The Preamble VII of the Bankruptcy Act 22/2003 (hereinafter, BA) contemplates the purchase of the insolvent company, preferably as a whole, thus ensuring the preservation of the company. However, pursuant to Article 43 of the BA, it is not possible to transfer assets of the company without permission of the Judge, until agreement or the liquidation of the company are achieved (regardless the exceptions in Article 43.3 BA). Although selling a company under bankruptcy proceeding may be accomplished in any phase of the procedure, in practice it is mainly performed in two stages:
– When applying for bankruptcy. In these cases, the debtor, at the time of filing the application for the procedure, includes a binding offer to purchase the company, which was agreed with a third party prior to the application.
– Liquidation phase. In these cases the Judge gives preference to the sale of the whole company as a unit, rather than production units sold individually, unless he considers selling isolated units will provide the insolvent company with higher profits, in which case the Judge shall order selling each asset of the company independently. At this stage, the sale of the company is conducted by auction, for which the judge previously launches a period of time where the interested companies in buying the insolvent company present their candidature. Regarding the criteria under which the Judge chooses the buyer company, those companies ensuring, in their offer, the greatest degree and reliability of the business continuity will be considered as preferable. For that purpose, they are mainly assessed taking into consideration two factors: the continuity of workers and the feasibility in the payment of debts to the creditors.
There are some interesting advantages regarding the acquisition of a company in bankruptcy. Firstly, the purchase price will be very competitive (in economic terms) compared to what a standard purchase would be. When the sale occurs after reaching agreement in the preceding, the sale price shall be fixed by the partners of the insolvent company and the receivers, whereas when the sale occurs in the liquidation phase only the later stipulate the price. Therefore, it is very advisable to buy an insolvent company as its price will always be lower than if the company was not under bankruptcy proceeding. Secondly, there is a very important legal security governing the process of buying these companies.
The buyer will possess accurate and reliable accountancy information of the company that he or she intends to acquire, since the receivers elaborate a report containing such information. Furthermore, these procedures are rapidly performed allowing the sale to be made in a short period of time, hence the buyer can quickly begin to stimulate and operate the business. Nevertheless, perhaps the most important advantage or, at least, the most attractive one for buying these companies, would be that the buyer does not acquire any debts of the insolvent company related to the Tax Agency, Social Security taxes or labour debts; therefore the fiscal risks are minimal.
In short, the acquisition of a company under bankruptcy presents very attractive advantages to the potential buyer. The workforce is already formed, the accounting and fiscal security is maximum and, finally, the creditors will recover their credits more quickly due to the assets liquidation occurring with the sale, which, in the end, is the main objective of the Bankruptcy Act.