Law No. 12 of May 19, 2016

On January 2, 2017, based on Law No. 12 On May 19, 2016, Panama adopted the Regime Bankruptcy Insolvency Processes. This Law is applicable to natural persons, merchants and companies commercial entities registered or not registered in the Public Registry of Panama and regulates both the bankruptcy process of reorganization, such as the bankruptcy liquidation process, also covering provisions on Insolvency cross-border.

Within the application of the law, the autonomous, semi-autonomous, decentralized entities, companies in which the State is the owner of more than 51% of shares or assets, banks, companies insurance, entities regulated by the Superintendency of the Stock Market and any other that is subject to a special liquidation or intervention regime.

To apply to the request for Bankruptcy Processes Insolvency the Debtor must be in a situation of cessation of payment, imminent insolvency or foreseeable lack of liquidity.

Both the bankruptcy reorganization process and the bankruptcy liquidation process, are aimed at protect the rights of Creditors, the protection of the credit and the recovery and preservation of the company as a unit of economic exploitation and source employment generator. This Law is intended to provide solution not only to those bankrupt companies imminent, but also to those that, even when they operate viably, they are in transitory crises so must be subject to reorganization processes financial and/or operational.


The Bankruptcy Reorganization Process has the intention to provide the Debtor with the opportunity to overcome their financial difficulties and thus be able to continue the operational and commercial functioning of your company.

Sometimes, this Bankruptcy Reorganization Process can lead to a reduction in execution capacity of the company and in case of not being able to solve the difficulties presented, ultimately it can conclude in a Judicial Liquidation process.

This Bankruptcy Reorganization Process can be requested by the Debtor (or his Representative), the Board General of Creditors in a liquidation process now initiated and the Representative of an insolvency process foreigner, as long as he complies with the requirements established in the Law.

So that authorized interested parties can begin the Bankruptcy Reorganization Process it is important that the Debtor is in a situation of imminent insolvency or has a foreseeable lack of liquidity.

Once the reorganization request has been submitted, it is your responsibility the Judge to examine the request and evaluate whether it complies with what is required by Law and within five (5) days following, he must decide whether to admit the request, giving thus initiate the Bankruptcy Reorganization Process, or if in his defect, he rejects it.

After the Bankruptcy Process request has been approved Reorganization the Judge, is available, among other things, to issue an Order by which the Process is opened Bankruptcy Reorganization, designating a bankruptcy administrator who is ordered to file the qualification and graduation of credits, put to available to interested parties the project reorganization presented by the Debtor, as well as to publish in mass media during five (5) consecutive days the Order that initiates the Bankruptcy Reorganization Process, calling everyone The bankruptcy creditors appear within the Bankruptcy Reorganization Process.

When the Bankruptcy Reorganization Process is open, a term of financial protection is declared favor of the Debtor that runs from the date of the Order of Opening of Process until confirmation of the Agreement Reorganization.


a) No executive process, execution of any kind, restitution of property or property may be initiated, launch against the debtor, except as provided in this Law. For this purpose, the prescription terms.

b) All contracts signed by the Debtor will maintain their validity and payment conditions. In Consequently, they cannot be terminated unilaterally early.

c) Compliance with Contracts signed by the Debtor may not be required in advance or made effective the contracted guarantees, invoking as cause the initiation of a bankruptcy process reorganization. The suspension will last until the Creditors' Meeting approves the Agreement of Reorganization, in which conditions may be established regarding the applicable interest rate or collection, total or partial, in each case.

d) The debtor may not be incapacitated or disqualified from contracting with state entities for submitting to the bankruptcy reorganization process, nor can this situation be invoked as grounds for resolution administrative of the Contract.

e) The Reorganization Agreement, once approved, binds all creditors, including those who do not have attended the General Meeting to approve it.


The Bankruptcy Liquidation Process consists of the method by which the Debtor makes available of the competent Authority, the assets that your company available, with the intention of ending the activity commercial of the company transforming said assets into liquid money through direct sale or auction private.

Once the assets are liquidated, the proceeds of this will be distributed through Award Agreement celebrated between the Creditors or, failing that, will be adjudicated by judicial order.

The Bankruptcy Liquidation Process can be carried out in two ways, voluntarily, by the Debtor or his Representative and necessarily either by a Creditor or the Board of Creditors and also by the Representative of a foreign insolvency process.

Mortgage or pledge creditors may not request the declaration of liquidation unless you prove that the encumbered assets are or have turned out to be insufficient to pay your credit.

The Bankruptcy Liquidation Process proceeds when the Debtor cessation of payment of an obligation that appears in executive title, resulting from commercial acts, has carried out against him three (3) or more executions, always who has not presented sufficient assets for payment total and when the Debtor hides, abandons his businesses or close your commercial establishment, without having named order with sufficient powers and means to fulfill his overdue obligations and finally any other budget provided by Law.

The request for the Bankruptcy Liquidation Process presented by the Debtor, will be examined by the Competent Court and whether it meets the requirements for initiate the voluntary bankruptcy process, an Order will be issued declaring the liquidation status within five days.

The liquidation demand presented by a Creditor will indicate the cause invoked and justifying facts, if the judge estimates that the claim meets the budgets and required documents, he will admit it within a period of five (5) days and will notify the debtor, for a period of twenty (20) days, so that you can appear in the process and with the response submit the documentation required by Law.

The Bankruptcy Liquidation Process is very similar to the filing for bankruptcy of a business with the possibility of that can be suspended and after this start a Bankruptcy Reorganization Process. So that the process may be suspended, the consent of 30% of the Creditors and the favorable vote of the majority of personal votes and 75% of liabilities.


Some effects of the Opening of the Bankruptcy Liquidation Process on Acts Executed by the Debtor:

a) Nullity of Acts executed after the declaration;

b) The above will not be applicable in the case of a bill of exchange whose payment must be reimbursed by the drawer or the person on behalf of whom this bill was issued;

c) Nullities for the benefit of the mass of Creditors;

d) Nullity of acts and contracts free of charge;

e) Nullity of simulated or fraudulent acts and contracts;

f) Nullity of Judicial Resolutions;

g) Annulment of Acts to the detriment of Creditors;

h) Resolution of unexecuted bilateral contracts;

i) Termination of lease contracts for things or services or any other successive agreement;

j) The declaration of liquidation will not have effects on the Trust Contracts

Some effects of the Opening of the Bankruptcy Liquidation Process regarding the Person of the Debtor when try a company:

a) The legal obligations imposed on the Debtor will be fulfilled by his Legal Representative, in the event that at liquidation is submitted, the company is found without legal representation due to resignation, the resignation registered by declaration of the Judge;

b) The liquidation of a company will in all cases involve the partners personally and solidly obligated, without affect the shareholders personally, as well as the limited partners;

c) An inventory of the social and private assets of each of the partners will be prepared obliged;

d) The liquidation of one or more personally and jointly liable partners will not produce that of the company;

e) The private creditors of the personally and jointly liable partners will not be able to participate in the liquidation of the company, but they will have the right to be paid.

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