The concept of insolvency (bankruptcy) of a legal entity is familiar to government officials, entrepreneurs, specialists, as well as students of economic and legal specialties. Someone who encountered this term studies tickets for the exam, someone writes term papers or thesis. In a later and difficult period of life, this phenomenon is encountered in courts and government bodies, entering various commissions or, in the worst case, being the owner of an insolvent enterprise. Next, we will reveal in more detail the features of insolvency (bankruptcy) of legal entities.
Bankruptcy: A General Concept
If we consider this term in the generally accepted form, then its meaning is insolvency. Similar situations arise at a time when an enterprise or individual cannot settle its obligations with respect to banks, tax authorities, suppliers or other categories of creditors.
However, in vernacular, an unemployed person is sometimes called bankrupt, and his livelihood has run out.
General characteristics of insolvency (bankruptcy) of a legal entity and stereotypes of insolvency have much in common. Outside of economic and legal relations, when a person does not have money or is not enough to pay off debts, as already mentioned, he is called bankrupt. Regulatory acts provide more detailed information. About her - further.
Bankruptcy (insolvency) of a legal entity in terms of legislation
It is important to note that this phenomenon cannot be described by any single legal act. In the Russian Federation, the Federal Law “On Insolvency (Bankruptcy)” of legal entities N 127- of 2002 acts as the main regulator of the legislation. In addition to the above-described act, the procedure and concept of bankruptcy are regulated by the Civil Code of the Russian Federation. After 127-FZ, the Civil Code occupies an important position and a central place. The latter also regulates the insolvency (bankruptcy) of legal entities and individuals.
In addition, other federal laws can be included in this list:
- Federal Law of February 25, 1999 N 40- "On the insolvency (bankruptcy) of credit organizations" (as amended).
- Federal Law of June 24, 1999 N 122- "On the Peculiarities of Insolvency (Bankruptcy) of Natural Monopolies of the Fuel and Energy Complex".
- Decree of the Government of the Russian Federation of February 3, 2005 N 52 "On a regulatory body that monitors the activities of self-regulatory organizations of arbitration managers."
This also includes many other Federal Laws on the insolvency (bankruptcy) of legal entities, which are applied in accordance with a particular situation.
The above acts include such basic concepts as:
- insolvency (bankruptcy) of legal entities;
- obligatory payments.
A debtor may be an individual, individual entrepreneur, or legal entity that is not able to repay their creditors' claims for monetary obligations or obligatory payments within the period established by the insolvency (bankruptcy) law of individuals.
Lender - as a rule, this is a legal entity in respect of which the debtor has the obligation to pay financial debt.
Bankruptcy (insolvency) of a legal entity is recognized by the arbitration court. It is understood as the lack of the ability of the debtor to satisfy the creditor's claims regarding monetary obligations.
Mandatory payments are taxes, duties, various fees and deductions, for example, to the Pension Fund or to employee health insurance.
In general, the legal regulation of insolvency (bankruptcy) of a legal entity is a rather complex system. This is the interweaving of many rules of law at various levels, as well as the provisions and articles from the Civil Code of the Russian Federation that define such a thing as insolvency (bankruptcy) of legal entities. Briefly explaining it is almost impossible.
In terms of office management
The concept and signs of insolvency (bankruptcy) of a legal entity include many elements. If we consider the procedure for identifying insolvency on the basis of judicial law, then, as described above, the fact of bankruptcy itself should be established by the arbitration court. The meaning of this is to resolve the aggravated situation between the enterprise and creditors legally. The main goal is to effectively distribute the property of the enterprise and, if possible, satisfy the interests of both parties to the conflict, namely, the enterprise and creditors.
The law on the insolvency (bankruptcy) of legal entities states: an organization is considered insolvent if the obligation to pay debts has not been fulfilled within three months from the date of delay.
In addition, the legislation provides an opportunity for organizations to improve the situation, but only under the control of the arbitration court, the banks themselves, as well as special commissions and managers, which will be discussed later.
Bankruptcy from an economic point of view
In general, the definition is similar to the legal one. The concept and signs of insolvency of a bankruptcy of a legal entity: in this case, insolvency is understood as the need to undergo the liquidation procedure or its recovery. This is due to the fact that the borrowing organization is not able to satisfy the requirements of creditors.
This situation occurs when there are certain symptoms of bankruptcy, that is, the reasons why the company cannot pay its debts. This may include, for example, improper management of the company when, due to the actions of management or persons performing certain duties, the company begins to incur losses and gradually goes bankrupt. Another reason may be the external environment: a sharp fluctuation in demand for a product or service, global economic factors, such as surges in exchange rates, as well as the entry of stronger competitors into the market or their collusion. Sometimes the political environment, such as sanctions, can influence. It also includes technical factors - malfunctions in the field of bank payments or equipment failure in the case of various financial enterprises can become critical.
Sometimes the cause of insolvency can be deliberate criminal actions of employees of the organization, for example, avoiding taxes or paying off debts, as well as withholding or withdrawing assets of the company. However, such actions are strictly punishable in accordance with the Criminal Code of the Russian Federation.
Signs of insolvency (bankruptcy) of a legal entity
With rare exceptions, virtually no enterprise can go broke in a jiffy. Before the organization goes into the insolvency stage, it will acquire a number of criteria, which are collectively called a pre-bankrupt state.
A formal sign is the inability for a long time to pay off their various obligations. In general, their appearance also means the initiation of litigation.
When conducting an audit, the most effective is a comprehensive review of informal signs of bankruptcy. Often control over such trends helps save the company not only from insolvency, but also from unnecessary procedures associated with improving the financial situation. Informal features can be divided into two conditional subspecies:
- documentary - one way or another related to financial statements, accounting and management accounting;
- indirect - related directly to the management of the enterprise, management model and behavior of those responsible.
