General characteristics and procedures for bankruptcy of an enterprise

January 15, 2006

The institution of bankruptcy throughout the world is considered one of the most important legal procedures regulating the relations of economic entities in the market, so it is quite understandable that the Russian legislator wants to develop a bankruptcy law that would allow establishing a stable, reliable system of legal relations, rights and obligations of entities in a situation of insolvency.

It's no secret that the civilized mechanism of the bankruptcy procedure often turns into an instrument of redistribution; it began to be used as a means to eliminate the owner. A special feature of the bankruptcy procedure in Russia is its liquidation nature. The new law “On Insolvency (Bankruptcy)” is intended, according to its authors, to restore the reputation of the bankruptcy procedure.

Action of law in time

As a general rule, the Law regulates relations arising after its entry into force. As for bankruptcy cases that were initiated in accordance with Federal Law No. 6-FZ of January 8, 1998 “On Insolvency (Bankruptcy)” (hereinafter referred to as Law No. 6-FZ) and proceedings for which were carried out at the time the Law came into force force, the provisions of Law No. 6-FZ apply until the end of a specific procedure (supervision, external management, bankruptcy proceedings). And from the moment the following procedure is introduced, legal relations will be regulated in accordance with the provisions of the new Law (Article 233 of the Law).

Measures to restore the debtor's solvency

Various measures can be taken to restore the debtor’s solvency during the period of external administration.

This is also important to know:
Bankruptcy of legal entities in 2020: step-by-step instructions for the procedure

In this case, the financial manager should focus only on their feasibility.

As a result, the following can be produced:

• closure of unprofitable production;
• opening new workshops to redevelop the company;
• retraining of employees;
• purchase of new equipment.

In this case, the manager may make large expenses if they are approved by creditors and promise to bring greater profits to the company in the future.

In addition, the manager can sell part of the debtor’s property to repay the loans.

Another measure to restore the enterprise’s economy is to attract financial resources from third parties in order to replenish the company’s authorized capital.

Concept of insolvency

The criteria and signs of insolvency remained the same. In accordance with Art. 2 of the Law, insolvency is the inability of a debtor to satisfy the claims of creditors for monetary obligations and (or) to fulfill the obligation to make mandatory payments within three months from the date on which they should have been fulfilled . But the Law changed the amount of debt of the debtor, which may entail the creditor filing an application with the arbitration court to initiate bankruptcy proceedings. Based on the minimum wage established at this time, the amount of claims against the debtor has doubled in comparison with Law No. 6-FZ (in relation to a debtor - a legal entity, the amount of claims is 100 thousand rubles, and in relation to a debtor - a citizen – 10 thousand rubles). The law also introduced an important provision regarding the claims of creditors against the debtor. Now, in accordance with paragraph 3 of Art. 6 of the Law, all claims of creditors against the debtor must be confirmed by a verdict of a court, arbitration court, or arbitration tribunal that has entered into legal force.

The new law expands the circle of persons who can be declared insolvent (bankrupt). In accordance with paragraph 2 of Art. 1 of the Law, all legal entities can be declared insolvent (bankrupt), with the exception of state-owned enterprises, institutions, political parties and religious organizations (clause 2 of Article 1 of the Law), while according to the provisions of Law No. 6-FZ in relation to non-profit organizations operating in the form of a consumer cooperative, charitable or other foundation, bankruptcy could not be initiated.

Ensuring bankruptcy procedures

Advice from lawyers:

1. She was going through bankruptcy proceedings and, in order to get her property out of harm’s way, she rented it out to her daughter. Singed an agreement. I have been declared bankrupt. Now my daughter has problems. She took out a loan, paid for two years, then lost her job and had nothing to pay. The bank filed an application with the court and demanded security for the claim in the form of seizure of property. We have no cars, dachas, land, only housing. We are talking about household property. What can be done in this situation?

1.1. Are we talking about a mortgage?

Did the answer help you?YesNo

1.2. No. The apartment is in shared ownership.

Did the answer help you?YesNo

1.3. Nadezhda, hello. Does the bank want to seize your daughter’s share in the apartment? Or what kind of property are we talking about? To lift the arrest, you must either pay off your debts or be declared bankrupt.

Did the answer help you?YesNo

Consultation on your issue

8

Calls from landlines and mobiles are free throughout Russia

2. The legal entity has been declared bankrupt, the sale of property and the bankruptcy procedure in general have been completed. For one of the collateral loans (partially repaid with sold property) there was a guarantor - an individual - there is a writ of execution for the guarantor (issued before the completion of the bankruptcy procedure). Is this writ of execution valid or is it necessary to ask the court to cancel measures to secure the claim or file for bankruptcy of this guarantor. We are talking about the amount of 1.5 million rubles.

2.1. Hello Nadezhda Yuryevna! According to paragraph 4 of Art. 149 of the Law “On Insolvency (Bankruptcy)” dated October 26, 2002 No. 127-FZ, bankruptcy proceedings (the last stage of the bankruptcy procedure) are considered completed, and the organization is liquidated from the day the corresponding entry is made in the Unified State Register of Legal Entities. Consequently, the requirement to the guarantor to repay the debt of the bankrupt debtor must be presented before this day. Then collect the remaining amount from the guarantor.

Did the answer help you?YesNo

3. Please tell me whether I need to pay a state fee when applying for additional measures to ensure the safety of the debtor’s property as part of the bankruptcy procedure?

3.1. In this case, this is neither a statement of claim nor a complaint. Therefore, such petitions are not subject to state fees.

