1. Bankruptcy vs Suspension of Payments
Do you know the difference between a bankrupt organization and another one in suspension of payments?
In popular terminology, these concepts commonly overlap and are mistakenly misused.
However, when you are looking financing for companies in crisis, for example, the distinction is decisive.
2. When is an organization bankrupt?
Una organization in technical bankruptcy or bankruptcy has a negative net worth, since its assets (assets and collection rights) are less than its liabilities (financial obligations) and therefore faces a structural insolvency, which you can remedy by finding financing for companies in crisis.
In short, a bankrupt organization is one that cannot meet its obligations and is affected by a definitive insolvency.
3. What is the suspension of payments?
La suspension of payments, also called cessation of payments or defaultIt seems a synonym for bankruptcy or bankruptcy, but it is not the same.
In fact, its consequences are not comparable either.
The starting point is, likewise, an insolvency. However, on this occasion, the affected organization declares as temporary his situation, since he considers that Will you be able to pay off your debts in the future?, more or less close.
Generally, it occurs when a company has many assets that are not liquid, that is, easily convertible into cash.
Faced with this lack of currency, he faced the inability to pay your obligations on time and in due form.
The usual thing is to try to reach an agreement with the creditors.
For this, the law establishes a series of parameters and obligations that must be respected.
In return, the company that suspends its payments can renegotiate its debts.
In order to declare suspension of payments, it is essential to demonstrate that the debts can be settled in the future.
For this, it is necessary to have more time or different payment conditions, which are achieved through this new situation.
Once proven, the interested businessman or businessmen, a lawyer and a solicitor must sign a written document with the application.
In this context, the Law of July 26, 1922 It is the one that applies in Spain.
4. How is the suspension of payments declared?
This condition is acquired when starting a liquidation or judicial administration procedure.
A large number of professionals can be attached to it, including:
- – Artisans and merchants.
- – Individual entrepreneurs with limited liability.
- – Liberal professionals.
- – Associations, companies and other legal persons under private law.
- – Civil societies.
- – Economic interest groups.
In any case, the debtor or one of the legal representatives of the company must sign this application.
The deadline for filing this statement is 45 days, maximum, from the cessation of all payments.
You have to go to:
- – The secretary of the commercial court, when prompted by a merchant or craftsman.
- – The court of first instance of the registered office in the rest of the cases.
5. Suspend payments and bankruptcy are not the same
Both suspension of payments as the statement of bankrupt organization occur as a result of insolvency.
They therefore share the inability to meet the debts contracted and, therefore, a reality of economic malaise in the company.
However, there is a major difference between the two:
- – Suspending payments is a provisional and transitory action. Precisely, this statement tries to gain time and improve conditions. In other words, the company aspires to maintain itself and recover its normality.
- – Declaring bankruptcy is irreversible. The decrease in income, the lack of activity or other factors have led to a limit and irrevocable situation.
Are you clear about the difference between suspension of payments and organization in bankruptcy?
If you manage your company well and surround yourself with qualified collaborators, such as WorkCapital, you will avoid these complications.
Call us and we will inform you without obligation!
Bankruptcy vector created by pikisuperstar – www.freepik.es
Worried businessman photo created by yanalya – www.freepik.es
