do business in the Dominican Republic - Pellerano & Herrera

DOING BUSINESS INTHE DOMINICAN REPUBLICbecome largely obsolete, today there are very few companies that make use ofthem to face insolvency situations.Overview of ProcedureThe statutory provisions consider to be bankrupt any business establishment thathas ceased meeting its obligations. Bankruptcy may only be declared in relationto “tradesmen”, that is, to companies or persons that carry out usually commercialactivities.The bankruptcy petition may be filed by the debtor, one or more of its creditors,and may also be commenced ex officio by the Court, provided the conciliationprocedure set forth in Law 4582 of 1956 has been followed, which aims at reachinga payment agreement between the debtor and its creditors and thus preventbankruptcy.The bankruptcy judgment has the following effects:To relieve the debtor from the management of his property,To make all debts due,To make interest on unsecured debts stop accruing,To grant automatic stay of individual procedures undertaken by creditors,and;To make void certain acts and payments of the debtor made up to ten daybefore the date of insolvency.The bankruptcy procedure has the purpose to liquidate the assets of the debtorfor the repayment of creditors, and comprises the following stages:Appointment of bankruptcy judge and trustee.Verification of claims.Trying to reach a payment agreement between debtor and creditors, andIn the absence of agreement, liquidation and distribution of assets amongcreditors.When insolvency has been the result of negligence or fraud, the debtor may becondemned for simple or fraudulent bankruptcy (“bancarrota”). Simple bankruptcyis an offence subject to prison of up to one year, while fraudulent bankruptcyis a crime subject to prison of up to five years.Regime of PrioritiesPursuant to Article 565 of the Commercial Code, the payment of creditors mustbe made according to the following order of priority:1. Judicial costs of bankruptcy procedure.2. Alimony payments assigned to debtor.3. Privileged creditors in the following order: (i) employees, (ii) the State, (iii)legal fees, and (iv) funerary expenses.4. Secured creditors (beneficiaries of mortgages and liens, following the date ofregistration of their security interest).5. Unsecured creditors, in proportion to their claims.92