Law 12 of 2016 is made for companies in bankruptcy and for those facing a transitory crisis. These companies must adapt to two processes clearly defined in the Law.
The Reorganization Process
It describes reorganization processes, with the objective of giving the debtor the opportunity to overcome its financial difficulties in order to be able to continue with the commercial and operational functions of its company.
Through a reorganization plan such as debt restructuring or capitalization, creditors are expected to receive a greater benefit from their claims.
Such reorganization plan will be presented to the General Board of Creditors and must be accepted by the Insolvency Judge and Board, and then be expressed in a Reorganization Agreement.
The Judicial Liquidation Process
This process has the sole purpose of liquidating the company in an orderly and quick manner. It can be requested by the debtor company voluntarily or by a creditor in a compulsory manner.
The company can liquidate the assets through a direct sale or a private auction. After this, the result will be distributed by entering into an Adjudication Agreement among the Creditors.
This law applies to natural or commercial persons and corporations with a presence in Panama, regardless if they are registered or not in the Panamanian Public Registry.
Read the complete Law 12 of 2016 on insolvency proceedings in Panama here: