Restructuring

Restructuring: Chile

Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

Castañeda Abogados

Actions prior to a formal proceeding

1. What duties do directors, officers or controlling shareholders of a company owe creditors or other third parties if the company is insolvent or in financial difficulties, or has negative net worth? Is there a standard of care towards third parties? In what circumstances can directors, officers or controlling shareholders be found civilly or criminally liable for continuing to operate a company in financial difficulties? In practice, are such liabilities commonly enforced?

Chile

The directors, shareholders or officials of a company in insolvency must act with great responsibility towards their creditors to attain the true information on their financial situation.

In the case of companies that are regulated by the Commission for the Financial Market, they must inform this entity of any financial problem affecting them.

Directors also have the obligation to inform to stockholders of any financial difficulties of the company.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

2. What actions are available to creditors (secured or unsecured) prior to a formal insolvency proceeding to recover on a defaulted loan or obligation of a debtor? Are there any expedited formal proceedings?

Chile

Before starting insolvency proceedings, all creditors have the possibility of exercising the collection actions arising from their securities. However, once the respective bankruptcy procedure has been initiated, these actions will be suspended because the creditors must attend this process.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

3. Can a creditor that has secured debt foreclose on the collateral or sell collateral in a private sale? If so, what rules exist to ensure the sale or foreclosure generates the maximum amount of sales proceeds possible? Can lenders take possession or control of the underlying collateral? Do insolvency proceedings stay the ability of secured creditors to foreclose on collateral of the debtor? Are there any accelerated procedures available for secured creditors, and if so, under what circumstances can they be used?

Chile

Prior to the start of a bankruptcy proceeding, secured creditors may exercise all the actions that emanate from their securities.

In the case of a judicial reorganisation process, they may only exercise such actions if they do not attend the agreement meeting or express their intention not to vote.

In the liquidation process, the board of creditors will determine the minimum price, and the secured creditor takes preference in the payment of credit.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

4. Can creditors that have equity as collateral take control of a debtor by exercising voting rights attached to pledged shares?

Chile

This option is not possible.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

5. Can secured creditors credit-bid their debt in a sale of a debtor’s assets, outside or within a formal insolvency proceeding? If so, what procedures or limitations apply?

Chile

That will only be possible to the extent that creditors approve such offer.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

6. Are there legal or regulatory concerns that secured creditors should consider in connection with a sale or foreclosure?

Chile

Our legislation is highly demanding and, therefore, there is special regulation for such matters.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

Formal proceedings

7. What types of insolvency proceedings are available in your jurisdiction? Are different insolvency proceedings available for individuals and companies? Is there any distinction made between "preventive" insolvency proceedings and "actual" insolvency proceedings?

Chile

Chilean law considers two types of insolvency proceedings. First, there is a restructuration proceeding, an exclusive option for the debtor, which aims to ensure the continuity of the business by renegotiating its payment structure, either establishing the same terms for all creditors or determining conditions based on the nature of the credit and its utility to the debtor. Second, the law considers the liquidation proceedings as such, which can be requested by the debtor or any creditor, supposedly in this last case one of the instances considered by the law is fulfilled. The insolvency proceeding aims to liquidate the debtor's assets in the most speedy and efficient manner to ensure quick payment of credits and to allow the debtor to start up new initiatives. The law also considers these two options for individuals, with some minor differences in the name of the reorganisation proceeding (calling it renegotiation for individuals). 

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

8. May government-owned entities, states or municipalities file for an insolvency proceeding in your jurisdiction? If so, are there special rules or a separate regime that applies to such entities?

Chile

Pursuant to the Insolvency Law, neither municipalities or states (called regions, an administrative separation without independent administration from the central government) can be subject to an insolvency proceeding as its terms and definitions limit the scope of the law to natural or private legal persons. Despite this, Chilean law gives the central government the possibility of participating in the ownership of legal persons as any other business, corporation or individual, without any change in market conditions or legal framework in which the state-owned entity must operate, including its subjection to insolvency proceedings of any type. 

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

9. On what grounds may or must a debtor be placed into an insolvency proceeding? Who may do this? What are the grounds for a voluntary proceeding? If an involuntary proceeding is filed, must a bond be posted or is there any risk of liability to the creditor or creditors who filed the action?