Did the answer help you?YesNo

4. My ex-mother-in-law took out a loan from Sberbank. I provided the car as collateral as security for the loan. According to the decision there is something there, in general the point is that bankruptcy proceedings are underway. A temporary manager has been appointed. The question is: does the temporary manager have the right to take away this property, so to speak? After all, the collateral agreement was with the bank.

4.1. You need to resolve the issue with him and familiarize yourself with the documents.

Did the answer help you?YesNo

4.2. Hello! I am answering as a current arbitration manager. 1) The temporary manager does not have the right to take away anything, only interim measures are possible through the court to prohibit disposal, etc. this property 2) But when bankruptcy proceedings are introduced, the bankruptcy trustee is already the manager (general director) and has the right to dispose of the property. 3) If we are talking about the bankruptcy of a citizen, then according to the procedure for the sale of property, the financial manager has the right to dispose of the property.

Did the answer help you?YesNo

5. I am preparing for bankruptcy proceedings on previously taken out loans from 5 banks, I received them without guarantors and without collateral. I paid off all my loans while I could. All of them are over 500,000 tr. I received loans in Moscow, and is currently registered in Novosibirsk. Are there any restrictions regarding the number of banks? And where should I initiate the procedure, at the place of receipt or at the place where the loan was received?

5.1. There are no restrictions. the application is submitted to the arbitration court at the place of registration.

Did the answer help you?YesNo

6. What amount can the court assign to ensure bankruptcy proceedings for an individual? Are there limits on such amounts?

6.1. A minimum of 10 thousand rubles per procedure to pay the financial manager + for other legal expenses (this has not been established, approximately 15-20 thousand rubles). But this is not the main part of the costs of the bankruptcy procedure. Arbitration/financial manager Vitaly Snytko.

Did the answer help you?YesNo

7. In 2007, I took out a mortgage loan. There were 2 co-borrowers. In 2008, he lost his job. The monthly payment was unaffordable: 32,000 rubles. Stopped paying. The bank waited until 2009 and filed a lawsuit. The apartment was taken to secure the debt, and the court decided that we jointly and severally still owed 870,000 rubles. Then our debts went to the bailiffs. And they remain hanging there to this day. I decided to start bankruptcy proceedings for individuals. That's why I was wondering if my co-borrowers' debts would be removed?

7.1. No, they won’t withdraw it precisely because of their status as CO-borrowers.

Did the answer help you?YesNo

8. I found myself in a difficult situation, I had debts on loans, I paid regularly until February 2020, I had additional income, at the same time I went on maternity leave, I notified the bank about the current situation, asked for restructuring, the bank refused, the amount of debt is about 500 thousand rubles , there is no real estate, one of the assets is a car, it is pledged to a legal entity, as collateral for a loan, you can still pay it, tell me if you start bankruptcy proceedings for individuals. faces, will the car be put up for auction?

8.1. Hello. Yes, and the car will be displayed. Bankruptcy is a long, tedious and expensive procedure...

Did the answer help you?YesNo

9. I work in a dangerous industrial production, I haven’t been paid since March, but I have to work to ensure the life of the enterprise. There are rumors that the enterprise will go bankrupt, what should you do to get paid in case of bankruptcy? Can I quit before this procedure? How to find out that a company has been declared bankrupt?

9.1. Hello! In this case, you need to urgently go to court with a claim for recovery of wages. The statute of limitations for going to court is 3 months (Article 392 of the Labor Code of the Russian Federation)

Did the answer help you?YesNo

9.2. You can find out about bankruptcy through the tax office. But it’s better for you to file a lawsuit to collect your salary debt now.

Did the answer help you?YesNo

10. We took out a loan for an LLC company secured by real estate and equipment, I am the guarantor. I left the company, if the borrower is unable to pay the loan, will the bank go for restructuring or will bankruptcy proceedings begin, what could be the consequences and how can I get out of being a guarantor.

10.1. Hello, the bank will go to court with a claim to recover the collateral.

Did the answer help you?YesNo

10.2. The bank will file a claim to collect the debt. The borrower and the guarantor jointly and severally. The court will satisfy the demands and foreclose on the collateral. Further developments may follow several scenarios.

Did the answer help you?YesNo

11. The bank provided the borrower with a loan secured by a mortgage of the borrower’s real estate. Bankruptcy proceedings have begun against the borrower. The bankruptcy trustee did not take measures to ensure the safety of the pledged property. Can the bankruptcy trustee be held responsible for this?

11.1. The bankruptcy trustee will be obliged to compensate the debtor, creditors and other persons for the losses caused.

Did the answer help you?YesNo

12. By a court decision, I was compensated (as a defendant) for losses caused by securing the claim. However, the Debtor does not want to pay me the amount determined by the court - more than 1 million rubles. I was advised to start bankruptcy proceedings for the Debtor - LLC. Are there signs of bankruptcy in this case? The amount of debt is impressive - more than 1 million rubles.

12.1. Insolvency (bankruptcy) is understood as the debtor’s inability to satisfy creditors’ demands for payment for goods (works, services), including ensuring mandatory payments to the budget and extra-budgetary funds, due to the excess of the debtor’s obligations over its property or the unsatisfactory structure of the debtor’s balance sheet. An external sign of insolvency (bankruptcy) is the suspension of current payments if the debtor does not ensure or is obviously unable to ensure the fulfillment of creditors’ demands within three months from the date of their execution (Article 1 of the Law “On the Insolvency (Bankruptcy) of Enterprises”). Based on your question, the debtor simply does not want to pay the money, so your actions are to obtain a writ of execution and send it to the bailiff department for enforcement.