So, documentary signs are those that are somehow reflected in the financial statements and in other documents of the enterprise. They appear again in the long-term debt of the organization to creditors, as well as in sharp changes in the balance sheet. For example, it can be the appearance of a large amount of available funds at the enterprise, a sharp increase or decrease in stocks, a delay in wages, large receivables. In general, these are any unreasonable significant changes that affect the financial component of the organization.
Indirect signs of insolvency of a bankruptcy of a legal entity are, as a rule, the earliest. The failure of organizations begins precisely with such trends. As mentioned above, this is primarily a change in the behavior of the management of the company or some responsible persons. It is very important to pay attention to conflicts within managers, as well as to various unreasonable innovations (attempts to speculate, inadequate pricing policy, etc.). If one of the owners of the enterprise abruptly sells his share, then this will also be an indirect sign of an unfavorable situation. This also includes a sharp change in long-term plans, the company's strategy, which can lead to an outflow of customers and, as a result, financial difficulties that will give rise to the entire chain, up to liquidation.
This is a very important procedure for the debtor enterprise - in fact, a second wind that can save the organization. It consists of two measures: external management and rehabilitation.
External management consists in transferring the property of the debtor to a specially appointed arbitration manager. The procedure is carried out by decision of the court. If the problems at the enterprise were connected precisely with the illiterate (and sometimes criminal) actions of the senior management, then external management can lead the organization out of the crisis, especially in large firms with a large number of assets or production capacities.
Remediation is a measure that consists in additional financing of a debtor enterprise. Sources of funds for assistance may be the state, the owner of the enterprise, and in some cases, creditors. Such measures are often applied to strategically important enterprises for the country, for example, various factories or banks.
These procedures allow you to gradually curtail the activities of a bankrupt company. Conventionally, these measures can be divided into two subspecies:
- voluntary liquidation (under the control of creditors);
- forced (by court order).
In the first case, the organization minimizes its activities through the conclusion of a settlement agreement. As a rule, the lender receives part of the borrower's property or some other way to resolve the conflict. Similar agreements can be signed at any time and at any stage of the bankruptcy litigation.
Forced liquidation involves a lengthy lawsuit that, by law, will resolve the dispute between the lender and the borrower. In this case, various administrative levers will be used, the distribution of property between banks, moreover, sanctions against responsible persons are possible.
Types of Bankruptcy
As a rule, it is customary to classify various concepts in economics and law for convenience. The insolvency (bankruptcy) of legal entities is divided into various subspecies. The following will be the most frequently encountered:
- Real bankruptcy. It is characterized by the inability of the organization to pay its obligations due to losses and the outflow of equity and borrowed capital. Based on this, business management at such an enterprise becomes impossible. Further, the arbitration court legally declares such a company insolvent.
- Temporary Bankruptcy. Often associated with large receivables, in which a significant portion of the product was not paid, but remained liquid. This leads to the appearance of debts to creditors, as well as to the reflection of problems in the financial statements of the enterprise. Such situations are not uncommon; in such cases, the arbitration court or creditors may give additional time to fulfill obligations. A third party manager or oversight of the company may also be appointed. A large percentage of such enterprises are recovering.
- Intentional bankruptcy. It has the most serious consequences for enterprise management. As a rule, it is used for the purpose of hiding assets, tax evasion, sale or separation of property, theft and other illegal activities. Such processes usually turn into criminal cases against company executives, as well as millions of fines and prohibitions on holding certain positions for a long time.
- Fictitious bankruptcy (insolvency) of a legal entity. The scheme is similar to the previous type, but its purpose is to obtain the most favorable conditions from lenders, for example, reducing interest rates on loans or deferring payment. Like the previous type of insolvency, in most cases it creates grave consequences for company executives, including criminal cases and real prison sentences.
Bankruptcy of individuals
In this case, a different procedure for considering insolvency is provided. Relations with authorities, courts, and lenders are regulated differently. Now the Federal Law No. 476-FZ (on the bankruptcy of individuals) is applied, which they began to use in October 1, 2015. Based on this normative legal act, any citizen of the Russian Federation can declare his insolvency under the following conditions: the debt is overdue for more than three months, there are documents that confirm the inability to pay off the debts (copy of labor, unemployment certificate, etc.) .), as well as the amount of debt that exceeds five hundred thousand rubles.
The bankruptcy process itself includes three stages. The first stage is an appeal to the judicial authority, and the application can be submitted not only by an individual, but also by his creditor. Next, the applicant’s petition is considered, and if it is satisfied, the third stage will begin - the trial itself .
So, an individual was declared bankrupt. In this case, all debts regulated in the law, or a certain part of them, are written off. However, this will entail some negative consequences, for example, the debtor will not be able to occupy leadership positions for five years, and there will also be problems with obtaining loans.
Recommendations for legal entities
In the case of entrepreneurs, the most favorable option would not be in situations where the risk to the financial condition of the organization is great. Comprehensive bankruptcy prevention measures can help here. First of all, this is compliance with all laws, common sense, control over your employees and reporting, and, of course, audit.
There are a fairly large number of consulting and audit firms, private specialists, accountant-outsourcers working remotely or arriving at the right time. These specialists can not only help prevent the bankruptcy (insolvency) of a legal entity, but also improve the desired performance and quality of work in general.
If an unfavorable situation has occurred, and the enterprise is in a state of bankruptcy, it is better not to delay the process in search of some workarounds, but to act voluntarily. Do not waste time and deceive creditors. This will only aggravate the situation and may add additional problems, such as fines and more serious sanctions, up to criminal punishment.
Also, if the company does not have a full-time lawyer, then you should attract a competent specialist, perhaps this can reduce legal costs, the time of the process, and also save part of the company's property from sale.
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