Declaration of bankruptcy

The modern market economy is often accompanied by such a phenomenon as bankruptcy. Bankruptcy is understood as the inability of the subject of business activity – the debtor – to restore its solvency, thereby satisfying the demands of creditors without applying the liquidation procedure.

Among the main reasons for bankruptcy:

1. Significant imbalance of positive and negative cash flows.
2. Significant excess of liabilities over available assets.
3. Prolonged insolvency of the company or enterprise.

Types of bankruptcy

Among the most common types of bankruptcy are:

• Real bankruptcy

In this case, the enterprise is completely unable to restore its solvency and financial stability in the next period due to a real loss of capital. Enterprises that find themselves in a similar situation are declared bankrupt.

• Deliberate bankruptcy

The owner or manager of the enterprise intentionally increases or artificially creates its insolvency, causes serious economic losses in its own interests or in the interests of third parties. If these facts are discovered, the manager or owner faces criminal proceedings.

• Fictitious bankruptcy

Providing false information about the company’s insolvency. The goal is to mislead creditors. Such actions are also subject to criminal liability.

• Technical bankruptcy

This option of bankruptcy is caused by a significant overdue/exceedance of debt on debits over granted loans. In these cases, the amount of assets significantly exceeds the available financial obligations. If effective anti-crisis management is used, the company, in most cases, is not legally declared bankrupt.

Bankruptcy procedure

A bankruptcy case can be initiated against a business entity – a natural or legal entity. State-owned enterprises are not the subjects of bankruptcy.

Both the debtor and the creditors can apply for bankruptcy proceedings to the commercial court.

An application to initiate a bankruptcy case must be submitted to the commercial court at the debtor’s place of residence (registration). The written application is drawn up in accordance with Article 11 of the Law on Bankruptcy and Article 162 of the Economic Procedure Code of Ukraine. Without special knowledge and experience, it is quite difficult to correctly file an application for recognition of bankruptcy. PRIKHODKO & PARTNERS specialists will help you with this.

Within 5 working days from the moment of receipt of the application to the commercial court, its further fate is decided, namely:

1. Application acceptance.
2. Refusal to accept the application.
3. Return of the application without consideration.

Please note: a person can withdraw his bankruptcy application before the day of the preliminary court hearing.

Initiation of a bankruptcy case is a reason for an on-site unscheduled inspection by the state fiscal service.

Bankruptcy procedure stages

After bankruptcy proceedings have been opened, new rules apply to the debtor:

• Interest and fines are not accrued on overdue obligations.
• A moratorium on meeting creditors’ demands is introduced.
• Alienation of the debtor’s property takes place upon agreement with the arbitration administrator in a previously determined manner.

Debt restructuring is the best option for ending the bankruptcy case. This is beneficial for both the debtor and the creditors. The declaration of bankruptcy contributes to the repayment of debts and the restoration of the solvency of an individual or legal entity.

The next step is to prepare a restructuring plan. In this plan, the amount of creditors’ claims recognized by the court is indicated, indicating the priority and the amount of the debt. Information on all available and expected income of the debtor must also be indicated. After the court approves such a plan, the debtor loses some rights:

1. Pledge.
2. Conclude loan agreements, life support agreements, etc.
3. Enter into agreements regarding the encumbrance or alienation of movable and immovable property (its value must exceed 10 times the minimum wage).

Professional lawyers of “PRIKHODKO & PARTNERS” will help to provide professional advice and draw up all the necessary documents regarding recognition of bankruptcy. Sign up for a consultation!