Did the answer help you?YesNo

13. Does the pledge agreement really become invalid upon termination of the main obligation (in this case, bankruptcy proceedings)? On what legal basis does this happen? With the completion of bankruptcy proceedings against the principal debtor, the principal debt is no longer collectible. In this case, how to remove the pledge from property owned by a third party, provided by him to secure the debtor’s main obligation.

13.1. In this case, the pledge is terminated automatically by force of law. It is necessary to submit the ruling of the Arbitration Court to the Federal Registration Service.

Did the answer help you?YesNo

Consultation on your issue

8

Calls from landlines and mobiles are free throughout Russia

14. Challenging the legality of attracting persons involved to ensure the activities of the bankruptcy trustee in the bankruptcy management procedure (bankruptcy).

14.1. Of course it can.

Did the answer help you?YesNo

14.2. To satisfy a complaint against the actions of the bankruptcy trustee related to the expenses incurred by him for carrying out bankruptcy procedures for the debtor, I advise you to: 1) prove the ability of the bankruptcy trustee to perform his duties without the involvement of specialists and, therefore, the presence of a need for their services; 2) prove that the book value of the debtor’s assets does not correspond to the expenses incurred for conducting competitive procedures, which exceed their limit; 3) draw and focus the attention of the court to the absence of acts of acceptance and transfer of work (services) performed (rendered) by specialists hired by the arbitration manager to support their activities during bankruptcy proceedings.

Did the answer help you?YesNo

15. On November 22, 2007, the Arbitration Court imposed interim measures to collect the current debt - seizure of the account. On November 21, 2007, bankruptcy proceedings were introduced at the enterprise. The request to cancel the security was rejected. Is this legal, taking into account clause 3, part 1, art. 63 Federal Law On Insolvency?

15.1. It is illegal; in bankruptcy, it is possible to take interim measures only in relation to property that is in dispute.

Did the answer help you?YesNo

16. On the issue of the petition for securing the claim No. 117901 of October 22, 2003 13:31. Dear Vyacheslav Alekseevich, yes, the monitoring procedure has been introduced until the hearing of the bankruptcy case on November 27 of this year.

16.1. Dear Valeria! If a decision is made to introduce a monitoring procedure on a bankruptcy petition, then from the date the arbitration court issues a ruling on the introduction of monitoring, claims of creditors for monetary obligations can be presented to the debtor only in compliance with the procedure for presenting claims to the debtor within the framework of the Bankruptcy Law, by virtue of Art. 63 of the Law “On Insolvency (Bankruptcy)”. In this case, the court will issue a ruling to leave your claim without consideration. As part of the bankruptcy procedure, the debtor's obligations to pay wages are decided by the employee representative and the arbitration manager. Sincerely,

Did the answer help you?YesNo

Participants in bankruptcy proceedings

Article 34 of the Law establishes a closed list of persons participating in a bankruptcy case, which include:

• debtor;
• arbitration manager;
• bankruptcy creditors;
• authorized bodies;
• federal executive authorities of the Russian Federation, executive authorities of constituent entities, municipal authorities;
• persons who provided security for financial rehabilitation.

The state body for bankruptcy and financial recovery, as well as the prosecutor, were excluded from the list and persons who provided security for financial recovery were added.

The difference between external management and the stage of financial recovery

Financial recovery and external management are two rehabilitation stages of the bankruptcy procedure. They are introduced in relation to the debtor and have the main goal of maintaining the company as a market entity. Both procedures provide preferential conditions for conducting business and are introduced by a court decision or the first meeting of creditors.

Free legal consultation We will answer your question in 5 minutes!

Call: 8 800 511-39-66

Free legal consultation

We will answer your question in 5 minutes!

Ask a Question

This is also important to know:
Features of bankruptcy of strategic enterprises and organizations

InformationThe fundamental differences between these two stages lie in the organization of financial and economic rehabilitation of the debtor organization. At the recovery stage, management remains with the company’s management (with limited powers), and in the case of external management, these functions fall on the shoulders of a court-appointed manager. There are differences between the stages of external management and financial recovery in the methods adopted to restore the debtor’s work. Financial recovery in a general sense is an installment plan for repaying accounts payable under certain guarantees. During external management, a set of measures is used to change the strategy of running a legal entity.

Application for bankruptcy

Article 7 of the Law, compared to the previous Law, expands the range of persons who have the right to apply to an arbitration court to declare a debtor bankrupt. If previously such rights were possessed by the debtor, creditor and prosecutor, now authorized bodies have been added to them - federal executive authorities, executive authorities of constituent entities of the Russian Federation and local governments, which represent the interests of the state in bankruptcy cases.

Please note that a creditor can apply to an arbitration court to declare a debtor bankrupt only if the following conditions are met:

• the creditor's claims are confirmed by a decision of a court, arbitration court, or arbitration tribunal;
• 30 days have expired from the date of sending the writ of execution to the bailiff service.

The authorized body has the right to apply to the arbitration court if:

• there is a decision of the tax or customs authority to collect the debt at the expense of the debtor’s property;
• 30 days have passed since the date of such decision.

Therefore, the applicant is obliged to attach to the application, firstly, a decision of a court, arbitration court, arbitration court or decision of an authorized body that has entered into legal force; secondly, evidence of the direction (presentation for execution) of the writ of execution to the bailiff service and its copy to the debtor (along with other documents specified in Article 39 of the Law).

