Libro Tercero Título V. Ejecucion colectiva

Natural or juridical persons, whether or not they are merchants, who have suspended or are about to suspend the current payment of their obligations, may propose to their creditors the conclusion of an agreement. They may also do so even when they have been declared bankrupt, provided that it has not been judicially classified as fraudulent or culpable.

The agreement may cover:

1º.Concerning assignment of property.

2º.Concerning total or partial administration of the assets by the creditors, or by the debtor, under the intervention appointed by them.

3º.Concerning extensions or remissions, or both concessions at the same time.

The agreement may be extrajudicial. In such case, the consent of all parties interested in the insolvency proceedings is required and it shall be executed in a public deed.

The judicial agreement must be proposed before the judge of the place where the debtor has the principal center of its business; and the application must contain, in addition to the requirements of any written submission, the following:

1º.Causes of the suspension or cessation of payments.

2º.Origin and amount of each debt, date of its expiry, security and conditions, if any.

3º.Draft of the agreement, to which shall be attached the general balance sheet of the business, signed by the debtor and by the person in charge of keeping the accounting records.

4º.The list of creditors, indicating the domicile of each of them or of their respective legal representatives.

5º.Two copies of the application and attached documents, one of which shall remain in the Tribunal, and the other shall be delivered to the review commission referred to in the following article.

Once the application has been filed in the prescribed form, the judge shall issue the order declaring the state of concurso, which shall contain:

1.Order that official communications be sent to the tribunals where there are pending executions against the party who requested the agreement, informing them of the filing of the respective proposal, so that they suspend those in which the auction sale has not yet been carried out; except those brought to enforce mortgage or pledge credits or in enforcement of judgments regarding payment of maintenance.

2.Appointment of a reviewing commission, composed of one person to be chosen by the judge from the list communicated to him for that purpose by the Ministry of Economy, and of two of the principal creditors of the proponent of the agreement. If the proponent is a bank, insurance company or bonding company, the reviewing commission shall be composed of a representative of the Superintendency of Banks and two of the principal creditors.

3.Appointment of a provisional depositary, who shall intervene in the operations of the debtor and deposit in one of the national banks the free portion of the income, after deducting the ordinary business expenses and those for the support of the debtor and his family.

4.Order to publish this order three times within a period of fifteen days, in the Official Gazette and in another newspaper of largest circulation.

The judge shall vest the members of the commission in their offices, thereafter setting for them a reasonable period so that, upon review of the accounting and documents of the debtor, they render a report that shall include the following:

1º.Verification of the truth of the statement of the proponent of the agreement.

2º.Opinion concerning the reasonable proportion between the personal expenses incurred by the debtor, as well as the dividends distributed where applicable, and the volume of the business and the amount of the profits produced.

3º.General state of the business, the correctness with which it has been managed and its probable future.

Any creditor may, until five days before the date set for holding the meeting, appear in writing before the judge, requesting their inclusion in the list of creditors or challenging the claims included therein.

The clerk of the Tribunal, in view of the requests or challenges referred to in the preceding paragraph and of the report submitted by the reviewing commission, shall draw up, no later than three days before the date set for holding the meeting, a list of creditors classified in the following order:

1.Creditors included by the debtor whose claims have not been challenged.

2.Creditors included by the debtor who seek an increase of the assigned amount.

3.Creditors omitted by the debtor who have requested their inclusion in the list.

4.Creditors included by the debtor whose claims have been challenged as excessive.

5.Creditors included by the debtor whose claims have been totally challenged.

This list and the report shall remain in the secretariat of the Tribunal at the disposal of the creditors.

Upon receipt in the Trial Court of the report of the review commission, if it appears therefrom that the debtor has deliberately failed to tell the truth on substantial points, or that there are indicia of fraud or culpability, the judge shall declare the debtor bankrupt; shall issue all orders established in this Code for such case and the preventive agreement procedure shall be terminated. The judge shall proceed in the same manner if the debtor fails to take action for fifteen days in the agreement proceedings. In this case, the judge shall rule on its own initiative or at the request of any of the creditors.

When the adverse circumstances against the debtor expressed in the preceding article are not deduced from the report, the judge shall set the place, day and time for the general meeting of creditors to be held; shall order that creditors who are present be summoned in person; those who are outside the place of the proceedings, but within the Republic, by rogatory letter or writ; and unknown creditors by edicts, to attend the general meeting with the documents substantiating their claims. The period for holding the meeting shall be no less than fifteen nor more than sixty days; and the convening edicts shall be published three times, during said period, in the Official Gazette and in another of those of greatest circulation.

