Pre-pack proceedings involve the negotiation for the sale of one or more productive units of a debtor company to a third party. This sale aims to satisfy the obligations of the creditors of said company by reaching an agreement on its value before the company formally files for insolvency proceedings.

'Avoidance action' is an umbrella term for any proceedings that seek to revoke illegitimate acts that diminish the debtor’s assets. These actions aim to protect creditors and maximise the value recovery from the debtor. Colombian law stipulates a variety of avoidance actions before and during insolvency proceedings, notwithstanding criminal liability for the revoked acts.

Before insolvency proceedings

The insolvency systems for companies and other legal entities vary from country to country. The main purpose of insolvency legislation, however, is fundamentally the same worldwide. If there is important value in the business, we need to protect it in order for the company to continue as a viable business and pay creditors. If the liquidation value is higher than the operational value, jurisdictions have liquidation mechanisms that allow companies to efficiently exit the market and pay creditors through an ordered sale of assets.