Sanitation is a set of measures to prevent bankruptcy

Sanitation is a series of legal, financial, economic and organizational measures aimed at improving the financial condition of enterprises in order to prevent bankruptcy. This term was derived from the Latin word sanatio, which in translation means healing. Sanitation is a system of measures that is especially necessary for many enterprises in the face of economic crises. However, these measures are applicable only to firms that have a certain potential for restoring their solvency.

Basically, there are three cases where sanitation is carried out.

• The enterprise, on its own initiative, is trying to overcome the crisis.
• The firm applies to arbitration in order to recognize its bankruptcy and conduct recovery.
• The decision of the arbitration court on the basis of applications received from creditors.

The main goals of recovery

• Repayment of debts to creditors.
• General restructuring of debts.
• Improvement of the state of finances and restoration of economic activity.
• Changing the structure of the enterprise.

Activities can be pre-trial and judicial.

Pre-trial rehabilitation is a measure to reorganize an enterprise using the financial assistance of owners or creditors, which is aimed at restoring solvency. To pre-trial activities also includes an independent recognition of bankruptcy of the company. However, this requires written permission from creditors. If at least one of them does not agree, then the head for the recognition of bankruptcy must apply to arbitration.

Judicial readjustment is the declaration of bankruptcy by appealing to the arbitration court with subsequent transfer of authority to manage the firm to the external administrator. Recovery can not last longer than 18 months. If the situation does not change and solvency can not be restored, then the enterprise is finally declared bankrupt and the bankruptcy proceedings begin .

Recovery plan

The main document according to which the enterprise is being reorganized is its plan. It substantiates the main objectives, as well as outlines ways to achieve them. The rehabilitation plan is an example of what actions need to be taken to restore the firm's solvency and return it to productive economic activities. The main objectives of the plan are the technical re-equipment of the enterprise, the increase in the volume of production and its successful implementation. By these methods, the debtor is fully recovered. Timely sanation is a set of measures that can save an enterprise from complete bankruptcy. It can be conducted both without changing the legal status of the debtor, and with its change.

Basic methods of recovery.

• Decrease in the share capital and reduction of issue of new shares.
• Receiving loans, loans, government subsidies.
• Merger or absorption by a larger structure.
• Liquidation of the company and creation of a new one.

Sanitation is an effective tool that helps enterprises overcome the crisis and continue normal economic activities.