8.1. General Issues
8.2. Reorganization
8.3. Bankruptcy

8.1. General Issues

The National Constitution of Argentina provides, in its Article 75, item 12, that the Congress enacts general laws for all the country on various matters including bankruptcy, which is applied by each jurisdiction. In this way, provided that it is consistent with the principles of a speedy and economic procedure, the matter is heard under the code of procedure of each jurisdiction, on matters not specifically contemplated by the national law on reorganization and bankruptcy.

The Law on Reorganization and Bankruptcy No 24,522 (LCQ) comprises both an individual and an entity, whether the latter is registered or not.

The court having competent jurisdiction is the court in the venue of the debtor’s residence and, in the case of a non-registered entity, the court where the entity has its business management and, if different venues are involved, the venue of the main establishment.

The LCQ comprises two primary cases: reorganization (concurso preventivo)and bankruptcy(quiebra), and in both cases a condition of insolvency or suspension of payments is required prior to the petition for either.

The purpose of reorganization is to avoid the debtor’s bankruptcy, which will be achieved by the latter upon negotiation with its creditors. The negotiation may be conducted in court or by an out-of-court proceeding known as “acuerdo preventivo extrajudicial” (out-of-court preventive agreement).

In a bankruptcy case, the debtor’s assets are sold and the proceeds are used to repay its debts.

The procedure to accept a creditor is similar in either case. A petition must be submitted to the trustee, describing the causes originating the claim and the amount, and the related documentary proof. Likewise, certain claims may have a payment privilege that must be asserted in order to be recognized.

8.2. Reorganization

A reorganization proceeding may only be initiated by the debtor. The law contemplates the right of a creditor to petition for bankruptcy of the debtor, who may in turn avoid the related order for relief by moving for its own reorganization.

Upon the commencement of reorganization, the debtor continues to manage its property under the supervision of a receiver.

The purpose of this procedure is to enable the debtor to negotiate with its creditors so as to arrive at a solution overcoming the insolvency condition. The debtor is free to submit the proposal it considers best for its creditors.

In order to overcome the insolvency condition, the debtor must obtain approval y its creditors by a majority of both capital and number of persons, and court approval of the proposal. Otherwise bankruptcy will be declared.

If a proposal for is approved in a reorganization process, it subsequent default will bring about bankruptcy of the debtor.

The procedure for reorganization may be used for an economic group, whether it comprises individuals or entities, and encompasses all persons in the group. For this procedure, the law requires that at least one of the group members be insolvent. The court having competent jurisdiction in this case is the court in the venue of the member with the largest assets, and will be conducted for each member separately.

The procedure for an out-of-court repayment plan (Acuerdo Preventivo Extrajudicial, APE) is essentially an abridged and informal reorganization, in a part of the proceedings. In this type of case, the debtor is not forced to negotiate with all its creditors, but only with those who would form the double majority in the reorganization and, upon obtaining consent by the creditors, must submit the agreement for judicial approval. The agreement approved by this procedure is valid and binding upon all the creditors.

8.3. Bankruptcy

In the event of bankruptcy, the debtor is dispossessed of its property, which is sold to repay the approved claims.

An order for bankruptcy of the debtor may be entered upon: i) the debtor’s own petition for bankruptcy; ii) a petition of a creditor for involuntary bankruptcy; iii) upon the failure of a reorganization proceeding; iv) upon default of an agreement approved in a reorganization proceeding; v) by extension, by being a member of an entity having limited liability; and vi) by extension from another bankruptcy proceeding, upon compliance with certain requirements provided by law.

In the cases of i), ii) and v) the debtor may request that the bankruptcy proceeding be converted into reorganization.

  ©Bulló – Tassi – Estebenet – Lipera – Torassa. Abogados.
This document is only intended to provide guidance on the main topics of Argentine regulations, and does not constitute advice of any kind whatsoever.
Latest update: August 2012.