Best Restructuring & Insolvency Lawyers in Ecuador

About Restructuring & Insolvency Law in Ecuador

Restructuring and insolvency law in Ecuador governs the processes and procedures for companies and individuals facing financial distress. The aim is to provide a legal framework for debtors who are unable to meet their obligations to creditors, while at the same time protecting the rights of creditors. Ecuadorian law establishes mechanisms for both debt restructuring, which seeks to allow companies to renegotiate their debts and continue operations, and insolvency, which may lead to liquidation if financial recovery is not possible. Ecuador has reformed its insolvency regime in recent years to make the process more efficient and to encourage economic recovery for businesses in difficulty.

Why You May Need a Lawyer

Seeking legal advice in restructuring and insolvency matters can help protect your interests during complicated financial situations. Common scenarios include:

• When your business is facing cash flow issues and cannot meet its financial obligations.
• If you are receiving demands or lawsuits from creditors.
• When you need to understand the consequences of entering into insolvency or restructuring procedures.
• If you plan to negotiate with creditors to restructure debts.
• When personal assets are at risk as a business owner or guarantor.
• If your company is unable to pay employees, taxes, or suppliers.
• To avoid accidental violations of local law during the insolvency process.
• If you need assistance with preparing restructuring plans or legal filings.
• To defend your interests as a creditor seeking recovery of debts from a debtor in distress.

An experienced lawyer can guide you through the legal options, represent you in court or out-of-court negotiations, and help achieve the best possible outcome.

Local Laws Overview

The principal legal framework for restructuring and insolvency in Ecuador is found in the Ley de Concursos Preventivos, the Código Civil, and the Código de Comercio. The most relevant aspects include:

• Preventive Proceedings (Concurso Preventivo): A voluntary process that allows companies in financial difficulty to reach agreements with creditors under court supervision, aiming to avoid bankruptcy and safeguard employment and economic activity.
• Formal Bankruptcy (Quiebra): Initiated when recovery fails, leading to the liquidation of assets and distribution among creditors based on established priorities.
• Role of Creditors: Creditors have defined rights and priorities. Secured creditors generally have preference, while labor and tax claims receive certain protections.
• Judicial Oversight: Courts oversee insolvency and restructuring proceedings, appointing administrators and ensuring fairness.
• Restructuring Plans: Debtors must propose detailed restructuring plans, which require approval by a majority of creditors and judicial endorsement.
• Insolvency Triggers: Inability to meet payments, accumulation of overdue debts, or negative net equity can trigger proceedings.
• Protection from Creditors: During restructuring, some enforcement actions by creditors are paused to allow negotiation and stabilization.

Ecuadorian insolvency law seeks a balance between recovery and fair resolution. Procedures are formal, requiring compliance with specific deadlines and documentation.

Frequently Asked Questions

What is the difference between restructuring and insolvency in Ecuador?

Restructuring is a process to renegotiate and modify debt terms so that a company can continue operating. Insolvency, or bankruptcy, occurs when restructuring is not feasible, and may result in the liquidation of the debtor's assets to pay creditors.

Who can initiate restructuring or insolvency proceedings?

Both debtors and creditors can initiate proceedings. Debtors typically start preventive restructuring, while creditors may request bankruptcy if a debtor fails to pay debts.

How long do restructuring or insolvency processes take in Ecuador?

The timeline can vary depending on complexity, the number of creditors, and court schedules. A preventive restructuring can take several months, while full bankruptcy and liquidation may take a year or more.

What happens to employees if a company enters insolvency?

Employee claims, such as unpaid wages and benefits, are generally given preference in bankruptcy proceedings. However, continued employment depends on the success of restructuring efforts or a company sale.

Am I liable for my company’s debts as an owner or director?

Generally, a company’s liabilities are separate from its owners. However, directors or owners may be held personally liable in cases of fraud, gross negligence, or if they provided personal guarantees.

Can I keep operating my business during restructuring?

Yes, one of the goals of restructuring in Ecuador is to allow the continued operation of the business while negotiations and court supervision take place.

Do restructuring and insolvency proceedings affect my credit record?

Yes, these proceedings can negatively impact both personal and business credit ratings, which may affect future access to financing.

What documents are needed to start insolvency proceedings?

Typically, financial statements, lists of creditors and debts, details of assets, and information regarding contracts and obligations will be required.

Can creditors take my assets during restructuring?

Once restructuring or insolvency proceedings are officially accepted by the court, certain creditor actions are paused. However, secured creditors may have rights to specific assets.

Is out-of-court restructuring possible?

Yes, informal or out-of-court agreements can be made with creditors, but they may lack the protections and enforceability of court-supervised processes.

Additional Resources

• Superintendencia de Compañías, Valores y Seguros: The main government regulator overseeing company registrations and insolvency proceedings.
• Corte Nacional de Justicia: The judiciary body responsible for handling insolvency cases.
• Cámaras de Comercio: Local chambers often provide information and support for businesses in distress.
• Legal Assistance Clinics: Several universities and nonprofit organizations offer free or affordable legal assistance for individuals and small businesses.
• Private Law Firms: Specialized law firms can provide comprehensive advice and representation in restructuring and insolvency matters.

Next Steps

If you or your business are experiencing financial difficulties, here is how you can proceed:

1. Assess Your Situation: Collect detailed financial records and review your obligations.
2. Seek Legal Advice: Consult with a lawyer specializing in restructuring and insolvency to discuss your options and obligations.
3. Prepare for Action: Gather required documentation, including financial statements, contracts, and creditor lists.
4. Engage With Creditors: With legal guidance, consider opening communication with key creditors to explore restructuring possibilities.
5. Decide on a Strategy: Based on legal advice, choose the most appropriate course: informal restructuring, preventive proceedings, or insolvency filing.
6. Stay Informed: Laws can change, so maintain contact with your legal advisor and monitor official sources for updates.

Navigating restructuring and insolvency law in Ecuador can be complex. Seeking timely legal guidance is the best way to protect your interests and find a viable solution.