Law 12 of May 19 on Insolvency Proceedings in Panama.
This law provides solutions not only to those companies in imminent bankruptcy, but also to those that, although operating, are in crisis, for which they must undergo a financial reorganization. There are two processes clearly defined in the Law:
Reorganization and judicial Liquidation.
Bankruptcy process of reorganization.
The Reorganization Process is designed with the intention of providing the debtor with an opportunity to overcome the financial crisis and continue to have an operating company. However, this process may lead to a reduction in the management capacity of the company and in the case that the crisis presented is not overcome, it may end in a judicial liquidation process.
The Reorganization Process consists of a proposal to reestablish the financial prosperity of the company, which must be presented to the general board of creditors and, if approved by the same jointly with the bankruptcy judge of the case, will be reflected in the agreement of reorganization.
Judicial Liquidation:
The only objective of this process is to liquidate the company in an orderly and speedy manner. That is to say, in essence, this process foresees that a debtor puts the case before the judges of the Insolvency Circuit, the assets that his company has, with the intention of transforming said assets into liquid money, through a direct sale or an private auction. And once liquidated, what is obtained will be distributed by entering into an adjudication agreement between the creditors or, failing that, by judicial order, this process can be voluntary or forced as the case may be.
Law 12 of May 19, 2016 establishes that this regime will apply to natural persons, merchants and commercial companies registered or not in the Public Registry of Panama, with a commercial address, branch, agency or establishment within the Republic of Panama .
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