The bankruptcy process is one of the most common in the legal environment, but there are many doubts about its real functioning. One of the most questioned in the legal field is who can file for bankruptcy of a company?
The answer to this question is simple, those responsible for the company’s management (in case of disability or death, the spouses and heirs) and, of course, the creditors who claim the payment of debts are free to enter with a bankruptcy process.
Hiring a bankruptcy lawyer is also essential for a successful process. You can find a good Las Vegas Bankruptcy lawyer to help your company in this case. In this article, we explain more about filing bankruptcy for your company.
What is the bankruptcy process?
The insolvency of a company occurs when its assets cannot pay off all outstanding debts, thus demonstrating the lack of sustainability in the operation of a business. This process occurs from the classification of all credits to the consequences for each involved.
The main benefit for all parties in filing for bankruptcy of a company is the discharge of debts in a satisfactory way for all parties, without damage to the private equity of the administrator.
Also described as a collective execution process, including liquidating the company’s assets, bankruptcy creates a mass of assets. This mass of assets, which includes all the company assets that are the target of the bankruptcy process, ends up being distributed according to the classification of creditors.
How does a company go bankrupt?
- By deliberation of the general meeting of creditors;
- Failure by the debtor to submit the recovery plan within the period stipulated by law;
- When the recovery plan is rejected;
- For breach of any obligation assumed in the recovery plan.
Based on these circumstances and the decision to open the case by the responsible judge, the company manager is removed and replaced by a judicial administrator.
This judicial administrator will be responsible for the management of the company during the processes that follow the bankruptcy request. The judicial administrator should be a finance expert to avoid more losses for the organization.
Consequences for partners in the bankruptcy process
When filing for bankruptcy of a company, direct consequences for the partners of the target company are imposed, preserving the premise of the bankruptcy process: Affect the legal entity and not the individual assets of each involved in the administration. Even in this basic premise, there may be exceptional cases affecting personal assets, as indicated by the judge.
As with the majority manager, the partners are prevented from exercising direct actions in the control of the company, being excluded from joint decisions and deliberations.
In short, the effects of the bankruptcy process for the manager and partners are similar, including the exclusion of the legal entity and payment of debts through processes that catalog the company’s assets and promote their liquidation, later resulting in their proportional distribution to the creditors. After the closure of the bankruptcy process, the administrator can still face legal consequences for his actions as a manager.
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