three situations in which the insolvency proceedings are presumed to be culpable, but evidence to the contrary is permitted: 

  • When the debtor has failed to comply with the duty to apply for the declaration of insolvency.
  • When the debtor has breached the duty to cooperate throughout the insolvency proceedings. For example, he does not provide the necessary information or does not attend the creditors’ meeting in situations where his participation is decisive for the adoption of the arrangement.
  • When the debtor legally obliged to keep accounts has failed to comply with its duties in any of the last three financial years prior to the declaration of insolvency. These are: to draw up the annual accounts, submit them to audit if necessary and deposit them in the Commercial Register or in the corresponding register.


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