When a company fears that one or more creditors may take legal actions that would harm its operations but lacks the time to prepare a full proposal, it is possible to file a notice of intention.
Reasons to file a notice of intention
- imminent seizure of the company’s assets or bank account by a creditor or tax authorities;
- undue pressure exerted by essential suppliers preventing the company from operating;
- imminent cutoff of public utilities such as electricity and natural gas.
The notice of intention is a simple document that informs creditors that a proposal will be submitted to them soon. The notice of intention halts all proceedings against the company and prevents future proceedings.
Once the notice of intention is filed, a proposal must be presented to creditors within 30 days. During this period, the trustee will carefully analyze the company’s situation and examine its financial statements, assets, and other relevant documents. This will allow the trustee to present the creditors with a statement of the company’s affairs.
The initial 30-day period can be extended up to a total of 6 months if the company needs time to reorganize its affairs, update its financial and accounting information, solicit investors or potential buyers, refinance its debt, etc.
In summary
- The notice of intention allows for immediate legal protection against creditors.
- It protects the company against actions and seizures.
- It allows the company to continue its operations.
- It provides a period of 30 days to 6 months to file a proposal.
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