Bankruptcy is considered a complex process, on the basis of which different firms or individuals are declared insolvent. Citizens and enterprises resort to it if for various reasons they cannot cope with numerous debts. Usually, the initiator of the process is the lenders, represented by banks, counterparties or other organizations or even private individuals. The insolvency procedure is divided into several different stages. Originally used in bankruptcy observation, consisting in a thorough study of the financial condition of the debtor. His goal is to identify opportunities for the return of solvency, which will prevent the closure of the company.
When is it advisable to conduct an observation?
This stage is used in almost every debtor for whom bankruptcy is initiated. Initially, creditors who cannot return their funds within 3 months file a lawsuit.
Then, a check is carried out within 5 days, on the basis of which it is revealed whether this claim is substantiated. If signs of insolvency are detected, then surveillance is used for bankruptcy. The main such factors are debt, and its size should exceed 300 thousand rubles. Additionally, the absence of debt repayment for three months or a longer period of time should be recorded.
The bankruptcy monitoring procedure is necessarily used, since it is it that allows you to determine what the actual state of the company is, what assets it has, and whether there are opportunities to restore solvency.
Process objectives
Observation is carried out to achieve several goals at once. These include:
- a study of the enterprise’s documentation, which reveals the reasons why it cannot cope with the credit load, what assets it has, and also determines whether special transactions have been made with the main purpose of selling assets;
- all property belonging to the debtor is retained, since the procedure for monitoring bankruptcy of a legal entity involves the use of restrictions on the owners of the company, therefore they cannot freely dispose of assets;
- different gray patterns are revealed that are used by company management or employees whose main goal was artificial bankruptcy;
- the reasons for which the organization cannot handle payments are determined.
If as a result of the process it is revealed that the bankruptcy process was intentional or fictitious, then the enterprise management is held criminally liable.
The purpose of the bankruptcy observation procedure is to study the documentation of the enterprise. The process is considered a preliminary and mandatory stage. It is on the basis of this stage that a decision is made on the appropriateness of applying other actions to liquidate the enterprise.
How is it implemented?
There are several bankruptcy procedures: supervision, financial recovery, external management or bankruptcy proceedings. All these actions are quite complex and specific. Their main purpose is removing the company from the crisis and paying off debts.
Initially, an observation is performed, which involves the implementation of several stages:
- initially, the creditor filed an application with the court, on the basis of which the bankruptcy process of the enterprise is initiated;
- the court makes a decision to start monitoring;
- all creditors represented by banks, tax authorities or counterparties are notified of this procedure;
- an interim manager is selected who will examine the financial condition of the enterprise, monitor the available assets, investigate previously concluded transactions and identify all the nuances of the insolvency of the company;
- a register of claims is compiled, which should include all creditors, since only they will be able to rely primarily on the return of their funds in bankruptcy proceedings;
- direct supervision is carried out during bankruptcy by the manager, moreover, the process usually lasts about 5 months, but at the same time the period may be extended if there are good reasons.
At the end of the procedure, a meeting of creditors is held, where a decision is made regarding further actions. If the manager determines that it is possible to restore the solvency of the debtor, then financial recovery is carried out. If there are no prospects for the further functioning of the enterprise, then the process of bankruptcy proceedings begins.
How long does the process take?
Initially, the court should decide on the initiation of the process of declaring the company insolvent. After that, the monitoring procedure begins with the bankruptcy of a legal entity. As a standard, it lasts for 5 months.
During this time, many issues are resolved, including identifying the reasons for closing the company, evaluating all assets, and also taking into account the possibilities for restoring solvency. Usually 5 months is enough for this.
Is it possible to extend?
If the manager believes that a little more time is required, then he notifies the creditors about it. At a special meeting, they decide to extend the observation to 7 months.
If after this period of time a company can really pay off debts gradually and continue to function, then an amicable agreement is drawn up with all creditors. Then a petition is sent to the court, on the basis of which the observation stage is terminated.
The nuances of the functioning of the enterprise
When conducting supervision during bankruptcy, the company continues to work with numerous restrictions. The main nuances of this process include:
- the head of the enterprise cannot use the property for any purpose, therefore it remains unchanged;
- the manager examines all documents related to the latest transactions, since if the property of the enterprise has been alienated on the basis of these processes, such transactions may be invalidated;
- the head of the company cannot issue new loans, with the help of which it is possible to pay off debts;
- the manager requires from the company management numerous documents related to the company, with the help of which he reveals whether there is an opportunity to lead the enterprise out of the crisis;
- various actions are being implemented, the purpose of which is to preserve the property of the company, therefore it is not allowed that the management of the company used different methods to sell assets.
If different requirements are violated by the management of the company, then this may become the basis for terminating the observation.
Other rules
During this process, the company continues to work, but new transactions cannot be concluded without the approval of the manager, since there is a high probability that the company will eventually be closed. Based on the process, the manager draws up a special opinion. This document contains a reasoned opinion about whether the company can cope with a difficult crisis situation and restore solvency.
When using surveillance, the manager cannot perform all the functions that the enterprise management is endowed with. Therefore, at this stage, the founders of the company continue to operate, although there are many restrictions for them. The manager exercises control over the work of the company, since the main goal is to prevent various illegal ways that managers can use to hide property.
What can a director do?
In the event of bankruptcy of legal entities, supervision is a mandatory procedure, but it does not imply that the head of the enterprise loses all the rights and opportunities to manage the company.
Therefore, the director of the company can perform actions:
- continue communication with counterparties;
- paid in the previous mode, salaries and other payments to employees;
- production or trading activities are carried out, but no new transactions are concluded with the aim of using the company's property;
- work continues on previously drawn up contracts;
- it is allowed to sign new agreements, on the basis of which the company can receive high profits, but this process requires control and permission from the manager.
It will not be possible to pay dividends to shareholders, issue new loans, sell property, pledge assets or issue securities. There is no opportunity to make any adjustments to the constituent documentation of the enterprise.
The advantages of observation include the fact that penalties for debts cease to accrue. Additionally, the seizure of property by the bailiffs is lifted.
What actions can be performed by the company?
All stages of the recognition of a company insolvent should be guided by the provisions of the bankruptcy law. Observation is only the first stage. Firms in respect of which this process is carried out can perform different actions:
- file complaints about unlawful actions of the manager;
- initiate bankruptcy proceedings;
- make various transactions under the supervision of a manager.
If there is evidence that the company can regain its solvency, then its representatives can agree with creditors, which will make it possible to draw up a settlement agreement.
The consequence of this process is the drafting of a settlement agreement or the continuation of bankruptcy proceedings, on the basis of which bankruptcy proceedings are implemented.
Conclusion
Observation is considered the initial stage of bankruptcy. It is represented by a process during which the manager decides whether the firm can get out of the crisis. For this, its documentation and financial condition are analyzed. The process is carried out by the administrator appointed by the court.
The result of the observation is the financial recovery of the company, drawing up a settlement agreement with creditors or bankruptcy proceedings.