Bankruptcy can be an effective debt management mechanism

More than 125 billion rubles went to the budget in 2020 as a result of the work of tax authorities to support bankruptcy procedures, said Deputy Head of the Federal Tax Service of Russia Konstantin Chekmyshev at a meeting-seminar with territorial tax authorities. Such results were achieved thanks to new approaches to initiating bankruptcies, as well as more active work on bringing to subsidiary liability, challenging transactions, collecting payments, etc.

Digitalization plays a big role in this direction, added Konstantin Chekmyshev : “Modern analytical systems make it possible to determine, including hidden assets and liabilities of the debtor, identify the real beneficiaries of the business, and determine the range of relationships with other parties to the transaction. This is the basis of an effective debt management strategy.”

The head of the department for ensuring bankruptcy procedures Kirill Kharitonov , in turn, said that a third of bankruptcy proceeds are voluntary repayment of debt as part of conciliation procedures. “Bankruptcy procedures must be cost-effective for the state as a creditor. At the same time, it should be more profitable for the debtor to repay the debt to the budget than to evade payment. On the one hand, mechanisms to combat abuse are being developed, and on the other hand, for those who comply with the law, the Federal Tax Service of Russia offers conciliation procedures to overcome the financial crisis. This allows businesses to save their companies, jobs, and the state to receive regular revenues to the budget,” noted Kirill Kharitonov .

Special attention at the seminar-meeting was paid to the interaction of the structural divisions of tax authorities in dealing with debt, ensuring bankruptcy procedures, as well as the legal and control blocks. “High efficiency of debt collection is achieved only by combining specialists from several areas. It is important to start dealing with debts before they arise. We have created criteria by which the taxpayer himself can assess his risks. The project approach has proven its effectiveness - revenues from its implementation have quadrupled over three years,” added Kirill Kharitonov .

This year the format of such meetings has changed. Along with traditional reports, interactive events were held where representatives of the regions were able to discuss key provisions of current legislation and approaches to work. Thus, in a round table, the participants discussed the main problems of appealing debtor transactions and objections to fictitious claims of creditors. Regions that have achieved positive results in interaction with law enforcement agencies held master classes on organizing work. More than 20 regions participated in the preparation of proposals for a strategy for supporting legally complex bankruptcy cases.

// Federal Tax Service

Arbitration manager

The main character of the entire bankruptcy procedure is the arbitration manager, whose status is significantly changed by the Law.

The article of the Law introduced two new criteria that the arbitration manager must satisfy: he must be a citizen of the Russian Federation, as well as a member of a self-regulatory organization. Licensing of the activities of arbitration managers has sunk into oblivion, but the requirements for the candidacy of a manager have become stricter. So, according to paragraph 1 of Art. 20 of the Law, the arbitration manager must:

• be registered as an individual entrepreneur;
• must have a higher education;
• have a total of at least two years of leadership experience;
• pass the theoretical exam in the training program for arbitration managers;
• undergo an internship for a period of at least six months as an assistant to an arbitration manager;
• be a member of a self-regulatory organization.

The arbitration manager must not have a criminal record for crimes in the economic sphere, as well as for a crime of medium gravity, serious or especially serious crimes.

In addition to the above mandatory requirements, bankruptcy creditors (meeting of creditors) themselves have the right to present additional requirements to the arbitration manager, a closed list of which is established by Art. 23 Laws:

• requirement that the candidate has a higher education in a specific field (legal, economic or other);
• the requirement that the candidate have a certain amount of work experience as a manager of an enterprise in a specific industry;
• establishing the number of bankruptcy procedures carried out by the candidate as an arbitration manager.

An important innovation of the Law is the introduction of financial liability of insolvency practitioners by insuring their liability. Each arbitration manager must annually enter into a liability insurance contract with its subsequent renewal for the same period. The minimum amount of financial support must be at least 3 million rubles. (clause 8 of article 20 of the Law). In addition, the arbitration manager must additionally insure civil liability for a specific case in an amount depending on the book value of the debtor’s assets.

Approval of the candidacy of the arbitration manager

The Law significantly changed the procedure for approving an arbitration manager (Article 45 of the Law). If previously, in accordance with Law No. 6-FZ, the candidacy of an arbitration manager was chosen by a meeting of creditors, and the arbitration court only approved the corresponding candidacy, now the meeting of creditors has the right only to submit to the court an application with requirements for the candidate, indicating the amount of remuneration and the self-regulatory organization of which he must be a member. be a candidate.

The arbitration court, in turn, sends the request submitted by the meeting of creditors to the specified self-regulatory organization, which draws up a list of three candidates, arranged in descending order of their compliance with the stated requirements. The debtor and creditors have the right to select one candidate each from the declared list. Accordingly, the remaining candidate is approved by the arbitration court. If none of the parties involved in the case has nominated any candidates, then the court appoints an arbitration manager whose candidacy occupies the highest position on the list.

It should be indicated in which cases the arbitration court should refuse to appoint an arbitration manager. According to the previous legislation, such an appointment was prevented by the presence of a criminal record, disqualification, as well as the experience of arbitration management in the same case. Now it is impossible to approve a candidacy if (clause 8 of Article 20 of the Law):

• the candidate is an interested party in relation to both the debtor and creditors;
• bankruptcy proceedings have been introduced against the candidate;
• the candidate is disqualified;
• there is no compulsory liability insurance agreement;
• the arbitration manager did not compensate for losses previously caused to the debtor, creditors, and third parties in the performance of duties.

