INTRODUCTION

Another approach to getting paid by a non-performing debtor is the suspension of payment (“SOP”) mechanism as provided by Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations (“Bankruptcy Law”). Although SOP and bankruptcy derive from the same regulatory framework, and both serve to ensure that creditors get paid, the fundamental approach of each is different.

Bankruptcy proceedings mainly revolve around liquidating a debtor’s assets to settling its debts, while SOP avoids liquidating the debtor’s assets by rearranging debt repayments through a composition plan or, to a certain extent, a debt restructuring. Through the SOP mechanism, the debtor is provided a second chance to continue its business operations and earn profits and contemporaneously settle its debt. SOP proceedings also give certainty to creditors as a 270 day limitation applies. Moreover, if a SOP proceeding fails, the Commercial Court has the power to declare the debtor bankrupt, following which the creditors may proceed to divide up the debtor’s asset.