Bankruptcy of a legal entity (enterprise)

Bankruptcy of a legal entity (enterprise) is recognition by the court of the fact that the debtor does not have the possibility of restoring solvency. In addition, the commercial court prepares an order according to which the recovery of the solvency of the debtor legal entity is possible with the help of rehabilitation or complete liquidation of the enterprise. Before bankruptcy is declared, payables, receivables and assets are studied. PRIKHODKO & PARTNERS specialists will help you with this.

Reasons for bankruptcy of a legal entity (enterprise)

Bankruptcy of the enterprise consists in an insufficient amount of assets in liquid form. It is these assets that must meet the requirements of creditors in the appropriate terms defined by the contract.

Possible reasons for the bankruptcy of a legal entity can be divided into 2 groups:

• External

Bankruptcy of debtors, economic or political reasons.

• Internal

Deficit of working capital, increasing debt, falling demand for the company’s products/services.

Among the main signs of bankruptcy: suspension of current payments; reduction in sales volume; delays in payment of wages.

One of the most common reasons for the bankruptcy of a legal entity (enterprise) is making numerous mistakes in management. The manager must take appropriate measures as promptly and accurately as possible. If this is not done in a timely manner, there will be a reduction in staff, internal payments, as well as rehabilitation – the enterprise will be supported exclusively by the investor.

The company is declared bankrupt both independently and in accordance with the decision of the arbitration court.

Grounds for initiating a bankruptcy case

The case of bankruptcy of a legal entity (enterprise) is initiated after the debtor or creditor submits an application to the court.

Importantly:

In order to declare a legal entity registered in a temporarily occupied territory or in a war zone as bankrupt, it is necessary to apply to the commercial court at the place of actual residence of the person. Jurisdiction of courts whose jurisdiction covers the war zone or the occupied part of Ukraine has been temporarily transferred to other courts.

The bankruptcy case involves:

1. Seizure of the debtor’s property

These measures are applied exclusively by the commercial court within the framework of bankruptcy proceedings.

1. Prohibition of fulfilling the requirements of the debtor – a legal entity
   It is prohibited to meet the requirements of a participant, founder or debtor – a legal entity regarding the possibility of allocating a share in the debtor’s property.
2. Restrictions on corporate rights
   The corporate rights of participants, shareholders or founders of a legal entity – an enterprise are exercised taking into account the restrictions established by the current legislation.
3. Reorganization or liquidation of the enterprise
   The decision to liquidate or reorganize the debtor legal entity is made in accordance with the Bankruptcy Code of Ukraine.

Advantages of recognizing the bankruptcy of a legal entity

The main advantage of the official recognition of bankruptcy is the possibility of debt write-off, including tax debts. After the court proceedings are opened, a moratorium is automatically declared on all creditors’ claims. In addition, the so-called “bad” debt is written off automatically.

Thus, bankruptcy is the only legal tool for exiting the enterprise from the market in the presence of debt obligations. This is an ideal option for enterprises that have significant debt to counterparties or the budget. Regardless of the amount and type of debt, the accrual of fines is stopped. Applying new burdens and restrictions is prohibited.

The lawyers of “PRIKHODKO & PARTNERS” will help prepare the necessary package of documents for the recognition of bankruptcy of a legal entity-enterprise. The key to our success is an individual approach to each client and the use of high-quality tools to achieve the set goals. Sign up for a consultation!