What is the definition of insolvency? What are its main criteria and reasons? How is the recognition process going and what are the disadvantages of this situation?
Views of different countries
Now more and more often you can hear this term not only in the media, but also in everyday life. What does he mean? Insolvency is the inability of the debtor to pay his debts to creditors. It is noteworthy that in different countries they treat debtors differently. For example, in the USA and France there is a special system that allows an insolvent person to get rid of debt obligations and create a new business. In other European countries, there is a different system in which the debtor is obliged to satisfy the creditor requirements to the maximum.
In Russia, the approach to this process is ambiguous: somewhere they allow debts to be written off, but somewhere they make them pay. However, if insolvency, bankruptcy was declared fictitiously, then this is already a serious crime and, accordingly, punishable by law.
Bankruptcy Statement
How is the bankruptcy recognition process going? Who can claim this status? It is worth mentioning right away that both a legal entity and an individual can declare bankruptcy. However, in the current legislation certain regulatory procedures are underdeveloped and therefore practically no discussion of insolvency, bankruptcy of individuals. In other words, the possibility of a statement by individuals about such a condition does not really work.
In Russia, only an arbitration court can declare bankruptcy. Therefore, the primary action is to file for bankruptcy. This application may be submitted by both the debtor and the creditors. A similar status must be proved: a bankrupt must have certain signs of such a situation. The result in this process is either the liquidation of the enterprise or the full reimbursement of financial obligations to the creditor.
Signs of Insolvency
What signs can give a definition of insolvency of the debtor? Firstly, the presence of debt to creditors; secondly, the inability to pay mandatory payments or arrears; thirdly, the presence of debt instruments of more than 10 thousand rubles for an individual and more than 100 thousand rubles for a legal entity; finally, the debtor is declared bankrupt by the relevant court.
In fact, the bankruptcy procedure is one of the most difficult, and for its implementation the help of specialists is needed. It requires a thorough approach and a large amount of time, since it is the court that sets up the monitoring of the activities of the enterprise in order to exclude the option of fictitious or intentional bankruptcy. However, observation is not the only method to establish insolvency status; There are many more different options for checking this information.
Financial solvency recovery procedure
Financial insolvency is not only recognized as a fact, it can also be tried to be restored with the help of certain measures. The monitoring procedure involves the appointment of a temporary manager through which all transactions related to the property of the debtor occur. This is required in order to preserve the property until a verdict is issued by the arbitral tribunal, as well as to identify the real state of the financial situation of the debtor.
Financial recovery is carried out with the help of an administrative manager. The main objective of this procedure is the rehabilitation of bankruptcy solvency. If in both of these cases the management of the enterprise is not removed, then the external management procedure implies such removal. During this procedure, all penalties and other accruals of creditors are canceled, but the manager must create a plan to restore financial and material well-being and provide it to creditors.
New manager
The concept of insolvency includes many different procedures. And how is the manager appointed during the monitoring and financial recovery procedures? A citizen who is a member of the representatives of one of the organizations of arbitration managers is elected to such a responsible position. It is only possible to appoint a manager as the person who does not have any direct benefits from the bankrupt. In parallel with the financial recovery of the debtor, the new manager can engage in other activities, but only if they do not interfere with the bankruptcy case and completely exclude any conflicts of interest.
Prerequisites are: higher specialized education, at least one year of work experience in a managerial position, and passing a specially prepared exam. The arbitration manager shall also not have a criminal record.
Competitive method
The value of insolvency carries many problems, therefore, along with financial recovery and other cardinal methods, the competition method is also used.
The purpose of the competition is to resolve problems associated with debt obligations of the debtor, and more specifically - putting his property for sale. After the sale of property, the moment comes to pay the debt to creditors in the order of priority. Such a competition can be carried out both forcibly and voluntarily. Not necessarily the property of a bankrupt is sold, it is also distributed to creditors, but only in compliance with the competitive procedure. A similar method can be applied to both legal entities and individuals. Insolvency is a status that can be assigned to different categories of citizens and enterprises.
Mutual agreement
There is also another method of dealing with bankruptcy called the “settlement agreement”. This is a contract between a debtor and creditors. It is used to solve all issues of debt restructuring. Insolvency is a provision that will definitely need to be proved in court. And only after this procedure the debtor has the right to apply for an agreement.
