Any economic activity in the modern world is always certain risks. Well, if the person making money in this area understands the possibility of financial collapse. Otherwise, you can be one on one with the detrimental factors of the market. Nevertheless, even taking into account the presented feature, economic activity is becoming more and more popular. A similar trend exists due to the high liquidity of this sector. People understand that making big profits is only possible through direct interaction with the market or its immediate segments.
Thus, in the Russian Federation today almost every day new companies, firms, individuals - entrepreneurs appear. But the main problem is the risks that are written about at the very beginning of the article. In practice, quite often a participant in an economic activity cannot satisfy all his obligations of one nature or another. The recognition of bankruptcy in this case is the only way to a civilized solution to the problem. Today, everyone knows this term, but many are not aware of its true meaning. We will try to explain the essence of the “bankruptcy” category, as well as highlight its key features and the regulatory framework.
Insolvency concept
Insolvency, or bankruptcy, can be considered from several angles. Such a normative act as Federal Law No. 127 “On Insolvency” provides a legal description of the concept of bankruptcy. However, it can also be viewed from an economic perspective. The most true characteristic of insolvency has economic and legal aspects. Thus, taking into account the theoretical background of this issue and its normative characterization, it can be said that insolvency is a procedure carried out by state bodies to recognize the inability of a debtor to pay in full on all existing obligations. In this case, according to the rules of the Federal Law No. 127 “On Insolvency”, such obligations include credit requirements and obligations to pay the appropriate state taxes.
Positive concept of procedure
It should be noted: not everyone knows that the bankruptcy procedure is not only aimed at recognizing the inability of the debtor to secure its obligations. Most often, the recognition of complete insolvency is preceded by a procedure for improving the financial condition of the debtor. In this case, various economic and legal measures are applied to the latter, which quite often allows achieving positive results. If the application of these measures is impractical or simply impossible, the person shall be declared bankrupt.
Actors and authority
Given the rich international practice in this area of financial activity, it should be noted legal entities as the main subjects of bankruptcy proceedings. However, in a number of countries there are mechanisms for insolvency of individuals. In the Russian Federation today, the first and second are in the legal field. The main body for the implementation of the procedure in the Russian Federation is the arbitration court. In the legal system, the institution of bankruptcy is wholly owned by the entrepreneurial branch of law.
Normative regulation
Declaring a subject as bankrupt is a rather laborious and extremely complex process. In order to avoid any negative consequences for all parties to this process, the legislator issued a special regulatory act. With its help, bankruptcy is directly regulated by the law. This is Federal Law No. 127 “On Insolvency”. It details the information on all the main provisions of the insolvency procedure, etc.
the federal law
The legislative act (127- dated 10.26.2002) is a special legal document that governs the recognition by a court of a legal entity as insolvent. It regulates the liquidation of such a person and the satisfaction of all claims of creditors. In the economy of the Russian Federation, Federal Law No. 127 “On Insolvency” consolidates the foundations of the Russian economy. The normative act consists of 12 chapters and 233 articles. If you analyze the provisions of the law in detail, you can highlight the individual components of the entire procedure. They are fully autonomous. However, their presence testifies to the uniform structure of the entire insolvency procedure.
Separate stages (procedures) of bankruptcy
The Federal Law on Insolvency describes several basic procedures applicable to a debtor in order to improve its financial situation. Thus, the following procedures are most often applied:
- observation;
- financial recovery;
- competitive external management;
- settlement agreement.
All of the above stages are not intended to destroy the debtor. On the contrary, in most cases, everyone wants to stay with theirs (creditors - get their money, debtors - not lose their favorite thing). All mentioned procedures differ not only in their final goals, but also in the way they are implemented.
The subjects of the procedures
Each of the above procedures during the recognition of a legal entity bankrupt is carried out by a specific subject of financial activity. This is their difference, because, depending on the specialist, the final result will vary. Thus, the supervision is carried out by the interim manager, external management by the external manager, bankruptcy proceedings by the bankruptcy manager, financial recovery by the administrative manager. This feature is fully regulated by 127- “On Bankruptcy”.
