Bankruptcy of a legal entity

According to the legislation of Ukraine, bankruptcy of a legal entity is the inability of an enterprise to fulfill its financial obligations to creditors, recognized by a commercial court.

Simply put: when a company cannot pay its debts, it can be declared bankrupt.

Importantly! Bankruptcy is not always a collapse.

In some cases, it can become a chance for a new life for the enterprise.

With the help of the rehabilitation procedure, it is possible to restructure debts, restore solvency and continue work.

Signs of bankruptcy of a legal entity

Signs of bankruptcy include:

• Inability to settle obligations on time: delayed payments to suppliers, lessors, employees, creditors.
• Fall in sales volumes: decrease in demand for products or services, decrease in income.
• Delays in the payment of wages: late payment of wages to employees.
• Increasing indebtedness: increasing the amount of debts owed to creditors.
• Loss of liquidity: lack of funds to cover current expenses.
• Loss of key customers: Loss of a significant portion of the customer base.
• Deterioration of business reputation: negative image in the market.

One of the most common reasons that leads an enterprise to bankruptcy is numerous mistakes in management. If the management does not react in time and does not take the necessary measures, the situation can quickly deteriorate. This could lead to downsizing and reduced internal payments.

Timely detection of signs and elimination of the causes of bankruptcy is critical for ensuring the stable operation of the enterprise. Management must closely monitor financial indicators and promptly take appropriate measures at the first signs of problems.

Bankruptcy procedure of a legal entity

The bankruptcy procedure is complex and multi-stage:

1. Filing an insolvency petition.
2. Opening of bankruptcy proceedings.
3. Moratorium on satisfaction of creditors’ demands.
4. Disposition of the debtor’s property.
5. Rehabilitation plan or liquidation.
6. Closure of proceedings.

Consequences of bankruptcy of a legal entity

One of the key consequences of bankruptcy for a legal entity is the possibility of its liquidation and complete cessation of activity.

After the recognition of the organization or enterprise as bankrupt, an arbitration manager is appointed in court, who conducts the liquidation procedure of the legal entity. This involves the following steps:

1. Inventory and evaluation of all property and assets of the bankrupt.
2. Sale of the debtor’s property at open auctions to accumulate funds.
3. Distribution of proceeds among creditors in accordance with the defined sequence of claims.
4. Dismissal of employees and settlement with them.
5. Closing all bank accounts of a legal entity.
6. Exclusion of the organization from the Unified State Register of Legal Entities.

Thus, after completion of the liquidation procedure, the legal entity ceases to exist as a business entity. Liquidation is a last resort in bankruptcy proceedings when other attempts to restore the debtor’s solvency have failed.

How much does a company bankruptcy procedure cost?

The bankruptcy procedure of a legal entity involves mandatory costs. The main part is the remuneration of the arbitration administrator, which currently amounts to 60,300 hryvnias. In addition, a creditor who initiates a bankruptcy case must pay a court fee of 26,840 hryvnias.

To this may be added other costs in the course of the case, for example, payment for the services of appraisers, experts, representatives, etc. But the specified amount is an unavoidable minimum for initiating the bankruptcy procedure of a legal entity.

Legal positions of the Supreme Court in cases of bankruptcy of legal entities

The Supreme Court plays a leading role in the formation of a unified judicial practice regarding the bankruptcy of legal entities.

The key positions of the Supreme Court are:

1. Defining insolvency as a permanent inability to fulfill monetary obligations.
2. Explanation of bankruptcy procedures – disposal of property, rehabilitation and liquidation, their purpose and conditions of application.
3. Rights and obligations of participants in bankruptcy procedures, in particular, the debtor and creditors.
4. The procedure for appealing court decisions in bankruptcy cases.

The Court also provided an explanation regarding the recognition of creditors’ claims, the order of their satisfaction, the sale of the debtor’s property, payments to employees, etc.

The legal positions of the Supreme Court ensure the unity of judicial practice and legal certainty in the field of bankruptcy of legal entities and are subject to mandatory application by the courts.

Are you interested in filing bankruptcy for your company? Fill out the short form below, and the lawyers of “Prykhodko and Partners” will provide you with a detailed estimate of the estimated cost of this procedure for your specific situation!

Do not delay, find out the real cost of the bankruptcy procedure for your company right now! Start the path to financial recovery of your business with our professionals.