Chile

In Chile, under the new Insolvency Law in force since 2014, there is no obligation for a company to start an insolvency procedure of any kind. In the case of voluntary proceedings, the company may start a reorganisation or liquidation procedure. In the first case, this option is exclusive of the debtor as both a direct action and as a defence against a liquidation request from a creditor. In both cases, the law considers these options as an exclusive right of the debtor and, as such, subjects to its exercise without any requirement beyond formal ones intended to display the debtor's financial situation. Saying that, it should be noted that courts tend to make more substantial reviews than the mere examination of the information being provided, even to the point of making a valuation of the company's real financial state. In the case of forced insolvency procedures, the only option available to creditors is a request for the debtor's liquidation, which can be made provided the debtor is in one of three situations: the debtor has ceased payment of an obligation on a creditor to register an enforceable title; the debtor has ceased payment of two or more obligations registered in different enforceable titles; or the debtor or its administrator can’t be found, having closed their offices without leaving a representative. To start a forced liquidation procedure a creditor must provide a bond of 100 Unidades de Fomento, a unit of account in Chilean pesos automatically adjusted for inflation, to cover the first expenses of the procedure.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

10. What effect, if any, does a filing have on a subsidiary or affiliate of the debtor? Are there any actions the debtor, the subsidiary or the affiliate can take to limit such effects? Are there any grounds for procedurally and substantively consolidating insolvency proceedings involving related parties? If a debtor organised under the laws of your jurisdiction entered into local insolvency proceedings, could the debtor’s foreign affiliates be included in the local filing?

Chile

In the case of a reorganisation, as the company keeps its administration structure and ownership, there should be any major implications for its subsidiaries or affiliates provided there isn’t a share structure of collaterals. Even though the risk of affecting the operations of subsidiaries or affiliates is minor, the business conglomerate could take measures aiming to arrange the assets of the company in a manner that ensure the continuity of other branches or subsidiaries maintaining at the same time the assets that sustains the company’s projections by a organise corporate restructuration. In the case of a liquidation proceeding, the scene is a little different, as all participation of the debtor in other companies must be consider as assets subject to liquidation to pay creditors. In any case, any insolvency proceeding will always be of a single juridical person, not being allow by the law to hold a proceeding that cluster entities own by the same person or corporation.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

11. What notifications and meetings are required after a debtor has been placed in an insolvency proceeding? Do the insolvency laws recognise bondholders under an indenture? What must they show to prove their ownership interest in the underlying debt?

Chile

The court’s determination that accepts the request must be published in the bankruptcy bulletin, a web page set up for this purpose by the law. At the same time, the first hearing in which the court hears any allegations made against one or more creditors or the conditions in which they were verified is the process to establish every creditor's right to vote. At the same time, the hearing to vote on the debtor proposal by the creditors, or to decide the conditions of liquidation, is fixed as of the publication of the resolution, as the term is set by the law. Once the process has started, creditors can be in one of two positions: their credit was informed by the company or their credit was not informed. In the latter case, creditors can verify their credit in the process by giving enough evidence of the credit’s existence and amount adduced by them, a verification that will be considered by the court as true if no participant challenges it.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

12. How are contingent creditors dealt with? Are inter-company or affiliate claims treated differently from other creditor claims in terms of recovery or voting? If so, has this been challenged and with what result? Are there special rules for certain contracts or debt instruments?

Chile

All contingent credits should be verified conditionally in the proceeding, on the understanding that the verification does not allow them to vote in the process approving the debtor’s proposal. In the case of a liquidation, the fulfilment of a contingent credit may only be requested once the credit becomes enforceable. Inter-company credits have a different treatment depending upon the proceeding. In reorganisations, all intercompany credit payments are postponed until all credits with non-related companies or individuals have been fulfilled. In the case of liquidation proceedings, the inter-company or affiliate claims concur on the same terms as all other creditors in the process.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

13. What effect does the commencement of an insolvency proceeding have on the debtor and its operations? Is there an automatic stay that prevents third parties from acting against the debtor? Can a debtor terminate or reject contracts to which it is a party?

Chile

In insolvency proceedings, the judicial resolution produces an immediate termination of the current administration to the court officer nominated, pending its ratification by the first creditors' meeting, in the presence of the judge on the case. In the case of reorganisation proceedings, the court resolution produces a “financial protection” phase from the resolution to the call for a hearing to pronounce on the debtor's proposal. This protection assures the debtor that no liquidation proceeding will be initiated in the intermediate time, all contracts subscribed to by the debtor will keep their validity and payment conditions and all public records participating in public tenders will remain the same provided the debtor is up to date with its records obligations. In addition, the law expressly states that no contract can be terminated unilaterally invoking as a cause the court’s reorganisation resolution.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

14. In what circumstances could transactions entered into before an insolvency proceeding be challenged? How far does the clawback period extend? Who can bring such challenges and who bears the burden of proof? How frequently are such challenges made and upheld?

