Articles

Insolvency

The insolvency proceedings in Portugal can be initiated by the debtor or by creditors. If the debtor initiates a legal proceeding he should give in details of his assets, including an evaluation, details of the claims and of the creditors, and a report stating the leading cause to the initiation of the proceedings of insolvency.

 There are two distinct proceedings concerning insolvency.

Through the first one the creditors attempt to arrange through court the recovery of the undertaking. Frequently, this is the first step to be taken. If the recovery is the measure to be taken, all enforcements stop at once. A certain period of time is given so that the company tries to recover from is financial situation. Normally creditors agree on a plan of payment of the existing debts with the forgiveness of the interests and part of the principal debt. If during this period of time the company do not pay according to this plan, creditors can claim the company’s insolvency.

The second proceeding is going immediately for claiming of insolvency (if the requirements are fulfilled). In this case the insolvency proceeding is characterized by having two distinct phases: a declaratory phase and an executive one.

The declaratory phase aims at the declaration of insolvency of the debtor.

The executive phase consists of the execution of the assets of the debtor, the apprehension and liquidation of the goods, the identification of the liabilities, and the payment to the creditors.The declaration of insolvency could have also criminal consequences.

« Back | 06.02.2006 | Know more »