Bankruptcy of the enterprise: grounds and consequences

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Shakhovets Anastasia

Lawyer in the practice of bankruptcy of individuals and individual entrepreneurs. Specializes in write-off of bank and MFI loans through the bankruptcy procedure.

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Bankruptcy of the enterprise: grounds and consequences

Reading time: 3 min.

Bankruptcy of an enterprise is the failure of the debtor, recognized by the commercial court, to fully satisfy the demands of creditors regarding monetary obligations (payment of debt, interest and fines) and to restore its solvency due to a lack of cash and other assets. This is the actual termination of the existence of an insolvent enterprise due to the impossibility of fulfilling its financial obligations.

Grounds for bankruptcy

The grounds for bankruptcy are:

  • Insolvency of the debtor

Insolvency means that the debtor company is unable to timely fulfill its monetary obligations to creditors. We are talking about debts for received goods, works, services, as well as under credit agreements.

  • Impossibility of full fulfillment of monetary obligations

Another reason for bankruptcy is the situation when the total amount of debts exceeds the value of the company's assets. That is, even if all the company's property is sold, the proceeds will not be enough to settle all creditors. This indicates the impossibility of fulfilling obligations in full.

Consequences of bankruptcy

  • Termination of business activity.

After being declared bankrupt, the company ceases its economic activity. It can no longer produce products, provide services, carry out any operations.

  • Transfer of property rights to the liquidation commission.

Management of property and assets passes from the owners of the enterprise to the liquidation commission. She receives the authority to dispose of property in order to satisfy the demands of creditors.

  • Suspension of fines.

Interest, fines, and interest for using other people's funds are no longer charged on all types of debt of the bankrupt enterprise.

Importantly! Do not forget about advantages such as - the opportunity to get rid of debts, close unprofitable production, get a chance to resume business.

Is bankruptcy right for your business?

To determine whether bankruptcy is right for your business, you need to analyze several key indicators:

  • Debt level - does the company have large amounts of overdue payables or credit? Do debts exceed assets?
  • Solvency - is the company able to fulfill current obligations to counterparties and the budget in a timely manner?
  • Performance - is the company profitable or unprofitable?
  • Recovery prospects - are there real ways to restore solvency and profitability without bankruptcy?

If there are signs of a deep financial crisis, lack of prospects to correct the situation, bankruptcy may be the optimal solution. But it is better to contact specialists for a comprehensive assessment.

Legal aid

In case of signs of bankruptcy, it is recommended to contact professional lawyers who will help to objectively assess the situation. In particular, the legal company "Prykhodko and Partners" employs experienced bankruptcy experts.

They will be able to analyze the company's financial condition, suggest ways out of the crisis, accompany the bankruptcy procedure or help avoid it.

Professional legal assistance is the key to making balanced decisions regarding the bankruptcy of an enterprise and minimizing its negative consequences.

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