If from the list of creditors submitted by the debtor it appears that any of them is outside the Republic and has no lawful representation therein, the judge shall send an official communication, with respect to those who are foreigners, to the Consul of the nation to which they belong so that, by himself or through the person he designates, he represents his fellow nationals until they appear personally or through an agent in the place of the proceedings. With respect to Guatemalans who find themselves in the same situation, the judge, on its own initiative, shall appoint a defender for them.

Creditors may attend the meeting personally or through a duly authorized proxy. No single person may have more than three representations at the meeting.

For the meeting to be held, no fewer than half plus one of the number of persons listed as creditors must attend it and they must represent at least three-fourths of the total credits. If they do not appear with the indicated majorities, a new meeting shall be summoned by estrados with eight days' advance notice, and it shall be held with those who attend, whatever their number may be.

Once the general meeting has been constituted, the creditors shall be informed of the application and of the documents submitted by the debtor, as well as of the report of the reviewing commission and of the classified list of creditors that the Secretariat of the Tribunal may have prepared. Thereupon, the meeting shall ratify the judicial appointment of the representatives of the creditors or shall proceed to elect other representatives in substitution thereof.

The creditors shall exhibit the supporting documents for their credits, and the meeting shall immediately undertake the examination and recognition thereof.

The creditors who do not submit to the meeting the documents referred to in the preceding paragraph, or who do not appear included in the lists, without challenge, shall be excluded from the meeting.

In the event that a credit is rejected or reduced, the creditor may claim in the act before the presiding judge, who shall decide immediately, confirming or modifying, with no appeal available, the decision of the majority.

This decision of the meeting or of the judge shall have value only for the purpose of constituting the meeting of creditors, but it does not prejudge the legitimacy of the credits nor preclude the subsequent claim of the interested parties.

All creditors whose claims are recognized shall have voice and vote in the deliberations relating to the agreement. Mortgage and pledge creditors may abstain from taking part in the decision of the meeting on the agreement, and by doing so, their rights shall remain intact.

If, on the contrary, they prefer to retain voice and vote on the proposal for the agreement, they shall be subject to the resolution of the meeting, without losing the guarantees and privileges of their respective claims.

At creditors' meetings, the majority of votes shall constitute a decision. The majority is constituted by half plus one of the number of voters, representing at least three-fifths of the total credits.

If remissions are to be granted to the debtor, the procedure shall be as follows: Where the remission exceeds 75% of the debts, the majority must be more than 80% of the number of voters; if it exceeds 60%, it shall not be less than 65% of the voters; if the remission reaches 50%, the number of votes shall be at least 60% of them, and if it is less than 50%, an absolute majority shall suffice. In these cases the capital majority shall be computed in the same proportion established for the majority of voters.

Once the verification of claims is completed, the judge shall submit the bases of the agreement for discussion.

The creditors may propose amendments to the bases, or new forms which shall likewise be discussed.

When the judge considers that the bases have been sufficiently discussed, the judge shall declare the debate closed and shall put them to a vote with the proposed amendments. The judge may also, on its own initiative or at the request of the majority of the creditors, postpone the discussion to a new meeting, which shall be held without need for a new notice, within the three following days, at the place, date and time indicated by the order to be issued in the same act in which the postponement is agreed.

The agreement reached shall be signed in the record at the same meeting at which it is concluded, under penalty of nullity, the necessary time being enabled on its own initiative, and it shall be considered as a mere proposal while it has not been approved by the judge.

Upon the lapse of fifteen days without a challenge having been filed, or once such challenge has been declared without merit, as applicable, the judge shall grant approval to the agreement, and no appeal shall lie against this decision, except those filed by the creditors who timely opposed the agreement.

Within the fifteen-day period referred to in the preceding article, the creditors and the review commission may oppose approval of the agreement on any of the following grounds:

1.Defect in the formalities prescribed for the calling, holding and deliberation of the meeting.

2.Collusion by the debtor with any creditor among those attending the meeting, to vote in favor of the agreement.

3.Lack of legal capacity, lack of personality or lack of representative authority in any of those who concurred with their vote to form the majority.

4.Fraudulent exaggeration of claims to constitute the interest that those adopting the decision must have.

Once the opposition has been formalized, the judge shall conduct it through the procedure of incidents, with a hearing of the debtor and of the representatives of the creditors.

