An end to zombie companies
The new bankruptcy code to be published for public consultation this week makes company board members liable for civil damages in case they fail to file for bankruptcy within the delays prescribed by the law.
The aim of this provision, government officials say, is to reduce the number of companies that, although in default of their payments, still operate, essentially outside the bounds of the legal economy, essentially parasitically, hence the name “zombie companies” applied to such firms.
The liability is enforced even when there has been negligence, rather than intent.
Liability is also extended to persons that can be proven to have influenced a company’s board not to file in time for bankruptcy.
If a company tries to avoid bankruptcy by negotiating for a deal that will allow the debtors to restructure the debt and ensure the interests of creditors, investors or other interested parties, this provision does not apply.
A company is declared bankruptwhen it has defaulted on its payments. Default is defined as failure to pay debtors at least 40% of overdue payments for at least six months, when overdue payments exceed €30,000.