Chile

The law considers two situations in which transactions prior to the insolvency proceeding can be challenged. First, any transaction that took place in the year before the insolvency resolution can be challenged and revoked if the operation caused any detriment to creditors. Second, any transaction in the two years prior to the insolvency resolution can be challenged, in which case the challenger will have to prove that the act caused detriment to the creditors and that the third party knew of the bad state of the debtor’s business. This second case, therefore, carries the burden of proving foreign intent. Even though there are recorded cases of these actions, it is not the general rule in insolvency proceedings.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

15. How are secured creditors treated in an insolvency proceeding? How do they protect their collateral, particularly liquid assets? Can they seek remedies? Must their approval be obtained to use or dispose of their collateral? Do liens on receivables, revenues or cash flow continue with respect to such collateral after a debtor’s insolvency filing has been accepted by a court, or are they cut off as of the date of the filing or acceptance? If they are not cut off, may the debtor use that cash collateral and, if so, must it provide any protection to the secured creditors?

Chile

The only secured creditors recognised by law are those who have either a mortgage or securities. Both will allow the creditor to obtain realisation of the product before any other creditors within the liquidation process, with the only exception being debts to employees or to the government for taxes. In the case of reorganisations, the debtor must identify whether its assets are essential to the business and, based on this, secured creditors will have a chance to execute the collateral independently, permissible in all cases in which the collateral has not been classified by the debtor as essential to the continuity of the business. However, when the asset is not essential, the creditor will have the power to execute the collateral separately from the proceeding, and will be paid from the product of the operation.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

16. How are unsecured creditors treated? How are equity holders treated? May an equity holder recover prior to creditors being paid in full?

Chile

All unsecured creditors meet in any insolvency proceeding, with voting rights in the process proportionate to their credit. Equity holders do not participate in the process given that their “credits” consist in their contribution to society, “credit” that can only being demanded at the company's dissolution, which is only verified at the termination of the liquidation if there are credits that could not be paid by the debtor’s assets.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

17. What is the effect of an insolvency proceeding on current and retired employees?

Chile

First, any debt with current or retired employees enjoys a preference against other debts up to a certain amount. In the case of employees who keep their contracts, a reorganisation procedure does not affect them beyond the measures that the debtor itself could adopt to ensure continuity of the business. In the case of liquidation proceedings, the court officer that takes control of the debtor has six days to terminate all labour contracts, notwithstanding the fact that employees needed to maintain the operation of the company while the court officer determines pending income or to avoid any other major damage to the company's property could be rehired.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

18. Do directors or officers of companies in insolvency proceedings suffer any consequences?

Chile

The insolvency law does not consider any special consequence for directors of a company in an insolvency procedure, notwithstanding, that corporate law establishes a sanction in regard to directors of companies in liquidation proceedings, prohibiting them from participating as directors of any other company within a year of the liquidation. Also, it is possible for directors to be subjects of criminal responsibility as regards their administration that led to the company's insolvency.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

19. How do the various types of claims rank in an insolvency proceeding? Do some claims automatically have higher priority? May claimants with lower priority receive consideration under a reorganisation plan even though claimants with higher priority are not paid in full?

Chile

The law establishes the preference of tax and labour claims above all; labour claims are limited to a specified amount. The excess beyond the preferential tax and labour claims is treated as an unsecured credit, in the same way as other unsecured credits. In addition, all secured creditors will have preference in respect of their credits up to the amount needed to realise their collateral, with the excess beyond the realisation of the collateral treated in the same manner as other unsecured credits.

Lastly, the law considers a special credit with a preference over any other in respect of the credit given to the debtor once the court resolution has started the process and is intended to finance the company’s operations in the process.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

20. Are local creditors treated differently from foreign creditors in practice? What laws exist to prevent such disparate treatment? What factors contribute to how effectively those laws are applied?

Chile

There is no difference in the treatment given by the law to local or foreign creditors and in practice they also have the same terms and conditions as local creditors.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

21. What level of creditor support is needed to approve a reorganisation plan? Can secured creditors and other priority claim holders that do not approve a reorganisation proposal be "crammed down"? Are there any substantive criteria that a plan must satisfy? Must hearings take place or documents be distributed?