If the party proposing the agreement is a bank or institution of a similar nature and the opponent is the superintendent of banks, even where the ground invoked is not included in the cases listed in the preceding article, the judge shall decide it, taking into consideration the legal and public-interest basis on which it is based.

In any case, the judge's decision shall be appealable, but only by the opponent and the persons who were heard at the hearing.

Once the decision approving the agreement has passed into the authority of res judicata, it binds the debtor and all creditors, except mortgage and pledge creditors who abstained from voting.

If the agreement has not been accepted and judicially approved, the debtor shall be declared insolvent and necessary insolvency proceedings or bankruptcy shall proceed, as applicable.

While the agreement has not been approved, no operations other than current operations may be carried out, in such a manner that the assets are not diminished nor the liabilities increased. Nor may new obligations be recognized nor pending ones be guaranteed. Acts and contracts executed in contravention of this provision shall be void and shall be presumed fraudulent.

Any private act or agreement entered into by the debtor with its partners, or with one or more creditors, that in any way modifies the terms of the agreement or grants them privileges or concessions not provided for by law, shall be void and of no effect.

The agreement may be annulled for concealment in the assets or exaggeration in the liabilities, discovered after the approving decision.

The annulment of the agreement for intent or fraud only prejudices the debtor, his co-obligors, whether joint or jointly and severally, and the creditors favored by the fraud, unless they prove that they had no knowledge thereof. Acts performed pursuant to the agreement before the nullity claim was filed shall be final with respect to creditors in good faith.

In the nullity trial, the body of creditors shall be represented by the two creditors who formed part of the Reviewing Commission, who shall have the character of trustees and all the powers of judicial defenders. If for any reason they are disqualified, the judge shall decide which of the creditors shall have judicial representation.

The nullity action shall prescribe within a term of one year running from the day of approval of the agreement.

The appointed depositary shall cease in his office upon judicial approval of the agreement and shall render accounts of his administration to the Review Commission, as many times as may be requested of him, while they have not been judicially approved for him.

The depositary shall enjoy the remuneration fixed for him by the General Meeting of creditors, not less than three nor exceeding eight quetzales daily according to the importance of the business and the time and work it requires.

Necessary creditors' proceedings against a debtor who has suspended current payment of his obligations lie in the following cases:

1º.When the prior agreement proposed by the debtor has been rejected by the creditors or judicially disapproved.

2º.When there are three or more pending enforcement proceedings against the same debtor and there is not sufficient and free property to cover the amounts claimed.

In the two cases provided for, any of the creditors may request the proceedings against the debtor and the judge shall declare it without prior notification.

The order in which the state of necessary insolvency proceedings is declared shall contain the provisions governing voluntary insolvency proceedings, with the following modifications and additions:

1º.Order to seize the property of the debtor not legally excluded from attachment, its accounting records, documents and business correspondence.

2º.Appointment of a custodian who, with the intervention of the Review Commission, shall receive by inventory the property of the debtor, and the latter may attend the proceeding.

3º.Order to request by official letter the corresponding offices to forward to the tribunal the communications addressed to the insolvent party.

4º.Order of travel restriction against the debtor, warning him of physical detention if he violates or attempts to violate the travel restriction.

5º.Prohibition on delivering property and making payments to the insolvent party and order to persons holding property of the latter or owing sums to him to place them at the disposal of the Trial Court within the third day, under penalty of being considered concealers and accomplices of the debtor and of the payments and deliveries they make being declared void.

6º.Setting of day, time and place for the creditors to hold a General Meeting, summoning them in the manner provided for voluntary creditors’ insolvency proceedings.

From the moment the Tribunal declares the state of necessary insolvency of a person, all credits and obligations owed by such person shall be deemed due and interest in favor of the creditors shall cease to accrue.

The insolvent party shall submit to the tribunal, within the term of five days, the documents stated in Article 350, and if he fails to do so he shall be punished with eight days of imprisonment, except for proven impediment.

If the debtor fails to comply, the Reviewing Commission shall prepare the general balance sheet and draw up the list of creditors, further reporting, in any event, on the points indicated in Article 352 and on the classification of the insolvency.

While the definitive situation of the insolvency proceeding is being resolved, current operations in the businesses of the insolvent party may continue, if the Review Commission deems it advisable, which shall communicate it to the Trial Court, stating the reasons for its decision so that, in view of the circumstances, it may authorize what is appropriate.

The same commission may use the services of the debtor in the administration of his property, while the Board of creditors decides.

The creditors are empowered to take, before the General Meeting, the steps applicable in voluntary insolvency proceedings.

