Trade and Commercial Law Assessment - Honduras - Economic ...

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS debtor has responsibility for negligent or criminal conduct leading to his or her failure to pay the debts. 95 Applicable to both natural and juridical persons and to all forms of insolvency involving both consumers and merchants, 96 the procedure simply is not used in current Honduran practice. In the estimation of Honduran commercial lawyers, no current sitting Honduran judge has experience in or knowledge of how to go about presiding effectively over any of the various bankruptcy proceedings. 2. Civil Code—Concurso or Concurrencia Promulgated in 1906, like the Code of Procedures, the Honduran Civil Code derives from the French Civil Code of 1804 as adapted in Chile, 97 where it became effective in 1855. Its venerable insolvency provisions can affect only private citizens who are not merchants. 98 The Civil Code denominates these consumer bankruptcies concursos or concurrencias. 99 The consumer bankruptcy procedures provided in the Civil Code consist principally of the debtor’s turning over all non-exempt 100 assets in an act known as the cesión de bienes, to create a bankruptcy estate that will be liquidated to pay claims. 101 Once the turnover has occurred, the proceedings consist of three separate ramos, or different aspects of the proceeding: (a) overall administration of the concurso, 102 (b) establishment of priorities among various creditors’ claims, 103 and (c) determination of the debtor’s possible responsibility for his or her insolvency. 104 The successful conclusion of the concurrencia does not discharge the debtor from responsibility for any debts not paid in full, and creditors with deficiency claims may pursue assets acquired by the debtor subsequent to the concurso. 105 Creditors may initiate the concurrencia, 106 and might have more incentive than the debtor to do so, since the court and its appointed trustee should then take charge of marshaling all of the debtor’s non-exempt assets and liquidating them to generate funds to pay off all claims. Apparently, however, creditors favor more efficient means of foreclosure provided in the law (such as a fideicomiso de garantía, which can be applied by the trustee without judicial process). 95 CdProc, Arts. 535(5), 551, 565, 608-611. 96 CdProc, Art. 645. 97 Under the stewardship of Andrés Bello, jurist, statesman, and man of letters. 98 Merchants’ legal affairs are consigned to the Commercial Code, which states in Article 1, “Merchants, acts of commerce and all commercial things shall be regulated by the dispositions of this Code and other commercial laws.” 99 CC, Libro IV (De las Obligaciones y Contratos), Título XV (De la Concurrencia y Prelación de Créditos), Arts. 2244-2262. The terms concurso and concurrencia may be translated as a gathering or competition, in this case among creditors in pursuit of debtor’s assets. 100 See CC, Art. 1444, for a list of personal assets exempt from creditors’ execution for payment of debts. 101 See CC, Arts. 1440-1450. The bankruptcy estate is defined in Civil Code Article 525 as “all the assets of [the debtor] and all his obligations, even those not due and owing, except those goods and obligations which the law expressly exempts.” 102 CdProc, Arts. 564, 1; 566-586. 103 CdProc, Arts. 564, 2; 587-607. 104 CdProc, Arts. 565, 608-611. 105 CC, Art. 2253. 106 CC, Art. 524, 2. VIII-9
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS The debtor may avoid the formal concurso proceeding and its implications by securing his or her creditors’ agreement to a convenio, or plan, submitted in satisfaction of the creditors’ claims. 107 Essentially, the debtor must convince the creditors that they will collect more against their claims by not taking the debtor’s non-exempt assets, but instead allowing the debtor to retain the assets and pay the debts over time. There is incentive for the debtor: upon successful compliance with the terms of an approved convenio, a debtor secures a discharge of all debts treated therein. Failing such a plan, or failing the debtor’s compliance after the plan’s acceptance by the creditors, the debtor’s non-exempt assets are liquidated for the benefit of the creditors in a straight concurrencia proceeding administered by the court and its appointed síndico, or trustee in bankruptcy, who is responsible for marshaling and liquidating the bankruptcy estate. 108 3. Code of Commerce— Bankruptcy (“Quiebra”) Effective since 1950, the Code of Commerce instituted new and advanced—for their time— bankruptcy rules, exclusively for merchants, consisting of two alternatives that track the alternatives under the Civil Code: (a) straight bankruptcy and liquidation of assets (quiebra) 109 and (b) suspension of payments in favor a debtor’s plan for payment accepted by the creditors (suspensión de pagos). 110 As with the concurrencia under the Civil Code, completion of the commercial bankruptcy, or quiebra, process does not discharge the debtor from his or her responsibility to any creditors who received less than full payment. They may continue to pursue the debtor until their claim is fully satisfied. 111 The Commercial Code’s treatment is more detailed than that of the Civil Code, however. The Commercial Code does not abandon the basic presumption of the Civil Code: that the debtor is at fault and that bankruptcy should provide procedures that aid creditors in pursuing the debtor who refuses to pay his or her debts. 112 A merchant might voluntarily declare bankruptcy, 113 but it is also possible for creditors, 114 attorneys general (ministerio público), 115 and even a court that finds proper grounds while presiding over another civil or criminal proceeding 116 to initiate an involuntary quiebra. 117 107 CC, Art. 2250. 108 See CdProc, Arts. 538(1), 539-542, 544(2), 554-562, 566, 568, 575 and 579. 109 CdCom, Libro V (Quiebra y Suspensión de Pagos), Títulos I-V, Arts. 1318-1640. 110 CdCom, Libro V, Título VI, Arts. 1641-1674. This section is shorter because in a suspension of payments the debtor must submit a plan for the creditors’ approval, Article 1644, triggering a special proceeding to test whether the creditors will accept the plan in place of a straight bankruptcy and liquidation. 111 CdCom, Art. 1543. 112 The Commercial Code begins its provisions on quiebra with the threat, “The merchant who ceases to pay his obligations may be declared in a state of bankruptcy.” CdCom, Art. 1318. 113 CdCom, Art. 1322. 114 Id. 115 Id. 116 CdCom, Art. 1326. 117 A summary hearing, held upon 5 days’ notice, will determine whether the merchant is truly bankrupt, since creditors might institute the proceeding even when the debtor is not truly insolvent. CdCom, Art. 1327. The court will issue its decision on whether the debtor is in fact and in law bankrupt “as part of the hearing, according to the reasonable presumptions that the judge acquires from the evidence presented.” VIII-10
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