Chile

A reorganisation procedure is subject to two quorums for approval. First, it requires the approval of 67 per cent of the passive creditors with voting rights. This is all creditors that have verified in the process or that have concurred with the information on their credits provided by the company, and it also requires the approve of two-thirds of the creditors in the hearing regardlesss of how many verified or concur. Secured creditors vote in a different class that groups them under the same quorum requirements. Once the agreement has been approved, it is binding on all creditors regardless of their role in the voting or assistance. 

Even though there is no minimum requirement for the content in an agreement, creditors tend to consider a period without payment of any obligation to allow the company to rebuild its working capital with a back payment term that varies in length and conditions. It is not usual for reorganisation plans to include a condonation of part of their debts.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

22. May creditors trade their claims during the course of a reorganisation? What impact, if any, will it have on voting for a plan?

Chile

The trading of credits during reorganisations proceedings is allowed. The only limitation to which creditors are subject is that the cessation of any credit in the 30 days before the court’s resolution accepting the debtor's request will be excluded from the roster of voting creditors, applying the same prohibition once the proceeding has started. To avoid this, it is usual for creditors to buy others’ credits, which does not effect in any way the credit, the payment or the rights that are born from that credit in a reorganisation proceeding. 

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

23. What kind of court supervision is there in each type of insolvency proceeding? Are the judges that supervise and administer the process specialised? Is a trustee or receiver (or other court-appointed officer) appointed to supervise the debtor or can the debtor continue to control operations during the insolvency proceeding? May a debtor company or its creditors select or influence the selection of the trustee, receiver or other court-appointed officer? Can creditors form creditors’ committees? What formal role do creditors (or creditors’ committees) play in the process? Do insolvency proceedings permit competing reorganisation plans? Are the judges that supervise and administer the process specialised? Does a debtor company or its creditors have any power to select or influence the selection of the trustee, receiver or other court-appointed officer?

Chile

In both cases of insolvency proceedings, the court names acourt official baesd on the vote of the relevant creditors, depending on the proceeding in question. For reorganisations, the court must name a court official who was voted for by the three largest creditors, who in turn can only vote from a list of people previously qualified for the role of veedor (a “debtor company observer”). The debtor keeps the administration of the company under the direct supervision of the observer, who must authorise all expenses made by the company between the request and the creditors' approval of the reorganisation. Common practice for all reorganisations proceedings is to create a creditors' committee once the reorganisation has been approved. The committee's main job is the supervision of compliance by the debtor of the reorganisation plan.

For liquidation proceedings, the biggest difference is that the controllers lose control of the company to the liquidator, a court official named by the creditors from a list composed of different persons as veedores to avoid any possible conflict of interest. In these cases, is it also common practice for creditors to set up committees in charge of supervising the liquidation of the debtor's assets.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

24. May a debtor obtain financing while in insolvency? Will the lender enjoy special rights or preferences for providing DIP financing? Can a DIP lender ‘prime’ or come ahead of an existing lien? What difficulties typically arise in obtaining such funding or any required approval thereof?

Chile

The law considers the possibility of obtaining DIP financing in reorganisations, only in the time between the court’s decision of accepting the debtors request and the creditors meeting call to vote the propose agreement of the debtor. This new credit's purpose is to maintain the company’s normal operations or ensure their future transactions, a motive that has to be approve by the court official observer. If all of the prerequisites are ok, then the credit will have a super preference, preferring any other credit, including employees, taxes or credit guaranteed by a real state of asset of the debtor. Even though it is an option available to any debtor, its use it is not very common as creditors then avoid increasing their risk in the operation.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

25. If a debtor company has issued debt securities, does your jurisdiction’s insolvency or securities law provide for any exemptions from registration of those securities under applicable securities law?

Chile

There is no exception, and it must continue to comply with the Securities Law.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

26. May creditors offset debts owed to them by the debtor in an insolvency proceeding? Does this require court approval? Can creditors recover the expense of participating in the process? How?

Chile

The Concursal Law prohibits any compensation that has not previously been handled by the Ministry of Law, among the reciprocal obligations of the debtor and creditors, except for related obligations derived from the same contract or the same negotiation, even if they are required in different terms.

If some type of compensation is needed, the court will decide if it is applicable under the Bankruptcy Law.