Once the general meeting of creditors has been constituted, it shall be informed of all that has been done and of the report of the reviewing commission. The points for resolution proposed by the commission shall be put to discussion, proceeding in all respects as in the case of voluntary insolvency proceedings.

If no agreement is reached between the debtor and their creditors, the judge, within the term of twenty-four hours, shall declare the state of bankruptcy and shall order the bankrupt to be placed in detention at the disposal of the Trial Court for Criminal Matters having jurisdiction. Detention shall not proceed if the review commission classified the insolvency as fortuitous or blameless. If the debtor fails to appear, the meeting shall decide without hearing him.

In all matters not contrary to the provisions of this chapter, the rules governing voluntary creditors' proceedings shall be applicable.

In cases in which the prior agreement is not approved, nor a settlement is reached in the necessary insolvency proceeding between the debtor and their creditors with respect to the administration and realization of the property and the payment of the liabilities, the declaration of bankruptcy shall proceed. Bankruptcy may also be declared, at the request of one or more creditors, in the cases stated in Article 371.

The order in which bankruptcy is declared shall contain the fixing of the time of cessation of payments, with the quality of for now, without prejudice to third party, all the provisions established for the case of necessary insolvency proceedings also being observed, if they have not been taken before; a detention order against the bankrupt, the pertinent matters being certified to the competent Criminal Branch Trial Court; and the appointment of provisional trustee and provisional depositary. The General Meeting, at its first meeting, shall ratify the appointments for those cases or designate other persons.

In addition, the judge shall appoint two experts for the appraisal of the property.

The trustee represents the body of creditors, judicially and extrajudicially.

He shall cause the edicts to be published, see to compliance with what is ordered in the order declaring the bankruptcy, see to the notifications being made, and shall take all steps conducive to the proceedings being conducted with the greatest possible promptness.

From the declaration of bankruptcy, if a reviewing commission had previously been appointed, it shall cease in its functions, which shall fall to the trustee, in the state in which they are found, and he shall carry them out in their entirety.

Trustees may avail themselves of attorneys, notaries and accountants, as well as confer special mandates for such steps as must be taken outside the place of the trial, reporting the same to the judge.

The occupation of property and its delivery to the depositary shall be carried out with the intervention of the trustee and in the presence of a notary and the two expert appraisers. If part of the property consists of money, jewelry, securities or shares, they shall be deposited by the trustee and the depositary in one of the national banks, or in their branches.

Where the insolvency proceedings or bankruptcy have not been declared at the request of the debtor, the debtor may file opposition within the three days following the day on which the declaration was notified to him.

The opposition shall be substantiated as an incidental matter between the opponent and the trustee.

The execution of the measures for the occupation of property, accounting records, documents and correspondence shall continue, notwithstanding the opposition.

Once the inventory and the appraisal have been completed, the notary shall present them to the judge, who shall give a hearing to the interested parties, for a common term of eight days, so that they may challenge them.

After this term has elapsed, the judge shall approve them if there has been no opposition, and otherwise, the opposition shall be processed in the form of an incident.

Once the inventory and the appraisal have been approved, the trustee shall request authorization to realize the property, which shall be carried out at public auction or in the manner determined by the judge in urgent cases.

Trustees, depositaries, experts and members of the Tribunal where the concurso or bankruptcy is pending are prohibited from acquiring property of the debtor by onerous or gratuitous title, under penalty of returning what was acquired and losing the purchase price.

The proceeds of the sales shall be deposited in one of the national banks or in their branches, no later than the next business day. Current administration expenses and any others shall be made with judicial authorization. The Meeting of creditors shall decide regarding the former.

The depositary, within the first five days of each month, shall submit to the Trial Court a report on its administration comprising details of sales, the amount of income and expenses and the status of the unsold property. The judge shall grant a hearing to the trustee in an incidental proceeding.

At the request of the trustee and the depositary, the judge shall order such rectifications of the appraisal as may be necessary; and shall authorize a reduction of not more than ten percent each week to expedite the liquidation. Such reductions shall be made known by means of press publications.

All sales shall be made strictly for cash, unless the judge authorizes another form of payment, given the circumstances.

If the Board of creditors, in view of the report submitted to it by the review commission or the trustee, as the case may be, requests that the bankruptcy be declared fraudulent or culpable, or if the judge so deems by virtue of what appears from the record, the judge shall certify what is pertinent so that the competent judge opens the criminal proceedings.

