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What next after having been declared bankrupt?
When a company or business in financial difficulty is no longer able to pay outstanding claims, it is declared bankrupt by the court. Either the company itself can file for bankruptcy or its creditors can file a petition for bankruptcy instead. The court seizes the company’s assets and appoints a bankruptcy trustee.
Who or what is declared bankrupt?
Who or what is declared bankrupt in the event of bankruptcy? This depends on the legal form of a company. If a company is a private or public limited company, the company will go bankrupt, not its director(s). An entrepreneur with a sole proprietorship is personally declared bankrupt. In the event of bankruptcy of a partnership or general partnership, both the company and all partners are declared bankrupt. The partners (associates) each remain liable for their part of the debts. Has a limited partnership been declared bankrupt? In that case, the court declares the limited partnership and all managing partners bankrupt. They remain responsible for the debts of the bankrupt company. In the case of a limited partnership, the silent partners do not by definition go bankrupt.
Company bankrupt: do I still have to pay?
In the event of bankruptcy of a sole proprietorship, the entrepreneur himself is declared bankrupt (privately) in addition to the company. This means that an entrepreneur remains responsible for outstanding debts. Starting a new company will therefore be a lot more difficult in this situation. Debts remain. When starting a new business, old creditors can submit a claim for outstanding debts to the entrepreneur once the bankruptcy has been completed without reaching a composition with creditors. Bankruptcy of a legal form that has legal personality, such as a private limited company, has no direct (financial) consequences for directors, provided there is no directors’ and officers’ liability. If an investigation by the bankruptcy trustee shows that the bankruptcy is the result of mismanagement, a director of a private limited company can be held liable for the negative balance. Legal forms with legal personality are:
- private limited company
- limited liability company
- association
- cooperative
- foundation
Bankruptcy of company and bankruptcy of private limited company
In the event of a bankruptcy of a company, only the business assets fall within the bankruptcy of the private company. A director is not liable with his private assets. A bankruptcy trustee appointed by the court liquidates the assets and aims to settle creditors’ claims. A bankruptcy trustee does this on the basis of a ranking of creditors. By securing the bankrupt estate, the sale of business assets and the collection of possible outstanding invoices, a bankruptcy trustee aims to collect funds to pay the bankruptcy debts. After a composition agreement or a composition with creditors is accepted or after paying all debts, the bankruptcy is completed and the company declared bankrupt. This finalizes the bankruptcy proceedings and the bankruptcy discharge.
What next after having been declared bankrupt?
A sole proprietorship being declared bankrupt results in personal bankruptcy. The entrepreneur loses control over all his funds and possessions, both his business and private assets. However, the entrepreneur remains responsible for his own administrative records. The bankruptcy trustee must remain permanently informed about this. The bankruptcy trustee aims to pay outstanding bankruptcy debts by selling both company and private assets, such as a house or car. An entrepreneur can appeal against the liquidation order or opt for debt restructuring.
Preventing bankruptcy debts
Bankruptcy always has far-reaching consequences. Is your company in financial difficulty or are you experiencing setbacks? Do not wait too long – intervene in time to prevent it getting worse and being declared bankrupt. The bankruptcy law specialists at Fruytier Lawyers in Business will be happy to assist you in preventing bankruptcy and bankruptcy debts. Based on your business situation, we will map out the possibilities for a reorganization, restructuring, a restart or a pre-pack. We also advise you thoroughly, specifically and above all personally in the event of a business sale or company takeover.
