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Position of creditors

Forms of security

What are the main forms of security over moveable and immoveable property and how are they given legal effect?

The main forms of security over movable and immovable property and how are they given legal effect are as follows:

  • mortgage over immovable property – secured creditors may bring an independent and autonomous action in order to enforce their collateral; and
  • pledge over movable property – secured creditors may bring an independent and autonomous action in order to enforce their collateral.

Additionally, another form of security is to execute a guaranty trust, where the assets will be transferred to the trustee and will not be owned by the insolvent company.

Ranking of creditors

How are creditors’ claims ranked in insolvency proceedings?

Creditors’ claims in insolvency proceedings are ranked as follows:

  • creditors against the estate (eg, labour claims regarding unpaid salary of the last two years);
  • singularly privileged creditors (disease and burial expenses);
  • secured creditors (pledged and mortgage);
  • labour creditors and tax creditors;
  • creditors with special privileges (right of retention);
  • unsecured creditors (not subject to any guarantee or collateral security); and
  • subordinated creditors.

Can this ranking be amended in any way?

No. Even if the creditors execute a private agreement recognising a different creditor ranking, the provisions of the Commercial Insolvency Law cannot be waived. These provisions are public policy, issued in the interest of society, and are therefore unwaivable. Consequently, any agreement to the contrary will be unenforceable.

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