Test: Legal basis for bankruptcy procedures

Completed: Art. gr. AUS-08-2

Filimonova N.A.

Checked:

Chita 2010

Content

1. The external management plan and the measures included in it to restore the debtor’s solvency.

2. Bankruptcy of an absent debtor

3. Problem

List of sources used

1. External management plan and measures included in it to restore the debtor’s solvency

External management from an economic point of view is a restructuring of the debtor organization: the introduction of a moratorium on satisfying creditors' claims against the debtor, the restoration of solvency through the implementation of a set of special measures are essentially elements of financial restructuring.

In accordance with paragraph 2 of Article 74 and paragraph 1 of Article 82 of the Federal Law “On Insolvency (Bankruptcy)” (hereinafter referred to as the Law), the arbitration (external) manager appointed by the arbitration court to implement the external management procedure must develop an external management plan. However, the Law does not provide for detailed regulation of the form and content of the external management plan.

An external management plan is a special type of plan; when developing it, it is necessary to simultaneously take into account:

— the requirements of the Law for this document,

- requirements for the business plan of the debtor - a legal entity.

An external management plan, like any other plan, is a document that must contain a description of the goal set, as well as qualitative and quantitative characteristics of consistently implemented actions aimed at achieving this goal within a specified time frame. The indicators, characteristics and calculations given in the plan must be reasonable and interconnected.

Since external management is a procedure applied to a debtor in order to restore his solvency (Article 2 of the Law), the legally established criterion for restoring the debtor’s solvency is of great importance for assessing its effectiveness.

From these norms of the Federal Law “On Insolvency (Bankruptcy)” it follows that the external management plan must reflect the amount of creditors’ claims for monetary obligations and obligatory payments of the debtor, which are subject to a moratorium in accordance with Article 70 of the Law.

It is necessary to take into account that during the period of the moratorium, penalties (fines, penalties) and other financial (economic) sanctions for non-fulfillment or improper fulfillment of monetary obligations and obligatory payments, as well as interest payable, are not accrued, and on the amount of the principal debt on monetary obligations and arrears on mandatory payments existing on the date of introduction of external management are accrued interest in the amount and manner provided for in Article 395 of the Civil Code of the Russian Federation.

The assessment of the size of creditors' claims should be based on data from the register of creditors' claims, maintained by an external manager, and not on data from the debtor's balance sheet as of the last reporting date.

In order to have the information necessary for a predictive assessment of the effectiveness of the external management procedure, the external management plan should also include calculations of interest accrued on the amount of creditors’ claims for monetary obligations and (or) mandatory payments.

In addition to moratorium requirements, the plan should also reflect the amount of claims against the debtor for compensation for harm caused to life and health, as well as claims for the collection of arrears of wages. However, due to the fact that these claims can be repaid during the period of external management, when calculating the forecast value of the need for free funds for settlements with creditors, the external manager should take into account these requirements only to the extent that cannot be repaid during external management .

This is how an assessment of the amount of need for free funds is formed, which, upon completion of external management, can be used to satisfy the claims of creditors for monetary obligations and obligatory payments of the debtor. Consequently, the main task to be solved when developing an external management plan is to find and show in the plan the main sources of the debtor’s funds for settlements with creditors in the established amounts.

These funds can be generated (accumulated) through the implementation of measures aimed at restoring the debtor’s solvency. The following measures are provided to restore the debtor's solvency:

— repurposing of production;

— closure of unprofitable production;

— liquidation of accounts receivable;

— sale of part of the debtor’s property;

— assignment of rights of claim of the debtor;

— fulfillment of the debtor’s obligations by the owner of the debtor’s property - a unitary enterprise or a third party (third parties);

—> READ COMPLETELY

Self-regulatory organization

A self-regulatory organization of arbitration managers is a non-profit organization that meets the following criteria (Article 2 of the Law):

• membership based;
• created by citizens of the Russian Federation;
• included in the unified state register of self-regulatory organizations;
• The goals of the activity are to regulate and ensure the activities of arbitration managers.

The rights and obligations of a self-regulatory organization are defined in Art. 22 Laws.

Since the process of creating such organizations and resolving all organizational issues will take some time, the legislator has established a transition period - one year, during which such a requirement for insolvency practitioners as membership in any self-regulatory organization is not mandatory (clause 5 of Art. 231 of the Law).

The procedure for introducing external control

The introduction of the stage of external management is carried out by the arbitration court in accordance with the decision of the 1st meeting of creditors of the bankrupt or on the basis of a court ruling (Article 75, No. 127-FZ).
A sufficient reason for such an event is the possibility of restoring the solvency of the legal entity. Like reorganization, external management implies preferential activities of the debtor aimed at changing the priorities of the company’s management in order to find a way out of the crisis situation. From the date of introduction of the management procedure, the previous management is deprived of its powers (technical functions may be retained), a moratorium on accounts payable is introduced, the manager carries out work in accordance with legislative rights and obligations, and previously taken measures to ensure settlements are canceled.