Objectives of the debtor insolvency process
Like everything in this world, the bankruptcy process also has its own specific tasks. Bankruptcy proceedings are carried out to achieve two key objectives, namely:
- Repayment of debts to creditors. When a person cannot answer in any way for his obligations, the state becomes one of the creditors, since proper payments are not received to him. Thus, debt collection is becoming a priority, because there is interest in the country, which, in turn, promotes all sorts of ways.
- The second priority is the restoration of solvency of the debtor. It is for this that, in the early stages, a financial recovery plan is created . With it, you do not need to remove one of the players in the national market. It is much more correct to help return, for example, the company to its “economic fortune”. In this case, of interest is the possibility of further development of the occupied segment of the market and the economy as a whole. To achieve the goals in this case, a rehabilitation plan is drawn up. This stage exists to restore solvency. The rehabilitation plan, in turn, allows you to streamline the process and increase its efficiency.
A concrete choice between these areas is made directly "on the spot" when the exact fate of the person is known.
Characteristics of the first stage of bankruptcy - observation
To understand in more detail the essence of the institute's work, it is necessary to analyze the main stages of its implementation. As mentioned earlier, the first step is called observation. In accordance with the Federal Law No. 127 “On Insolvency”, monitoring is one of the bankruptcy procedures that are used to analyze the financial condition of the debtor, preserve his property, etc. The procedure is mandatory, therefore it is always implemented. This is due to the great importance of observation. Indeed, before making a decision on the liquidation or rehabilitation of an enterprise, it is necessary to collect a sufficient amount of financial information so that the decision is justified by facts.
To begin the procedural monitoring, permission of the arbitral tribunal is required. If it is, the debtor begins a direct analysis of the appropriateness of his future activities. First of all, it is necessary to identify absolutely all debts in order to analyze their essence. This is done through a committee or meeting of creditors. In some cases, the lender has the right to completely suspend a separate line of activity in connection with the recovery of funds. To exercise this right, there is such an institution as a statement of a creditor. It should be remembered that procedural observation is an opportunity to get out of a debt hole. The main advantage is that certain organs of the debtor are not liquidated, although some restrictions may be present in their work.
However, the bankruptcy of an LLC or other legal type of organization at the monitoring stage occurs with the appointment of an interim manager. This subject of the process acts independently, in parallel with the "initial" manager of the debtor company. It should be noted that the role of the interim manager is quite large. In fact, when the bankruptcy of an LLC or an organization of another legal type begins, some transactions of a company can be made only with its written approval. Transactions of this kind include:
- Operations directly related to the sale or other type of disposal of property, which has a value of more than 5% of the total balance sheet assets of the organization.
- Financial activities: issuance of guarantees, loans, loans, etc. An application by the debtor for its permission in this case is mandatory.
Thus, the observation stage is the starting point for the implementation of the insolvency process. With its help, a further selection of additional procedures is carried out.
Optional Procedures
As mentioned earlier, observation is the main, mandatory insolvency procedure. In this case, financial recovery, external management, bankruptcy proceedings and a settlement are additional procedures. They may require a bankruptcy recognition process. However, the specific choice of one or another secondary procedure will completely depend on the conclusions made at the stage of observation. Thus, additional steps are implemented only after analysis of the financial activities of an individual or legal entity. All stages presented are contained in Federal Law. The latest version of 127-FZ (full text) is published on the official websites of federal and regional authorities, as well as in the media.
Conclusion
So, in this article we examined in detail the financial and legal process of bankruptcy, as well as methods for its implementation. In conclusion, it should be noted that many mechanisms for the implementation of this institution are still not brought into the form when they can be used without problems in the legal and economic field. And even the latest edition does not give unambiguous interpretations of the procedure. Perhaps in the near future, lawyers and economists will jointly invent the most successful design for the implementation of the institution of bankruptcy, which will allow it to be carried out correctly and competently, to save debtors, and not liquidate enterprises.