Asset tracing and recovery advice

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Asset Tracing & Recovery: the importance of making a previous analysis of the debtor before proceeding judicially

Asset tracing and recovery advice

Asset Tracing & Asset Recovery lawyers

Given our extensive professional experience in the practice of Asset Tracing and Asset Recovery in Spain, we can help you as a creditor of a debtor to ascertain information regarding owned assets and to define the best procedural strategy for you. Contact us and our experienced professionals directly for personalized and specialized advice on Asset Tracing and Asset Recovery. Read on for more information.

The objective behind proceeding judicially in debt recovery is quite simple: to recover the debt incurred. Therefore, it is advisable and highly important to determine the feasibility of recovering an asset or debt and to carry out a previous evaluation of the debtor before proceeding with the judicial claim.

Otherwise, legal proceedings that may be initiated even though the recovery of the asset or debt may be practically impossible, could cause unnecessarily wasteful and expensive costs to the creditor.

The more investigations carried out on the debtor, the easier it will be to design the best possible procedural strategy for the creditor to obtain the highest probability of success.

This previous analysis will additionally serve to prevent recurrent and common problems in debt recovery that are detrimental to the creditor, such as proceeding judicially against companies that have disappeared or closed, or even initiating enforcement proceedings against debtors who have no assets.

Some recommended previous investigations to be carried out

Considering that obtaining “a favourable judgement” will not be useful for the creditor if the debtor has no assets, outlined below are some preliminary checks that can be very helpful for the creditor before proceeding judicially:

1. Checking whether the debtor is in insolvency proceedings

It is very important to note that in case of a judicial debt claim against a company where insolvency proceedings have already been filed, proceedings related to such claims will be suspended or even archived. Therefore, it is worthwhile to make such a check.

If the debtor is in insolvency proceedings, the appropriate procedural strategy to be followed will be to inform the insolvency practitioner of the amount and the type of the claim of the creditor, in order for it to appear accordingly in the insolvency proceedings.

2. Check if the debtor holds shares in a registered company in the Spanish Commercial Register

It is possible to check whether a debtor holds shares in a registered company in the Spanish Commercial Register.

Considering that, according to the Spanish Civil Procedure Act, the shares of a company are seizable and enforceable, it is advisable to make such verifications before proceeding judicially to recover a debt.

3. Check whether the debtor is the owner of a property in the Spanish Land Registry

In addition to the previous investigations, it is also possible to check in the Spanish Land Registry whether the debtor is owner of any property.

Indeed, if the creditor’s claim has been judicially recognised, the seizure and enforcement of such property will be possible at the enforcement stage.

4. Check whether the debtor is owner of a movable property in the Spanish Movable Property Register

Different property rights can be registered in the Spanish Movable Property Register. Among others, ships, aircraft, automobiles and other motor vehicles, industrial machinery and “Rights in Rem” can be registered.

Before proceeding judicially to recover a debt, it is worth checking whether the debtor is the owner of any of these assets, since in case of obtaining favorable judgement, the creditor may request their seizure or even their execution.

5. Check whether the debtor company files its annual accounts to the Spanish Commercial Register

If a company does not comply with its obligation to file its annual accounts with the Spanish Commercial Register, the company is likely to be inoperative, untraceable or even have no assets.

Thus, if the debtor company does not comply with this duty, it will be difficult and unlikely for the creditor to recover its debt, therefore it would not be advisable to proceed judicially.

6. Verify the liability of the debtor company’s administrators

It is also advisable to verify whether the company’s directors are liable before proceeding judicially in debt recovery.

According to the Spanish Capital Companies Act, if the value of a company’s net worth is lower than half of the value of the share capital, directors are obliged to dissolve the company or apply for insolvency proceedings.

If these obligations are not fulfilled, the directors will be liable for all the debts that the company has incurred during the period in which it is in a state of dissolution.

Thus, the creditor may apply to the Court for the company and its directors to be ordered to pay the debts.

As we can see, making a previous analysis of the debtor before proceeding judicially in debt recovery allows determining feasibility, assessing probabilities of success, and avoiding the initiation of legal proceedings in which debt recovery will not be possible.

Contact us for specialized legal advice and personalized guidance towards the best strategy for you as a creditor to adopt in debt recovery.

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