Insolvency Law at Guatemala
Guatemala's insolvency framework is governed by Decree 8-2022, known as the Insolvency Law, which entered into force on September 5, 2022. This legislation modernizes the country's approach to insolvency, emphasizing business continuity and restructuring over liquidation. (Insolvency Law - Guatemala - LatinAlliance, Insolvency Law - Guatemala - LatinAlliance)
Key Features of Guatemala’s Insolvency Law (Decree 8-2022)
1. Scope and Exclusions
Applicable to: Individuals and legal entities engaged in commercial activities.
Excluded from: Public sector entities, financial institutions, and banks. (Guatemala | Lex Mundi)
2. Insolvency Procedures
Voluntary Insolvency: Initiated by the debtor seeking to restructure obligations.
Necessary Insolvency: Filed by creditors, co-debtors, or guarantors when the debtor is unable to meet obligations. (Guatemala | Lex Mundi)
3. Role of the Insolvency Administrator
Appointment: In voluntary cases, the debtor selects from a list provided by the National Insolvency Directorate; in necessary cases, creditors holding over 50% of liabilities choose the administrator.
Duties: Manage and protect the debtor's assets, oversee the insolvency process, and ensure fair treatment of creditors. (Insolvency Law - Guatemala - LatinAlliance, Understanding Liquidation and Insolvency Procedures in Guatemala)
4. Reorganization Plan
Objective: Facilitate the debtor's recovery through financial, administrative, or operational restructuring.
Approval: Requires consent from creditors representing at least 60% of the liabilities. Once approved, it becomes binding on all parties. (Guatemala | Lex Mundi, Insolvency Law - Guatemala - LatinAlliance)
5. Liquidation Process
Initiation: Can occur if the reorganization plan is not approved or fails.
Execution: Managed by the appointed insolvency administrator, who oversees the sale of assets and distribution of proceeds to creditors. (Insolvency Law - Guatemala - LatinAlliance)
6. Court Procedures
Jurisdiction: Cases are handled by the Civil Branch of the First Instance Courts located where the debtor's operations or domicile are situated.
Appeals: Decisions can be contested through revocation and appeal; cassation is not applicable under this law. (Insolvency Law - Guatemala - LatinAlliance, Insolvency Law - Guatemala - LatinAlliance)
Context and Implications
Prior to Decree 8-2022, Guatemala's insolvency processes were governed by the outdated Civil and Commercial Procedural Code, which proved ineffective for modern business needs. The new law aims to provide a more efficient and structured approach, promoting economic recovery and creditor protection. However, its effectiveness hinges on the timely publication of regulations by the Executive Branch. (Insolvency Law - Guatemala - LatinAlliance, Ley de Insolvencias en vigencia a partir de Septiembre, 2022 - Carrillo & Asociados)
If you require assistance navigating Guatemala's insolvency procedures or need guidance on specific aspects such as reorganization plans or creditor rights, consulting with a legal professional specializing in Guatemalan commercial law is advisable.
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