Spanish Property Insight › Forums › Spanish Property Forums › Spanish Real Estate Chatter › Developers filing for protection from creditors
- This topic has 6 replies, 6 voices, and was last updated 15 years, 3 months ago by Anonymous.
February 28, 2008 at 10:36 am #53723
Mark has started a new thread – “Spanish developers going bust”. This is the thread that every purchaser ‘in difficulties’ has dreaded but knew was coming.
Especially if still facing the dilemma of whether to complete on an illegal build or not or involved in long drawn-out court cases.
Am particularly interested to read the part in Mark’s post that Jale Construcciones “has filed for protection from creditors”.
I remember visiting the OMIC offices in Marbella a couple of years ago where I had a meeting with the leading advisor on property matters. A very helpful and ‘on the ball’ type. I brought this subject up being the proud owner of an illegal build myself and planning to go to court to get monies back that I had paid. The property was ‘officially’ being developed by a small company, one of many that were set up for each development by a much larger company. Most of the directors of the large parent company were on the boards of these smaller ones.
I voiced my concern that the small company concerning my development could simply fold if difficulties arose but was told that they couldn’t simply get away with doing that. That these directors could be followed right through to the larger ‘parent’ company responsibility-wise.
Would be interested to know if any ‘legal eagle’ contributors could throw any further light on this possibility, or any forum members who have knowledge/experience of this scenario.
February 28, 2008 at 11:33 am #79314InezParticipant
Well if its any help an SL – spanish version of a limited company – is just that and in its escritura names the shareholders and administrator. The lowest limitation os 3005 euros so thats the most the company would have to pay over if it folded.
My understanding is that the administrator can be liable personally if there is fraud or foul play and is one of the reasons why canny lawyers are no longer agreeing to be the administrators for SLs where they feel the directors way try a fast one.
I can see no reason why a smaller company could not fold but if it were challenged in court that a larger parent were holding it in order to enable it to be let go, then possibley there would be retribution. However, as you all know, that would take money and time to get to that stage
Sounds similar to the 70s and 80s UK where people would set up limited companies, rack up debts then close it with little or no recourse, only to reopen under a different name the next day. This of course is still haopening today but now directors are made personally liable if its seen to be intentional.
February 28, 2008 at 11:51 am #79316
While I have no legal qualifications it would seem that the BG is the mechanism to protect the purchasers money. The SL could indeed fold and the money should be guaranteed by the bank (I know, I know.) It would be difficult to get money out of a director/shareholder of a bankrupt SL unless they had signed personal grantees of some kind. even then i would think the bank would have first go at any assets they may have and the person in the street would be at the bottom
February 28, 2008 at 12:07 pm #79319
” why canny lawyers are no longer agreeing to be the administrators for SLs where they feel the directors way try a fast one.”
Another reasons why lawyers/administrators will not get involved if there is no assets for the administrators to get paid from.
“It would be difficult to get money out of a director/shareholder of a bankrupt SL unless they had signed personal grantees of some kind”.
Due to the limited liability status. The banks will take a personal guarantee of the directors. Apart from having a first charge over the land and or floating charge over the units for sale.
” The person in the street would be at the bottom. “
The person in the street should be protected by the Guarantee which the Banks issues ( Please dont start going about the guarantee)
February 28, 2008 at 12:59 pm #79330katyBlocked
I think most of the developers/Directors will have already covered their backs before liquidacion. I thought that bank guarantee system was set up for exactly this purpose, if the developer cannot complete the buyers money is safe….Spain and the Judges moving the goalposts again 🙄
February 28, 2008 at 1:27 pm #79333
If the directors/administrators have signed personal guarantees for re-finance etc. they will no doubt have used their personal assets as collatoral. Houses, bonds and insurance policies will be on the line.
I expect there would be quite a fight if they default on both their re-finance loan and their mortgages as to which bank gets to repossess first.
March 1, 2008 at 8:54 am #79475
Many thanks for all your replies on this.
I received a pm from Drakan, one of the forum lawyer-contributors (what a guy – he’s actually on holiday at the moment!) with a nice clear cut response which I’m cut and pasting here for other members’ interest.
Well as you can imagine then why incorporate a specific company for every development if the “responsibility follows the administrators” to the parent company ?
Obviously not. They are limited liability companies. The responsibility is always limited to the companies assets and rights. Unless the administrators are incurred in a crime -and you will have the huge onus of proving it- the responsibility is “contained and limited to” that company.
Much like in a ship you have different interlocking hulls so when there is a hull-breach, you can contain and limit the extent of the damage. It’s the same principle only that instead of hulls we are talking of companies.
Hope that helps.
Many thanks for clearing that one up Drakan – enjoy the rest of your holiday. 😉
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