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The exponential spread of CODIV-19 is seriously affecting the financial standing of businesses and individuals at a global scale, many of which have already expressed the likelihood of a potential insolvency in view of the significant reduction of their operations. In view of this situation, both corporations and individual businesspersons alike are evaluating their options and next steps to be taken both in the face of their possible insolvency as well as that of their debtors.
Restructuring Law No 141-15 regulates restructuring and judicial liquidations of both national or foreign corporations, as well as individual business persons, domiciled or with a permanent presence in the Dominican Republic. The law offers a feasible process for the restructuring of insolvent companies to ensure their operational continuity while protecting the rights of its creditors, within a framework of transparency and equality.
An application for restructuring or liquidation may be made by either the insolvent debtor itself, or by any creditor whose claims represent at least 50 minimum wages when the requirements set out in article 29 of the law are met, under the following grounds:
- Failure to comply for more than ninety (90) days with at least one liquid and enforceable payment obligation in favor of any creditor or failure to pay Tax Debts to the Tax Administration for no less than six (6) tax periods.
- When current liabilities exceed its current assets during a period of more than six (6) months;
- When it has failed to pay at least two (2) consecutive salaries to its employees.
- Should there be an open restructuring, bankruptcy, insolvency or cessation of payments procedure in a foreign jurisdiction where the parent company or its main establishment or center of interest is located.
- Should there be active embargoes, judgments or execution proceedings that affect or could affect more than fifty percent (50%) of its total assets.
- In the event of a restructuring and for the duration of the conciliation and negotiation stage of the restructuring plan, all judicial, administrative or arbitral actions against the debtor’s assets are suspended, thus safeguarding the assets and the continuity of the business along the course of the process.
- The law also provides for the possibility of authorizing the debtor to seek new financing, allowing the banking institution to register a special lien for its security.
Previous Plan Agreement
Another possibility for both corporations and individual businesspersons facing actual or imminently financial difficulties in the face of this health crisis and ensure the continuity of their operations is to submit a prior plan agreement to the restructuring court before the start of any restructuring process. This plan can be made with respect to all creditors or only with respect to a selected group of them, such as financial institutions, labor creditors and suppliers. In each case, the agreement requires the acceptance of creditors representing at least 60% of the total creditors or any creditors’ class in order to be approved.
This plan may address any lawful restructuring plan for the debtor’s liabilities and assets or reorganization of its business, as well as the negotiation of partial write-offs and deadline changes for the payment of the debtor’s obligations.
Once the plan has been approved by the creditors and the court, it will have the same effects as those derived from a restructuring plan. In addition, the court may order, among other things, the suspension of any enforcement proceedings against the debtor’s assets and rights. Similarly, from the time of its submission and until the application is granted or rejected, creditors cannot apply for the restructuring of the debtor.
COVID-19: Resource Center
Guzmán Ariza is actively monitoring government guidance and situation updates and stand ready to help clients navigate COVID-19 related business concerns. We invite you to visit our COVID-19 Resource Center to catch up with the latest updates.
Article written by:
Alfredo A. Guzmán Saladín is a lawyer and partner of Guzmán Ariza, Attorneys-at-Law (www.drlawyer.com) and a lawyer recommended by The Legal 500 Latin America. He has advised multiple real estate sales in Casa de Campo Resort and Villas, the most important and prestigious real estate development in the region. A resident of Casa, Alfredo serves clients at the La Romana and Punta Cana offices and can be contacted at [email protected] or (809) 550-6400 – (829) 259-3058.
Fabio J. Guzmán Saladín – Lead partner of the corporate department of the firm Guzmán Ariza, with years of experience in business law, mergers and acquisitions, project financing, restructuring and insolvency, banking, securities and insurance law, and foreign investment. He currently advises more than 75% of the cases of commercial restructuring in the Dominican Republic, including the first and main case in the country. Fabio serves clients in the Santo Domingo offices and can be contacted at [email protected] or (809) 255-0980.
Guzmán Ariza, Lawyers and Consultants Profile:
In Guzmán Ariza we combine experience with innovation. We were founded in 1927, long before the vast majority of other Dominican law firms, and since then we have been at the forefront of the exercise of law in the Dominican Republic, the country with the largest economy in Central America and the Caribbean.
Guzmán Ariza has been a pioneer in the provision of legal services of all kinds to international companies and private investors in the Dominican Republic, from the simple purchase of a summer villa to the structuring of complex corporate mergers or multi-million dollar real estate projects.
Convinced that constant innovation in the exercise of their profession is vital to achieve client satisfaction, our attorneys have specialized in areas of law that have been carefully selected to meet the most pressing demands faced by our clients in the Dominican Republic.
We are internationally connected. As a member of three global legal networks — Nextlaw Referral Network, SCG Legal and GGI Geneva Group International — we are able to assist you effectively in international transactions throughout the world.
Guzmán Ariza La Romana office:
Av. Trinitaria No. 45, 2do Piso
Alfredo A. Guzmán: (809) 550-6400, [email protected]