In terms of expenses, creditors do not recover expenses for participating in the process. What they can obtain is a certificate that allows them to register the uncollectibility of their credit.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

27. If a debtor company has tax losses prior to a reorganisation, will it retain and be able to use such losses after it emerges from the reorganisation?

Chile

In a reorganisation process, the company will continue to operate normally with its restructured liabilities, so that the common legislation governs tax matters.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

28. What happens at the end of an insolvency proceeding? If there is a discharge of prior claims, is it permanent or subject to any conditions subsequent?

Chile

At the end of an insolvency (liquidation) procedure, the court will issue a resolution that terminates it, and will also declare the debtor’s rehabilitation and the termination of all credits that have not been paid with the debtor's assets.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

29. How long do restructurings last? Is there a formal deadline?

Chile

The reorganisation process has a specific duration in the Law. The reorganisation resolution sets the period of "bankruptcy financial protection", which lasts 30 days. Notwithstanding the foregoing, the debtor may request the extension of bankruptcy financial protection for a period of 30 days if it has the support of the creditors holding 30 per cent of the liability, and for 60 days if it has the support of 50 per cent of the creditors.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

30. Is there an expedited or summary proceeding available to obtain court approval of an out-of-court restructuring plan? If so, what types of claims and creditors may participate and how does the process work? Are out-of-court proceedings commonly used and what are the primary benefits and drawbacks?

Chile

There is an extrajudicial procedure called the simplified reorganisation agreement. The approval of this type of agreement requires the support of 75 per cent of the total creditors of the company, unlike the judicial reorganisation process, which requires 60 per cent of creditors who can vote to enforce their rights in the process.

These types of processes are rarely used in Chile, given the difficulty of approval. We must specify that once the debtors and the creditors have signed them, these agreements also require the approval of the court.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

Additional considerations

31. Does the government tend to play an active role in insolvency proceedings? What factors determine this?

Chile

The government nominates the liquidator and veedor. Likewise, it is responsible for the supervision of procedures through the Insolvency Superintendency.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

32. How are extraterritorial bankruptcy or insolvency proceedings recognised? Could a bankruptcy or insolvency judgment abroad substantially delay an insolvency proceeding in your jurisdiction? Does your jurisdiction contemplate ancillary or parallel insolvency proceedings with respect to a foreign proceeding? If a company organised under the laws of your jurisdiction (or whose principal place of business is in your jurisdiction) entered into extraterritorial bankruptcy or insolvency proceedings, would those proceedings be recognised in your jurisdiction?

Chile

The current Bankruptcy Law contemplates cross-border insolvency, which allows the recognition of foreign bankruptcy proceedings in the country. Therefore, it is possible to recognise both a reorganisation procedure and a liquidation procedure in Chile, through a recognition ruling by a court.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

33. How frequently do debtor companies reorganise and emerge from bankruptcy as opposed to liquidation? What factors determine this?

Chile

Currently, the number of companies that decide to reorganise has increased, which will depend on various factors, such as the viability of the company, the type of debt, the composition of the liability, etc.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

34. What is the appeal process for an insolvency proceeding in your jurisdiction and what effect do appeals have on approved plans? How long do appeals take to resolve?

Chile

Judicial reorganisation agreements can be challenged by the creditors, which means invoking some of the causes that are specifically indicated in the law.

For a challenge to suspend the entry into force of a reorganisation agreement, it must be challenged by the creditors of a certain class or category, representing as a whole at least 30 per cent of the voting liability of their respective class or category.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

35. Are there any common techniques that debtors use to manipulate or control insolvency proceedings? Have any of these techniques been challenged, and if so, what was the result?

Chile

Our legislation is very strict on debtors; there is no technique to manipulate or control insolvency proceedings.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

36. What impact, if any, has the ongoing volatility in the global credit markets and rise in corporate restructurings had on your jurisdiction’s insolvency regime? Are any amendments to your jurisdiction’s insolvency laws envisaged? If so, which problems are such amendments intended to address and how?

Chile

Our market is constantly exposed to the volatility of foreign credit markets, which definitely influences the number of companies that are reorganising or asking for liquidation.

Our legislation is relatively new, as it came into force in 2014, so there is no background to support the possibility of modifications.

Answer contributed by Luis Felipe Castañeda Catalán, Juan Cristóbal Pino Alfaro, José Domingo Widow Pecchenino and Pablo Cornejo Zambrano

Get unlimited access to all Latin Lawyer content