Insufficient assets
Situation in which the assets realized are insufficient to pay the admitted claims, which results in the closure of the judicial liquidation and may render the director liable.
Definition
Asset deficiency refers to the situation in which the assets realised in a judicial liquidation are insufficient to pay the admitted claims. The liquidator finds that the available assets, once the costs of the proceedings and the preferential claims have been paid, do not make it possible to settle the other creditors.
This finding gives rise to a judgment closing the proceedings for asset deficiency, which brings the proceedings to an end. The judgment is published in the BODACC: creditors then know that the proceedings are ending without payment, and in principle they regain the right to pursue individual enforcement action, except where the debtor is subject to sanction proceedings.
This is the most frequent closure decision in our data, which speaks volumes about the subject: in the majority of liquidations, the assets do not cover the admitted liabilities. The rest therefore plays out elsewhere, in the liability of the director and in the wage guarantee, rather than in the distribution.
What the asset shortfall changes for each party
For the director
This is the point at which the question of their liability arises in the most direct way. An action to make good the asset shortfall may be brought where a management fault contributed to the lack of assets, and personal bankruptcy or a ban on managing a business may be imposed in the cases provided for by the legislation.
For the creditors
They will not be paid the uncovered portion, and interest and late-payment penalties are not admitted for the period after the opening. The closing judgment restores to them, subject to conditions, the possibility of acting individually, with time limits to be monitored.
For the employees
Wage claims are covered by the wage guarantee, up to a ceiling set by decree. The portion exceeding that ceiling follows the fate of the other unsecured claims and remains in principle unpaid.
How BODACC publishes closure for insufficient assets
The judgment closing proceedings for insufficient assets is published in BODACC, like most decisions that terminate a proceeding. The publication indicates that the liquidation is ending and allows a third party to understand why a company disappears from the register of announcements.
Our platform includes these judgments, which makes it possible to follow the end of a proceeding's life: conversion into judicial liquidation, sales, statement of claims, then closure for insufficient assets or for extinguishment of liabilities. The two types of closure do not have the same meaning, and the distinction can be read in the published nature.
Frequently asked questions
Are debts discharged by the closure?
The proceedings come to an end and unpaid creditors in principle recover their right to pursue claims, subject to the limits laid down by the legislation. The discharge of the debts of an individual debtor requires a favourable decision, and it does not preclude an action against the director where the conditions are met.
What is the difference from a closure for extinction of liabilities?
A closure for extinction of liabilities presupposes that the admitted claims have been paid: it is the normal and rare end of a liquidation. A closure for insufficiency of assets establishes the opposite, the assets are lacking, and this is the most common case.
Who can bring an action against the director?
The liquidator, where a management fault contributed to the lack of assets, and the public prosecutor. Creditors do not act in the liquidator's place, but the decision handed down is published and becomes a strong signal for all the company's partners.