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EVERYTHING YOU NEED TO KNOW ABOUT THE INSOLVENCY PROCESS FOR COMPANIES IN COLOMBIA

The corporate insolvency process in Colombia, regulated by Law 1116 of 2006, has the purpose of protecting and safeguarding Colombian companies,seeking alternatives for the payment of their claims or liquidating their assets in an organized manner. Nowadays, with all the problems presented by the pandemic generated by the COVID – 19, there are many businessmen who require an expert lawyer to initiate these processes, so here is the information you should keep in mind to start an insolvency process:
1. REQUIREMENTS TO INITIATE THE PROCESS:
Only one of the following general requirements must be met to initiate an insolvency proceeding:
Defaults on the payment for more than ninety days of two or more obligations in favor of two or more creditors, or has at least two demands of execution filed by two or more creditors for the payment of obligations. The obligations must represent not less than 10% of the debtor’s total liabilities.
Manifest an imminent inability to pay.
2. CORPORATE REORGANIZATION:
The corporate reorganization seeks to present a payment plan for creditors, which must be adjusted to the economic reality of the company. At this stage, several negotiations are carried out between the creditors and the debtor, trying to reach an agreement where all parties benefit and their interests are protected.
3. BUSINESS LIQUIDATION:
In the event that the continuity of the development of the corporate purpose of the company is unfeasible or the corporate reorganization agreement is not complied with, the company’s assets will be liquidated. In this situation, a loan graduation project will also be prepared and an appraisal of the company’s assets will be made. Once these two reports are finalized, the assets will be sold and the liabilities will be paid in an organized manner. Once this process is completed, the company will be legally liquidated and its legal status will be extinguished.
4. GENERAL BENEFITS
The main purpose of the insolvency process regulated by Law 1116 is to protect companies as economic entities that generate resources and employment. For this reason, it regulates a process for companies experiencing cash flow difficulties to reach an agreement and agree on a payment method with their creditors that facilitates the development of their corporate purpose.
Likewise, it also seeks to protect the interests of the company’s creditors in the event that the company cannot continue, so that individuals or companies are not financially defrauded for their actions carried out in good faith.
In general these processes are excessively formal and with a lot of paperwork, so it is always recommended that a lawyer is present throughout the process, in order to protect the interests of each party and / or accompany in the proper management of the declaration of insolvency. Cuadro Legal has highly qualified professionals who can advise you and resolve all the concerns you may have about an insolvency process.
Written by: Pedro Henao Cardona

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