Argentina: Argentina Bankruptcy Law Revisited

Last Updated: 27 January 2010
Article by Hernan Papa


The Law applicable to collective execution proceedings in Argentina is Law nº 24,522 (hereinafter "The Bankruptcy Law").

The Bankruptcy Law does not apply to public entities nor to, pension and social securities funds, insurance companies and financial institutions which are regulated by special regimes.

Three insolvency proceedings are set by The Bankruptcy Law:

  • Reorganization Proceeding (so called "Concurso Preventivo");
  • Workout/Out of Court Judicial Agreement (so called "Acuerdo Preventivo Extrajudicial" or "APE"); and
  • Bankruptcy or Liquidation Proceeding (so called "Quiebra").

The three proceedings referred above comprehend a general principle which is the "Cessation of Payments" (so called "Cesación de Pagos") which means a general inability to pay debts and meet current liabilities with the available assets, as they become due.


A Reorganization Proceeding is a remedy by which a debtor obtains financial relief through a judicially supervised reorganization proposal made to its creditors.

Its main features are the following:

  1. Only the debtor - individual or legal entity, whether local or foreign- may voluntarily seek a Reorganization Proceeding (creditors are not entitled to claim it);
  2. Reorganization Proceeding works as a measure to prevent a Bankruptcy or Liquidation Proceeding;
  3. Management of the legal entity maintains the administration of the debtor's affairs with restrictions and under the supervision of a trustee appointed by Court;
  4. The commencement of the Reorganization Proceeding effectively stays claims of unsecured creditors against the debtor arising prior to the filing of the petition and interest on unsecured debts cease to accrue.
  5. Creditors (secured and unsecured) have a bar date to submit a "Proof of Claim" (so called "Verificación de Créditos") before the trustee;
  6. Admissible claims by judicial ruling will be counted for voting purposes in connection with a reorganization plan;
  7. Debtor is entitled to differentiate voting creditors by categories and creditor groups in the Reorganization Plan (so called "Categorización de Acreedores");
  8. Debtor has an "Exclusivity Period" (so called "Período de Exclusividad") during which the debtor has the exclusive right to submit a proposal for payment to creditors in each category and obtain creditors approval, the same proposal has to be made to each and all creditors within the same category, however different proposals may be made to different categories;
  9. Debtor can choose from a wide range of options to include in the plan for payments to creditors, which involves any solution that can be legally implemented such us amortization payments, refinancing, and asset transfers, among others;
  10. Debtor has to obtain a majority of the majority of the creditors within each category, representing at least two-third of the outstanding debts within the same category;
  11. A Novation of credits that were admitted occur after the Court approves the Reorganization Plan proposed by the debtor grounded on the terms and conditions of such plan; and
  12. When debtor is not an individual i.e.: is legal entity such as a corporation, a limited liability company, a cooperative, or a company partially owned by the Federal, Provincial, or Municipal Government and has failed to obtain the necessary approval for its reorganization plan, bankruptcy is not declared ipso facto in order to allow any creditor or a third party interested in the purchase of the company to submit their own proposal based on their interest in taking over the company (so called "Cramdown" or "Salvataje").


It is a private out of Court agreement between the insolvent debtor and its participating creditors. It structures the terms and conditions under which the parties agree on the restructuring and repayment of debts and it is submitted for judicial approval.

It stands out for:

  1. No specific formalities are required regarding its content and terms;
  2. Debtor should obtain a majority which consists on: more than a half of its general unsecured creditors ("absolute majority criteria") that represents two-thirds of its total outstanding general unsecured indebtedness;
  3. Privileged or secured creditors are excluded from the majority count;
  4. Creditors may oppose the Workout/Out of Court Judicial Agreement in case: (i) they were not declared by the debtor; and/or (ii) fraudulent or malicious debt declarations were made by the debtor; and/or (iii) required majorities were not obtained; and
  5. Workout/Out of Court Judicial Agreement subject to Court approval is mandatory to all unsecured creditors which credits were originated before the judicial filing.
  6. The agreement shall be binding on the intervening parties even if the Court's approval is not obtained, unless otherwise expressly agreed.


It is a remedy which seeks to either have the debtor's remaining assets liquidated and distributed among the creditors and to thereby discharge the debtor from any further obligation or to restructure and reorganize the insolvent's debt structure.

  1. The proceeding could be initiated: 1- upon request of the debtor, 2- by petition of a creditor, or 3- following a default or nullification of a plan in a Reorganization Proceeding or Workout/Out of Court Judicial Agreement.
  2. Debtor is entitled to convert a Bankruptcy or Liquidation Proceeding into a Reorganization Proceeding.
  3. Debtor is divested of its assets which are administered and eventually disposed by the trustee appointed by Court.
  4. A "preference or suspect period" (so called "Período de Sospecha") is set, extending up to two years prior to the declaration of bankruptcy by the Court where certain actions by the debtor may be voidable or ineffective vis a vis creditors by operation of law, namely acts made for no apparent reason, or when debt is paid before it falls due, among others.
  5. Creditors have to file a "Proof of Claim" before the trustee in order to get their credits admitted by Court (such credits, in case of a prior existence of a Reorganization Proceeding must be originated after the start of this latter proceeding and before the Bankruptcy or Liquidation is initiated).
  6. The Bankruptcy Law set different ways of liquidating assets in the following order of preference: a- sale as an going concern in case the debtor's is a legal entity, b- sale of assets as a whole in case of close down of debtor's activities, and c- sale of all or some of the assets individually.
  7. After the foreclosure is ended, the trustee must prepare a final report including a proposal for the final distribution of the proceeds. The Bankrupcty Law establishes certain privileges/preferences for the payment of creditors with the foreclosure proceeds.


Argentine Courts have jurisdiction over Bankruptcy or Liquidation Proceedings initiated by or against debtors domiciled in Argentina or foreign debtors when they have assets in Argentina exclusively in relation to such assets.

A foreign insolvency proceeding may not be invoked in Argentina against the interest of local creditors whose credits are payable in Argentina in relation to local assets.

On the other hand, the opening of a reorganization proceeding in another country under its laws is sufficient cause for commencing a reorganization proceeding in Argentina, if requested by the debtor or by a creditor whose credit is to be paid in Argentina.

In case of bankruptcy or liquidation, if parallel proceedings are opened in Argentina and in a foreign country, creditors in the foreign bankruptcy proceeding are subordinated to creditors in the Argentine bankruptcy proceeding.

Reciprocity for foreign creditors claiming credits in a local proceeding is required.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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