Insolvency proceedings

The Supreme Court (TS) has ruled that a payment made by an administrator to himself shortly before his company entered into insolvency 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 informed the court that it was facing serious financial difficulties and, finally, voluntary insolvency 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, enforceable 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 creditors' pool, that is, the rest of the people or companies to whom money is also owed.

In this case, the administrator acted when insolvency was imminent and, as such, he had to wait his turn in the proceedings like any other creditor, and not collect before taking advantage of his position. In addition, being a corporate loan, his credit had to be considered subordinated, waiting to be paid after the ordinary creditors. Thus, the TS confirms that what matters 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 similar situation to the one described, our professionals can provide you with the necessary assistance and take any actions that may be relevant.