Bankruptcy proceedings

The Supreme Court (TS) has ruled that a payment made by an administrator to himself shortly before his company entered bankruptcy proceedings can be annulled , even if that money was owed to him and the payment was, in principle, completely legal.

In this case, the CEO of a company, who was also a minority partner, paid himself 37, 000 euros thus repaying a loan that he himself had granted to the company to help with the company's financial problems. One day after making the payment, the company removed him from his position as CEO. Weeks later, the company reported to the court that it was facing serious financial difficulties and, finally, the voluntary bankruptcy was declared, that is, the company acknowledged being in crisis and unable to pay its debts.

Although the first judge believed that the payment was properly made , as it was a debt owed, payable, and there was no insolvency yet, the Provincial Court and the TS disagreed. Why? Because they ruled that there are exceptional situations in which, even if the debt is owed, the payment harms the estate of creditors, that is, to the rest of individuals or companies to whom money is also owed.

In this case, the administrator acted when insolvency was imminent and, as such, had to wait its turn in the insolvency proceedings like any other creditor, and not collect earlier taking advantage of its position. In addition, being a corporate loan , its credit had to be considered subordinated , waiting to collect after the ordinary creditors. Thus, the Supreme Court confirms that what is important is that all creditors are in equal conditions and no one gains an advantage, even if their credit is legitimate.

If you find yourself in a situation similar to the one described, our professionals can provide you with the necessary assistance and take any actions that may be relevant.