Insolvency Law at Honduras
Honduras' insolvency and bankruptcy framework is primarily governed by the Commercial Code (Código de Comercio), established under Decree No. 73-50. This legal framework provides structured procedures for businesses facing financial distress, ensuring an orderly process for debt resolution and asset distribution. (Commercial Code (approved by Decree No. 73-50), Honduras, WIPO Lex)
🏛️ Legal Framework and Initiation of Insolvency
Insolvency proceedings in Honduras can be initiated under the following circumstances:
Voluntary Declaration: A company may file for bankruptcy voluntarily.
Creditor Petition: Creditors can petition the court for a bankruptcy declaration.
Ex Officio Declaration: The Public Prosecutor's Office or the court may initiate proceedings without a petition.
The court with jurisdiction over the company's registered office is competent to declare bankruptcy. In cases involving foreign companies, the court where the company has its main seat of business in Honduras holds jurisdiction. The declaration of bankruptcy results in the company being deprived of the right to manage and dispose of its assets until the bankruptcy is finalized. The company will be represented by its administrators, managers, or liquidators, or, in their absence, a special curator appointed by the court. (Honduras | Lex Mundi)
⚖️ Roles and Responsibilities in Insolvency
Liquidator: Appointed to manage the liquidation process, including concluding pending operations, collecting debts, paying liabilities, selling assets, and preparing the final balance. The liquidator must deposit the final balance with the Mercantile Registry and the Chamber of Commerce. (Honduras | Lex Mundi)
Court: Oversees the insolvency proceedings, ensuring compliance with legal procedures and protecting the rights of all parties involved.
Creditors: Engage in the process to recover debts owed to them, with secured creditors generally having priority over unsecured creditors.
📊 Distribution of Assets and Creditor Prioritization
During liquidation, the distribution of assets follows a specific order:
Secured Creditors: Those with collateral backing their claims are paid first.
Unsecured Creditors: Creditors without collateral receive payment after secured creditors. (Understanding Liquidation and Insolvency Procedures in Honduras)
Employees: Claims related to employee wages and benefits are prioritized. (Understanding Liquidation and Insolvency Procedures in Honduras)
Tax Authorities: Outstanding tax obligations are settled.
This hierarchy ensures a fair and structured approach to debt resolution. (Understanding Liquidation and Insolvency Procedures in Honduras)
🔄 Rehabilitation and Prevention
The Commercial Code also provides mechanisms for the rehabilitation of insolvent companies through:
Suspension of Payments: Allows a company to delay payments temporarily while restructuring.
Preventive Agreement: Enables a company to negotiate with creditors to reach an agreement that avoids full bankruptcy.
These provisions aim to provide companies with an opportunity to recover and continue operations, rather than proceeding directly to liquidation. (Commercial Code (approved by Decree No. 73-50), Honduras, WIPO Lex)
🛡️ Debt Relief Law for Workers
In addition to corporate insolvency provisions, Honduras has enacted a Debt Relief Law for Public and Private Sector Workers. This law allows workers to consolidate debts from commercial houses, non-bank lenders, and the regulated financial system. It facilitates access to formal credit and debt consolidation through regulated financial institutions, cooperatives, and pension institutions, with repayment via payroll deduction. The law aims to assist over-indebted workers and promote financial inclusion. (Debt Relief Law in Honduras)
✅ Summary
Honduras' insolvency laws, as outlined in the Commercial Code, provide a structured approach to managing corporate financial distress through liquidation and rehabilitation processes. The legal framework ensures that creditors' rights are protected, and there is a clear hierarchy for the distribution of assets. Additionally, the Debt Relief Law offers support to workers facing financial challenges, promoting broader economic stability.
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