Publication of information about bankruptcy procedures

An important innovation of the Law that provides additional protection for the rights of creditors. Unlike Law No. 6-FZ, when only information about the introduction of the final procedure in relation to the debtor - bankruptcy proceedings (Articles 50 and 100 of Law No. 6-FZ) was subject to mandatory publication, now in accordance with Art. 28 of the Law, information should be published not only about the introduction of bankruptcy proceedings, but also about the introduction of surveillance. If the number of creditors exceeds one hundred or their number cannot be determined, then information about the beginning of each creditor is subject to mandatory publication. This obligation is assigned to the arbitration manager, who, within three days from the date of receipt of the relevant judicial act, sends this information to the official publication, which in turn is obliged to publish the received information within ten days (Articles 54, 28 of the Law). Until the Government of the Russian Federation determines the official publication in which information about bankruptcy cases is published, this information is subject to publication in the Rossiyskaya Gazeta (Clause 6 of Article 231 of the Law).

Basic functions of bankruptcy

Through the institution of bankruptcy, the influence of the subject is organized, the socio-economic relations that arise in the event of the debtor’s inability to satisfy the demands of creditors are regulated. The bankruptcy institute includes:

• Legislation establishing the rules of procedure,
• The judicial system, as a mechanism for carrying out the procedure,
• Institute of specialists for insolvency proceedings,
• State bodies that ensure the implementation of state policy in this area,
• Public opinion.

Note 1
The main function of bankruptcy is that this procedure is designed to stimulate the managers or owners of the company to strive to maintain financial discipline and pay off their obligations on time.

In addition, if there is a threat of bankruptcy, there is a desire to timely develop a set of anti-crisis measures that can be aimed at improving the business.

Finished works on a similar topic

• Course work Functions of bankruptcy 450 rub.
• Abstract Functions of bankruptcy 280 rub.
• Test work Bankruptcy functions 210 rub.

Receive completed work or specialist advice on your educational project Find out the cost

Overcoming a crisis situation with the goal of restoring the regularity of payments. Another important function of bankruptcy is the reliable protection of the creditor’s rights, helping to reduce their risks and allowing companies to improve the conditions for obtaining credit (extending loan terms, reducing interest rates, providing convenient loan repayment schemes).

The transfer of assets to effective owners through the use of a civilized bankruptcy procedure makes it possible to increase the efficiency of using production factors and the competitiveness of the enterprise, leading to an improvement in the overall economic situation and the functioning of the market mechanism.

By transferring assets to effective owners when applying an insolvency procedure, it can increase the efficiency of using their factors of production, as well as the competitiveness of the company, which can lead to optimization of the economic system as a whole and the proper functioning of the market mechanism.

The next function of bankruptcy is to reduce the cost of competitive procedures.

Too lazy to read?

Ask a question to the experts and get an answer within 15 minutes!

Ask a Question

Observation

The observation procedure has undergone certain changes.

Now the monitoring procedure is introduced not immediately after the application is accepted (Article 56 of Law No. 6-FZ), but based on the results of the arbitration court’s consideration of the validity of the applicant’s claims (Article 62 of the Law). Surveillance is introduced immediately only at the request of the debtor himself. It should be noted that the arbitration court, in a separate meeting, considers the validity of the applicants’ claims in any case, even if there are no objections from the debtor or other persons. Based on the results of such consideration, the creditors' claims are either included in the register of creditors' claims or are recognized as unfounded and not accepted (Article 71 of the Law).

As before, from the moment of introduction of supervision, the management bodies of the debtor (manager) are not removed from management. However, the new Law (Article 69) provided for the possibility of replacing the head of the debtor by the arbitration court at the request of the temporary manager with another person. In addition, also at the request of the temporary manager, the arbitration court has the right to make a decision against the manager to prohibit him from carrying out any transactions or actions or to carry them out only with the consent of the manager. The observation ends from the moment the arbitration court issues a ruling on the introduction of the next bankruptcy procedure, approved by the first meeting of creditors. Thus, it is possible to introduce financial recovery, external management, bankruptcy proceedings, or even terminate the case and approve a settlement agreement (Article 75 of the Law).

Pros and cons for lenders

The activities of an external creditor are aimed at restoring the solvency of a legal entity (the procedure does not apply to individuals) through various effective economic measures. Thus, the positive side for the injured party is to create conditions under which the defendant’s debts will be returned to them.

This is also important to know:
Who is the bankruptcy trustee: his powers and responsibilities

Moreover, they have the right to approve the action plan developed by the manager if it suits them, or to reject it and wait for the next one if some of the points are in doubt. That is, during external management at the management level, it is the meeting of creditors that is the current temporary body.

True, such a procedure may also have negative consequences. Considering that the period of external management is quite long, debt collection will require a lot of time. And not always even the manager’s plan approved by the creditors guarantees the financial recovery of the debtor company. Thus, after 2 years they may be left with nothing and again file for bankruptcy of the defendant legal entity.

Sanitation

Financial recovery is a new bankruptcy procedure applied to the debtor in order to restore his solvency and repay the debt in accordance with the debt repayment schedule (Article 2 of the Law). Financial recovery is introduced for a period of no more than two years.

Financial recovery is introduced in the following cases (Article 75 of the Law):

• if the meeting of creditors made a corresponding decision, - on the initiative of the head of the debtor, who is obliged to propose introducing this procedure;
• if the first meeting did not make any decision regarding the following procedures and if there is a petition from the founders (participants), the owner of the debtor’s property or third parties, subject to the provision of security for the fulfillment of the debtor’s obligations in accordance with the debt repayment schedule;
• if there is a petition from the above entities and a bank guarantee as security for the fulfillment of the debtor’s obligations on schedule.

