Insolvency Law at Uruguay
In Uruguay, insolvency law (referred to in Spanish as Derecho Concursal) governs how individuals and companies deal with financial distress and inability to pay debts. The system is primarily court-based, and the rules are established under the Ley N.º 18.387 (Ley Concursal), enacted in 2008, which modernized Uruguay's approach to bankruptcy and reorganization.
Here is an overview of the main features of Uruguay's insolvency law:
🔹 1. Main Legal Framework
Law No. 18.387 (2008) is the core legislation.
It provides procedures for:
Reorganization (Concurso Voluntario y Forzoso)
Liquidation (Liquidación Concursal)
Applies to both individuals and legal entities (companies, cooperatives, etc.).
🔹 2. Types of Insolvency Proceedings
Uruguayan law allows for two main types of bankruptcy processes:
✅ Concurso (Reorganization)
Goal: To allow debtors to restructure their debts and continue operating.
Can be:
Voluntary (Concurso Voluntario): Initiated by the debtor.
Involuntary (Concurso Necesario): Initiated by creditors when a debtor fails to meet payment obligations.
Involves negotiation with creditors under court supervision.
The debtor presents a payment plan (convenio), which creditors must vote on.
Requires majority approval by value and number of creditors.
❌ Liquidación Concursal (Liquidation)
When reorganization is not feasible, the debtor’s assets are sold to pay creditors.
Initiated when the debtor is irreversibly insolvent.
A trustee (síndico) is appointed by the court to manage the process.
Once assets are liquidated and debts are paid to the extent possible, the remaining debts may be canceled.
🔹 3. Automatic Stay (Suspensión de Ejecuciones)
When a bankruptcy proceeding starts, an automatic stay on individual creditor actions takes effect.
Creditors cannot seize assets or initiate lawsuits independently.
This provides the debtor with time and space to negotiate a restructuring plan.
🔹 4. Creditors' Classification and Priority
Uruguayan insolvency law sets a hierarchy of claims, where creditors are paid in the following general order:
Secured creditors (acreedores con garantía real) – e.g., mortgages
Labor claims – unpaid wages, severance, etc.
Tax authorities – government claims (e.g., DGI)
Unsecured creditors (acreedores quirografarios) – such as suppliers or lenders without collateral
Subordinated creditors – including claims by shareholders or related parties
🔹 5. Role of the Trustee (Síndico)
Oversees the estate during the process
Evaluates the debtor’s financial situation
Assists in verifying claims, asset sales, and creditor communications
🔹 6. Discharge of Debt (Exoneración de Pasivos)
Available primarily to individuals and small businesses.
If the debtor cooperates and acts in good faith, residual debts may be discharged at the end of the process.
The goal is to offer a “fresh start” to honest debtors, similar to U.S. bankruptcy discharges.
🔹 7. International Aspects
Uruguay recognizes some aspects of cross-border insolvency, but the system is not yet fully harmonized with the UNCITRAL Model Law.
Coordination with foreign courts is limited but evolving.
🔹 8. Recent Trends
Growing focus on preventive restructuring to avoid liquidation.
Digital tools are being adopted for case filings and notices.
The 2008 law brought Uruguay more in line with modern international standards, but further reforms are occasionally discussed.
🔹 9. Key Institutions
Judicial System: Oversees insolvency cases (Juzgado Letrado de Concursos)
Síndico/Interventor: Trustee or administrator appointed by the court
Creditors’ Committee (Comité de Acreedores): May be formed in large or complex cases
✅ Summary
Uruguay's insolvency law under Law 18.387 provides a structured and modern legal process for both reorganization and liquidation. It seeks to balance creditor protection with debtor rehabilitation, especially for viable businesses. Courts play a central role, and the process involves oversight by a trustee and participation by creditors.
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