When the bankruptcy is classified as fortuitous, the judge shall immediately notify the judge hearing the criminal proceedings of it, so that the latter sets the bankrupt at liberty, and the decision containing such declaration shall be published in the Official Gazette.

The trustee, within thirty days after the first Meeting is held, shall present to the Tribunal a report embracing a succinct account of the incidents and administration of the insolvency proceeding, the verification and ranking of claims, the summary of the operations carried out by the depositary and the existing net proceeds.

The judge shall order a new general meeting of creditors to be convened, in which the same rules as in the first shall govern, an account shall be given therein of the trustee's report, and if it is approved, it shall serve as the basis for payments.

If any of the creditors objects to the trustee's conclusions, the objection shall be processed and decided in the form of an incidental proceeding.

The decisions of the Meeting shall be published in the Official Gazette and in another newspaper of widest circulation. The decisions bind unknown creditors and those who did not attend the Meeting, who may no longer challenge them.

The classification and ranking of credits, except as provided in other laws, shall follow the following order:

1st. Claims for present maintenance and for personal work.

2nd. Claims for expenses of last illness and funeral, will, inventory and succession proceedings.

3rd. Claims established in a public deed, according to the order of their dates.

4th. Common claims, which comprise all those not included in the preceding numerals.

As for mortgage and pledge credits, once paid, if there is any surplus, it shall be delivered to the depositary of the bankruptcy.

Once the ranking of credits has been accepted by the General Meeting or the orders resolving any challenges made have become final, the trustee shall prepare the liquidation of the insolvency proceedings, establishing the amount corresponding to each creditor in the resulting balance, after deduction of legal expenses.

The costs of the bankruptcy shall be paid with absolute preference.

The composition and bankruptcy proceedings attract all pending claims against the debtor and shall cause to cease the enforcement proceedings being pursued against the latter, except those based on mortgage or pledge credits.

It also attracts all claims that the debtor has initiated, or that are initiated subsequently.

If the property has not been realized in whole or in part before the ranking of claims, for lack of bidders, the trustee shall formulate a project for distribution of such property, at two-thirds of its appraised value, to award it individually or jointly to the creditors. The judge shall give them a hearing for six common days, and taking into account the reasons they state and what the majority of them expresses, shall resolve by approving, modifying or rejecting the trustee's proposal.

When properties that do not admit convenient division are involved and, owing to circumstances to be assessed by the judge, it is not possible to sell them at a good price, the creditors to be paid with such properties shall be given co-ownership rights in the proportion corresponding according to their respective claims. The trustee, in such cases, shall propose the bases for the organization of a company, in accordance with which the property or properties that could not be divided are to be henceforth operated, if the case so warrants.

The same procedure shall be followed when the public interest opposes the liquidation and division of the properties forming a company subject to bankruptcy proceedings.

The fees of the trustees, depositaries, attorneys, notaries, accountants and legal agents shall be determined in accordance with the respective fee schedule. In any event, the total of such fees, considered jointly, shall not exceed twelve percent of the assets of the bankruptcy, the judge to make the corresponding adjustments in each liquidation. The fees of the trustees shall be fixed in accordance with what is prescribed in the fee schedule for depositaries.

The judge shall determine the distribution in view of the time spent and the work of each one, and the fees shall be charged to the expenses of the proceedings.

In bankruptcy proceedings, the following parts of the record shall be kept separately:

The first shall comprise everything relating to the declaration of insolvency, appointment and removal of trustees and depositaries, and the agreement between the creditors and the debtor that terminates the procedure. The second, the measures of seizure, deposit and realization of the property and everything concerning administration, up to liquidation and rendering of accounts.

The third, the examination, verification, ranking and payment of the various claims.

The person who, as a consequence of their state of bankruptcy, shall have been deprived of their rights and disqualified from exercising certain functions, recovers their former legal situation through rehabilitation.

The rehabilitation of the bankrupt shall proceed in the following cases:

1º.If he has paid his creditors in full.

2º.When all or part of his property has been accepted from him in payment.

3º.When the agreement entered into with his creditors becomes final.

4º.When the bankruptcy has been declared non-culpable.

5º.After the penalty to which he may have been sentenced for culpable or fraudulent bankruptcy has been served.

The claim for rehabilitation shall be filed before the judge who heard the bankruptcy, shall be substantiated and decided as an incidental matter with a hearing of the trustee and, in his absence, due to incapacity, death or absence from the place of the proceedings, with the Public Prosecutor's Office.

Once the rehabilitation of the bankrupt has been declared, the judge shall order its publication in the Official Gazette.