The law establishes certain rules for filing petitions for each category of persons, and they have certain differences. However, the fundamental requirements are that the petition must be accompanied by a debt repayment schedule indicating the period for its repayment and evidence of the provision of security for the debtor's obligations to be fulfilled in accordance with the debt repayment schedule (Articles 77, 78 of the Law). Moreover, the debt repayment schedule must provide for the start of debt repayment no later than a month from the date of the decision on the introduction of financial recovery and the repayment of creditors' claims on a monthly basis, in proportion, in equal shares within a year from the date of the start of satisfying the creditors' claims. The debtor's fulfillment of obligations in accordance with the debt repayment schedule can be secured by: collateral (mortgage); bank guarantee; state or municipal guarantee; surety; by other means that do not contradict the Law. The petition cannot be secured by a withholding, deposit or penalty.

If the persons who provided security for the debtor’s fulfillment of obligations did not fulfill their obligations within five days from the date the administrative manager contacted them, then civil liability measures will be applied to them (Article 91 of the Law). If such persons ensured that the debtor fulfills its obligations to creditors, then they receive the right of recourse against the debtor after the termination of bankruptcy proceedings or during bankruptcy proceedings as part of the claims of third-priority creditors (clause 4 of Article 89 of the Law). To carry out financial recovery, the arbitration court approves an arbitration manager (who at this stage is called an administrative manager), whose rights and responsibilities are defined in Art. 83 of the Law. During the financial recovery, the debtor’s management bodies continue to exercise their powers, but with the restrictions established by Art. 82 of the Law. Based on the results of consideration of the results of financial recovery, the arbitration court makes one of the following decisions:

• a determination to terminate bankruptcy proceedings if there is no outstanding debt and the creditors' complaints are considered unfounded;
• a determination to introduce external management if it is possible to restore the debtor’s solvency;
• a decision to declare the debtor bankrupt and to open bankruptcy proceedings in the absence of grounds for introducing external management and in the presence of signs of bankruptcy.

Concept, signs and purposes of bankruptcy

Bankruptcy as a legal phenomenon arose in the Russian Federation and neighboring countries relatively recently.

Even 25 years ago, no legislative framework existed for declaring companies and individuals financially insolvent, since the market economy had just begun its emergence in the vastness of the former USSR.

The first bankruptcy law was adopted in 1992. Since then, regulations have changed many times, as economic reality in Russia and neighboring countries has changed.

Today the Insolvency Law of 2002 is in force in the Russian Federation.

Until October 2020, only legal entities – companies, firms, organizations – could become bankrupt. In connection with the development of the lending institution, there is a need to change legal regulations.

Today, ordinary citizens – individuals and individual entrepreneurs – can declare themselves bankrupt. The Law on Bankruptcy of Individuals is aimed at a civilized solution to issues related to violation of debt obligations.

For more information about what bankruptcy is, see the corresponding resource article.

Purposes and types of bankruptcy

I’ll say right away that bankruptcy as a fact does not relieve you from debts. Financial insolvency of companies and individuals is an opportunity to fulfill debt obligations in alternative ways and at least partially free themselves from pressure from creditors.

This is also important to know:
How bankruptcy of a non-profit organization with debts is carried out

As long as the debtor owns real and movable property, he will continue to pay off his debts until he pays them off in full. Another thing is that the form of debt repayment will be fundamentally different.

For businesses, the long-term goal of bankruptcy is to either close down or radically reorganize the business. Individuals initiate insolvency proceedings in order to stop the progressive growth of loan debts.

Currently, there is a massive credit default - people who at one time took out consumer and mortgage loans are experiencing difficulties paying off their debts during the crisis.

In simple terms, incomes have fallen, the cost of living has risen, and debt obligations have become difficult to meet.

Things have not improved for legal entities either: the crisis of recent years has led to the ruin of many companies, especially in the field of small and medium-sized businesses.

As an ordinary citizen, I personally observe an almost quarterly change of signs in an office building opposite the windows of my own apartment - enterprises move into new premises and within a few months wind down their activities due to bankruptcy.

There are several types of bankruptcy:

1. Real bankruptcy is when companies cannot restore their solvency on their own as a result of financial losses. Enterprises simply do not have the capital to operate fully.
2. Temporary bankruptcy (also conditional) - when the assets of an enterprise increase, and liabilities vice versa. This happens if, for example, the company has accumulated a surplus of unsold products.
3. False bankruptcy. Intentionally declaring one's insolvency in order to mislead creditors or obtain relief and benefits from them. This type of activity is criminal and is fraught with criminal liability.
4. Deliberate bankruptcy is another type of illegal act. Intentional bankruptcy is carried out by company owners for the purpose of personal gain or for the benefit of others.

The task of the judicial authorities is precisely to understand what type of bankruptcy they are dealing with and initiate the appropriate legal procedure.

Signs of bankruptcy

The main sign of the insolvency of a company or individual is insolvency: a person cannot pay his credit bills and has debts on loans. There is a clear lack of financial resources, and expenses exceed income.

These are formal signs of bankruptcy.

Free legal consultation We will answer your question in 5 minutes!

Ask a Question

Free legal consultation

We will answer your question in 5 minutes!

Ask a Question

There are also informal symptoms of ruin that can be noticed before the onset of real financial insolvency.

These include the following facts:

• there are many inaccuracies in accounting documents;
• reporting papers are submitted late;
• the external balance of the enterprise changes;
• employee wage debts are growing;
• payments to the company's investors are delayed or stopped;
• pricing policy is changing.

