Law on Restructuring and Liquidation of Business and Physical Persons on the Dominican Republic and its Application
11 September 2017
On August 7, 2015, the Executive Branch enacted Law No. 141-15 of Restructuring and Liquidation of Businesses and Physical Persons on the Dominican Republic (the “Law 141-15”), establishing as the date of entry into force on February 7, 2017. In order to regulate the implementation of the Law, on February 13, 2017, the President of the Republic issued, through Decree No. 20-17, the application of the law.
Until the promulgation and entry into force of Law 141-15, our legal system did not contemplate the restructuring of companies and individuals traders, but used such figures as bankruptcy and liquidation.
Law 141-15 has introduced new figures of its own in order to enable the effective application of its provisions and orders the establishment of specialized courts to hear judicial proceedings.
Law 141-15 regulates the process applicable to: i) the natural persons traders, be they national or foreign; and, ii) national companies and those that have established domicile or have a permanent presence in the country.
Its purpose is mainly to: a) protect creditors against the insolvency of their debtors; and, b) to help debtors overcome their insolvency situation, ensuring their operational continuity.
Law 141-15 is based on 10 guiding principles: celerity, ethical conduct, efficiency, economic and corporate governance, equality, maximization of assets, negotiability, reciprocity, transparency and information and universality.
One of the pillars of Law 141-15 is the creation of the restructuring and liquidation jurisdiction, composed of the Restructuring and Liquidation Courts of First Instance and the Appeals Courts of Restructuring and Liquidation.
The decisions of the latter may be appealed in cassation before the Civil and Commercial Chamber of the Supreme Court of Justice. Law 141-15 also creates two special courts located in Santiago and in the National District, which will be territorially competent to cover the other jurisdictions of the country.
The restructuring can be requested from the competent Court of Restructuring and Liquidation, both by the debtor and by one of the creditors to whom Law 141-15 grants quality for this. Once the request for restructuring has been made, the Court should order the appointment of a Verifier to confirm the debtor’s financial situation and to inform the Court of the results of its investigations.
The rule allows the parties to submit a Preliminary Agreement of Restructuring Plan, which if accepted by the Court will have the same effect as the restructuring ordered by said Court.
If the Court welcomes the restructuring process, it orders the notification and initiates the Conciliation and Negotiation process, which will be guided by a Personal Conciliator appointed by the same Court. During this process all judicial, administrative or arbitral actions against the estate are suspended, so that the debtor can continue with the operation of the business.
Precisely for the purposes of business continuity during the conciliation process, it is envisaged that, at the request of the conciliator and without an objection from the majority of creditors, the Court may authorize new financing at the expense of the debtor to ensure continuity of ordinary operations.
At the request of the creditors duly substantiated, the Conciliator may bring an action for annulment against acts performed by the Debtor within two years prior to the date of the request for restructuring, when those acts have constituted an unjustified distraction of the property of the estate.