FZ "On bankruptcy": the main provisions

Insolvency or the so-called bankruptcy is the inability of the debtor to pay off its debts to the borrower within the prescribed period, as well as the lack of ability to satisfy the requirements of the budget and off-budget funds.

According to the Federal Law on bankruptcy, only an arbitration court can declare insolvency on the basis of an application of creditors or the borrower himself. Bankruptcy can only be a legal entity or any organization engaged in commercial activities, except for state-owned enterprises, a pension or charity fund.

The Federal Law (FZ) on bankruptcy of legal entities presupposes the liquidation of an enterprise only after an attempt to restore the solvency of a legal entity by conducting preventive measures. The purpose of these procedures, first of all, is the calculation with all creditors and the budget, and secondly - a full restoration of solvency.

Actions to prevent bankruptcy are meaningful only if the debtor company agrees and can be initiated by creditors, government agencies, etc. According to the Federal Law on Bankruptcy, the basis for submitting an application to an arbitration court is:

- presence of overdue debts with a period of not less than three months;

- the inability of the organization to pay its debts in the near future.

The debtor is obliged to notify all his creditors of the holding of preventive measures. If all the requirements are met, the judge, within five days of filing, reviews the application and makes a final decision.

First, to assist the enterprise in restoring its solvency, the arbitration court introduces the manager, who performs supervisory and control functions. A month later the manager provides a report on the work done.

If necessary, the legislative norms are edited according to current trends and norms. For example, changes were made to the Federal Law on insolvency (bankruptcy), involving an expansion of the list of measures aimed at meeting the demands of creditors.

The maximum term for hearing a bankruptcy case should not exceed seven months. Based on the conducted studies, a decision is made to declare the debtor bankrupt. A measure may be introduced, such as bankruptcy proceedings, financial recovery or external management. Moreover, at each stage an amicable settlement can be concluded by mutual agreement of the parties with full settlement of all obligations with creditors.

The main task of the arbitration court is not to declare the liquidation of a legal entity, but in accordance with the Federal Law on bankruptcy granting assistance to an enterprise that has fallen into a difficult situation. Elimination is carried out only after all of the above measures have not produced the proper result. Then the activities of the manager will be directed at satisfying the demands of creditors and state bodies. The consideration of the case may be postponed on the basis of the debtor's request, if in the near future it plans to pay off all the debt it has.

As a rule, the introduction of external management gives hope for a significant effect. In a month, the external manager must provide a report on the work done and information on the prospects for further activities. After full satisfaction of the claims of creditors and the budget, the prospects of the legal entity, that is, the expediency of its existence, are evaluated. The arbitration judge makes a verdict: either states the impossibility of further activity, or fixes a positive trend of temporary management and allows the legal entity to continue its activity with new forces.