Limitations and prohibitions imposed on the bankrupt in the agreement. The action for recovery under article 137.2 of the Insolvency Law

Abstract

Insolvency settlements are effective  as from  the date of the judgment in which they  are approved, and  once  approved the legal and  judicial effects  of the initial action declaring  the insolvency are cancelled  and  replaced  by the provisions contained in  the  settlement itself.  Article  137  of the  Insolvency Law  provides that the settlement may  contain measures to prohibit or curtail  the exercise  by a debtor of its  rights  of ownership (the  legal nature of which is discussed), and  this  is recognized  by  learned  opinion as  variously constituting a restriction on  the  debtor’s legal capacity, or  a prohibition on the  disposal of  assets,  or  a mere  duty  not  to dispose   or  not  to  administer, which would not  affect  the  effectiveness of acts  to the  contrary. The  Insolvency Law  penalizes the  infringement of such measures by allowing creditors  to  apply  for a declaration to  the  effect  that  the  settlement has been  breached,  and  also  by  allowing for the  possibility of  pursuing an action for the  recovery  of the  asset  that  has  been  disposed of in  a manner that  is prohibited (art.  137.2   of  the Insolvency Law).   But   this   action for  recovery,  the  nature  of which (also  discussed) appears  to  be  more  that  of  an  action for rescission, will only  prejudice third-party subacquirers, provided that the  prohibitive or  restrictive  measures are previously recorded  at  the  Registry,   under  the  entry  where  the settlement is  recorded.  The  said  action for rescission would not  be based  on  any prejudice to  the  insolvency assets,  or on  fraud,  but  rather  merely  on  the  infringement of the  prohibitive or restrictive measures laid  down in  the  settlement, given that  what the said measures and action are seeking  to protect  is in compliance with the  normative content of the  insolvency settlement, which regulates  the  execution of future contracts by the  insolvent party.