Financial rehabilitation and bankruptcy of enterprises

Financial rehabilitation and bankruptcy are two different legal mechanisms that apply to companies in a state of financial crisis.

1. Financial rehabilitation is aimed at improving and preserving the enterprise. Its purpose is to restore the company’s solvency, overcome financial difficulties and ensure the continuation of its activities. It provides for a set of measures for financial recovery, debt restructuring and optimization of business processes.
2. Bankruptcy, on the other hand, is a procedure for the liquidation of an enterprise that is recognized as unable to restore its solvency.

Comparison of financial rehabilitation and bankruptcy

Although both procedures apply to companies with significant financial difficulties, they have significant differences in objectives, methods and consequences.

• Financial rehabilitation

Goal:

• Restoration of solvency and financial stability of the enterprise. This is a process of financial recovery aimed at overcoming the crisis and returning the enterprise to normal functioning.

Activities:

• Debt restructuring.
• Reorganization of production.
• Cost reduction.
• Investment attraction.

Procedure:

• Sanitation can be carried out by a court decision in the framework of a bankruptcy case or with the consent of creditors without judicial intervention.
• The process involves the development of a rehabilitation plan, its approval by creditors and its implementation under the supervision of an appointed rehabilitation manager.

Consequences:

• Preservation of the enterprise as a functioning economic unit.
• Preservation of jobs, which is important from a social point of view.
• Saving tax revenues to the budget.
• An opportunity for lenders to get more money in the long run.

• Bankruptcy

Goal:

• Satisfaction of creditors’ claims through the sale of the debtor’s assets. This happens when the restoration of the company’s solvency is no longer possible.

Activities:

• Liquidation of property.
• Settlement with creditors.
• Exclusion of the debtor from the register of legal entities.

Procedure:

• Bankruptcy is conducted under the supervision of a court-appointed receiver. The process includes the identification and assessment of assets, the formation of a register of creditors’ claims, the conduct of auctions for the sale of property and the distribution of received funds.

Consequences:

• Termination of the enterprise.
• Loss of jobs.
• Reduction of tax revenues.
• Possible economic consequences for partners and counterparties of a bankrupt enterprise.

What to choose?

The choice between financial rehabilitation and bankruptcy depends on the specific situation and prospects of the company’s development.

Financial rehabilitation may be appropriate if:

• The company has potential for recovery;
• There are real opportunities for debt restructuring and cost reduction;
• There are investors who are ready to invest in the development of the enterprise.

Bankruptcy is more likely if:

• The company has significant debts that cannot be restructured;
• There are no prospects for business development;
• The activity of the enterprise poses a threat to its creditors.

Recommendations for action

The choice between financial rehabilitation and bankruptcy is a decision that requires
there is careful analysis and a balanced approach. When making such a decision, it is necessary to take into account all important factors affecting the current state and prospects of the enterprise.

Professional legal support plays an important role in this decision-making process. Specialists of the company “Prykhodko and partners” specialize in providing assistance in matters of financial rehabilitation and bankruptcy. Experienced lawyers are ready to provide comprehensive support at all stages of the process: from the initial analysis of the situation to the development of a strategy and its practical implementation.

We provide an individual approach to each client, taking into account the specifics of their business and the specific circumstances of the case.