This agreement is also considered in court, and only the arbitral tribunal can satisfy it. An obligatory aspect when concluding a settlement agreement is the consent of both parties to this procedure. After the conclusion of such an agreement, the process of restructuring the credit structure begins (installment payments, revision of interest, deferred payments).
Absolute and relative insolvency
This area in legal practice is considered to be definitely new, because the bankruptcy status appeared much more recently. The very term insolvency rests on the term "insolvency". The latter, in turn, is divided into relative and absolute.
Absolute insolvency is called bankruptcy, while relative insolvency implies overcoming insolvency through agreements between the debtor and creditors, installment payments.
The legal definition of insolvency is described in the Federal Law on Bankruptcy; it is the inability of the debtor to fully compensate for losses on monetary obligations to creditors or to fulfill the requirements for payment of mandatory payments, which is recognized by the arbitration court. However, do not forget that insolvency and bankruptcy are used as synonyms.
Individuals
More and more, various organizations have become bankrupt. And there are really many reasons for this. But insolvency is a term that also applies to individuals. In order for a citizen to be declared bankrupt, several factors must be taken into account: his debts must be higher than half a million rubles; no payment should be more than 3 months. When these criteria are present and the citizen is declared bankrupt, then certain restrictions come and prohibitions are imposed.
Within a few years, this citizen will not be able to carry out entrepreneurial activity, will not have the right to be assigned to managerial posts, and will not take loans from any bank. Until that moment, until the bankruptcy proceedings cease , a citizen will not be able to travel abroad. And this is not the whole list of restrictions.
Regulatory Aspects of Insolvency
Legal insolvency is well designed for all categories that fall under bankruptcy. More specifically, the legal regulation carries a lot of complex measures to exit from the status of bankruptcy, as well as to close all debts of the debtor. Of course, as a result of these measures, all the property of the enterprise can be sold, but no one will take more than expected. From the moment of the beginning of bankruptcy of an enterprise, individual entrepreneur, individual, any accrual of interest, interest or late payments shall be stopped.
Insolvency is a situation under which various categories of persons fall. Are there categories that cannot fall under the concept of bankruptcy? Yes there are. These include state-owned enterprises, religious organizations, political parties.
Fictitious Bankruptcy
Often, starting their own business, entrepreneurs cannot clearly calculate the entire plan of doing their business, thereby increasing the chances of bankruptcy. However, insolvency is not only a real danger, but also a certain way of deception, which dishonest entrepreneurs take. This step is decided for many reasons. For example, in order not to pay monetary obligations both to creditors, and to individuals or even government bodies.
Nevertheless, it is quite realistic to prove fictitious bankruptcy, and the punishment for this fraud is quite serious. The deceiver will receive either a fine in the amount of 80,000 to 300,000 rubles, or a ban on the conduct of this business for a period of 12 to 36 months, or real imprisonment for a period of up to 72 months. Therefore, it is worth considering the need for such a fraud and understand that you will definitely have to bear responsibility for it.
Avoiding Bankruptcy
Do not think that insolvency is an inevitable process. It's a delusion. Bankruptcy can be avoided if certain measures are observed: to have certain reserves of cash for the organization, to increase revenues from transactions or sales (sales should be increased not by lowering prices, but by advertising campaigns, increasing the number of buyers, etc.). Try to convince your customers of the need to pay advance payments on transactions, control the process of delayed payments and unpaid bills, monitor timely billing, try to optimize the sales system of goods and services, reduce the staff if you do not need any of them at all. Naturally, it is not necessary to dismiss all employees either through one, otherwise there will be no one to help in the development of the business, but just talking about the possibility of staff reduction may make the team work more efficiently.
Bankruptcy as a continuation of the path
Despite the fact that the mention of bankruptcy causes many unpleasant thoughts, this is far from the end. Insolvency, bankruptcy - a definition that can give a second chance to a company or organization. Sometimes an enterprise does not collapse, dozens or even hundreds of people do not quit, but the leader changes. Yes, it is possible to lose investments, cash, property, but along with this a second chance is acquired. Many were able to rise from scratch once, and will not give up a second time.
It is one thing when an enterprise or organization becomes bankrupt. And how does a bankrupt, who is an individual, feel? In this case, it is doubly scary to talk about
insolvency, bankruptcy . Only the law here is on the side of the citizen and is aimed precisely at ensuring that his property remains intact and safe, and that the person does not remain ruined. Of course, no one will become richer from bankruptcy, but it is absolutely not worth considering this the end of the road.