[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN PORTUGAL] 66
c) claims for fines and other monetary penalties for crimes or administrative offences; d) tax clams. II. 5. EFFECTS ON CREDITORS Insolvency proceedings are dynamic and, as a result, there is a lot of information that is constantly being analyzed and put forward to all parties involved – the creditors’ right to be provided with a report prepared by the Insolvency Administrator should be noted. This report will be presented at the creditors’ general meeting, which will focus on discussing and deciding whether to close or maintain the activity of the establishments comprising the insolvency estate and can empower the Insolvency Administrator to prepare an insolvency plan and determine the suspension of liquidation of the insolvency estate. To a certain extent, CIRE is flexible in allowing creditors to opt for the restructuring and maintenance of the company. If the creditors do not approve an insolvency plan or request the Insolvency Administrator to prepare a plan through which the company is to be maintained and the creditors paid, then the proceeding follows in the view of liquidation and the assets of the insolvency estate will be sold in this framework. One of the keystones of CIRE is that creditors must receive equal treatment. There are few exceptions to this rule and those permitted by law abide by the rule that “ordinary credits” are considered equal. On this basis, a distinction is made between guaranteed, privileged, ordinary and subordinated credits: • Guaranteed credits are those secured by a guarantee in rem. They are paid out of the proceeds of the sale of the secured asset once sale expenses and any amount allocated to credits over the insolvency estate are deducted. If the secured assets are insufficient to pay all debts owed to guaranteed creditors, any
remaining debt is included in the common credits. • Privileged credits are those benefiting from general creditor’s privilege (e.g., credits arising from an employment contract) over assets comprised in the insolvent estate. Due to their nature, these credits are paid in a pro rata basis with the proceeds of the unsecured assets and according to its inner ranking. In fact, there are several types of privileged creditors that are ranked differently. As a novelty introduced by Law no. 9/2022, of 11 January, the compensatory credits resulting from the termination of the employment contract by the administrator after the declaration of insolvency of the debtor are qualified as automatic insolvency claims. • Common creditors can only be paid after creditors who rank in priority to them are paid in full. They are paid in a pro rata basis if the proceeds of the insolvency estate are insufficient to fully satisfy the debt. • Subordinated creditors rank below common creditors. Redefined by Law No. 9/2022 of 11 January as the credits held by persons especially related with the debtor, provided that the special relationship existed already at the time of the credit was born (and not acquired), and by those to whom they may have been assigned in the two years prior to the beginning of the insolvency proceedings. • In addition, there is another special and prioritized category, known as credits against the insolvency estate, which generally arise after the declaration of insolvency (e.g., court fees, the costs and expenses of administration, and claims resulting from obligations incurred under contracts entered by the Insolvency Administrator after the judgment opening insolvency proceeding or that the administrator chooses to perform). These credits are not subject to ranking or acknowledgement and, in
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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