Bankruptcy is the debtor’s inability, recognized by the economic court, to restore its solvency using reorganization procedures or a settlement agreement and to pay off the monetary claims of the creditors in no other way as through the use of a liquidation procedure.
Bankruptcy is used as follows:
- In order to avoid credit and other obligations
Bearing in mind that the claims are not satisfied in the bankruptcy procedure, they are considered cancelled (paragraph 5 of Article 45 of the Law on Restoring the Debtor’s Solvency or Declaring it Bankrupt” (hereinafter referred to as the Bankruptcy Law). Thus, to get rid of debts, an artificial indebtedness of the debtor enterprise to a “friendly” creditor in the amount of at least 300 minimum wages is created, which is confirmed by a court decision. Within the framework of the bankruptcy procedure, it turns out that the assets of the enterprise are insufficient to satisfy the creditors’ claims, and the collateral has significant drawbacks and its cost has significantly decreased, or it does not exist, so it is impossible to repay the creditors’ claims. In connection therewith, creditors have only to wait for the receipt of the document, and it will make it possible to recover the debt.
- In order to withdraw assets
The Bankruptcy Law determines the procedure for selling the property of the bankrupt. Using its features, the “controlled” Insolvency Official is able to control the sale of the debtor’s assets, ensuring their sale at a price that is acceptable to persons ordering “artificial” bankruptcy or “friendly” with the debtor of the company. This way of withdrawing assets can be used to reduce their cost.
- As a way of liquidation
Bankruptcy is “sold” as a way to liquidate a legal entity without conducting a tax audit. Unfortunately, the audit by tax authorities, which is conducted during the liquidation of an enterprise, frightens entrepreneurs and pushes them to conduct “controlled” bankruptcy procedure, in which the company is liquidated along with its “tainted tax past” without conducting a tax audit. And the deadline for liquidation through bankruptcy may be less than the time for a tax audit in case of liquidation by the decision of the owner.
Which companies does it fit?
1. Enterprises having a significant debt to the budget and/or counterparties;
2. Creditors who want to recover their debt from an insolvent company.
— it is more profitable for you to start a bankruptcy procedure for a company than to repay a debt to counterparties;
— it is not necessary to conduct an unscheduled audit of a taxpayer by the state tax service body;
— the procedure is beneficial to both the creditor and the debtor. The creditor gets the opportunity to recover the debt from the insolvent company. Economic sanctions imposed on the debtor are ceased; the seizure from its property is removed; the accrual of penalty is ceased from the moment of commencement of the bankruptcy proceedings by the economic court. Among the main shortcomings of enterprise bankruptcy procedure, we can note its duration.
As a result, after carrying out all the necessary procedures, you will receive the following:
— a record of the termination of activities of a legal entity being a bankrupt, entered in the Unified State Register of Legal Entities and Individual Entrepreneurs;
— all debts will be considered extinguished;
— accrual of penalties, interest and other economic sanctions will cease;
— the seizure imposed on the debtor’s property will be cancelled.
The cost of the bankruptcy procedure depends on the region of an enterprise, its turnover, the number of employees, accounting mode and many others factors.