Persons interested in clarifying the financial condition of a company can initiate bankruptcy proceedings in court if they receive the appropriate authority to do so.

There is a separate article on the website about bankruptcy of legal entities.

External control

The term of external management was increased by the Law from twelve to eighteen months, and, as before, it can be extended for another six months (Article 93 of the Law, Article 68 of Law No. 6-FZ). Previously, according to Law No. 6-FZ, the management bodies of the debtor during external management were generally removed from the management of the debtor. Now the debtor’s management bodies retain a number of their powers (clause 2 of Article 94 of the Law). These powers relate, firstly, to issues of the activities of management bodies of joint-stock companies (for example, a decision to increase the authorized capital, placement of additional shares, holding a meeting of shareholders), and secondly, to such issues as the sale of the debtor’s enterprise, replacement of the debtor’s assets, election of a representative founders of the debtor, conclusion of an agreement between third parties and the debtor’s management bodies on the completion of major transactions or the provision of funds to fulfill the debtor’s obligations.

It should be noted that, as before, the creditor has the right to present his claims at any time during external management. But such demands must be confirmed by a judicial act, and must also be sent not only to the debtor (as was before, see Article 75 of Law No. 6-FZ), but to the arbitration court and to the external administrator (clause 1 of Article 100 of the Law) . New Law in Art. 109 introduces additional measures to restore the debtor’s solvency: increasing the debtor’s authorized capital through contributions from participants and third parties, placing additional ordinary shares, replacing the debtor’s assets (which means the creation of one or more open joint-stock companies based on the debtor’s property).

One of the important measures to restore the debtor's solvency is also the sale of the enterprise. Let us consider in more detail the provisions of the Law relating to this measure.

Despite the fact that Art. 110 of the Law as a whole reproduces Art. 86 of Law No. 6-FZ, it contains important innovations that you should pay attention to.

Thus, the Law defines the very concept of an enterprise for the purposes of this Law (which was not in Law No. 6-FZ). According to paragraph 1 of Art. 110 of the Law, an enterprise is understood as a property complex intended for carrying out entrepreneurial activities. The object of sale may also be branches and other structural divisions of the debtor - a legal entity. Now the sale of an enterprise is carried out through open bidding in the form of an auction, with the exception of cases where the property includes limited negotiable property. That is, the provision of Law No. 6-FZ that closed auctions can be introduced by an external management plan has been excluded, which will eliminate the bankruptcy procedure as a way of redistributing property. In addition, the initial value of the enterprise is now established, as before, by the meeting (committee) of creditors, but only on the basis of the market value, which must be determined by an independent appraiser. Thus, the possibility of buying up an enterprise for next to nothing is reduced. In addition, the initial price cannot be lower than the minimum sales price of the enterprise determined by the debtor’s management bodies when applying for the sale of the enterprise (clause 5 of Article 110 of the Law). The law also regulated in detail the typical situation when tenders for the sale of an enterprise cannot take place due to a lack of applications for participation. In this case, further attempts may be made to sell the enterprise, and the price of the enterprise may be repeatedly reduced, but not lower than the price determined by the debtor’s management bodies (clause 7 of Article 110 of the Law).

What is external enterprise management

Preventive external management as a bankruptcy procedure is a set of measures introduced by the arbitration court aimed at restoring the bankrupt’s previous solvency by transferring leadership functions to an independent external manager. The transition to this stage is carried out based on the results of the financial recovery stage (stat. 92 No. 127-FZ) subject to compliance with the following criteria:

• The possibility of restoring the normal solvency of the debtor company within the approved time frame has been established.
• The meeting of creditors submitted a petition to the arbitration court to move to the stage of external management.
• Facts have been revealed that indicate the possibility of restoring the bankrupt's solvency after filing a petition to the court for recognition of bankruptcy and, accordingly, moving to the stage of bankruptcy proceedings.

This is also important to know:
What consequences await the debtor in case of bankruptcy of individuals

The most important difference between external management is the removal of senior-level actors from the management of the enterprise and the transfer of powers to an external manager, who has the right to dismiss the previous administration (Clause 1 of Article 94 No. 127-FZ) and dispose of the property of the legal entity at his discretion.

Bankruptcy proceedings

As for the bankruptcy procedure, the Law also contains a number of innovations. The procedure for determining the fate of property related to social infrastructure facilities has changed. All these objects are divided into two groups (Article 132 of the Law). The first includes housing facilities, and the second includes preschool educational institutions, general education institutions, medical institutions, sports facilities, and communal infrastructure facilities related to the life support system. If earlier Law No. 6-FZ obligated the debtor to transfer all of the above objects to local governments, now the Law defines a different procedure. The debtor first tries to sell objects belonging to the second group through bidding in the form of a competition. Moreover, after the auction, buyers of such objects must conclude an additional agreement with the local government on the intended use of the purchased objects. If some social infrastructure objects have not been sold, then they, together with the housing stock, are subject to transfer to local governments, which are obliged to accept them. In case of refusal or evasion of municipal bodies from accepting such objects, the bankruptcy trustee is entitled to apply to the arbitration court (clause 9 of Article 132 of the Law).

New are the provisions of Art. 146 of the Law, according to which a debtor can avoid being declared bankrupt if:

• the bankruptcy trustee, based on financial analysis data, will consider that the debtor’s solvency can be restored;
• financial rehabilitation and/or external administration was not introduced in relation to the debtor.

In this case, the bankruptcy trustee convenes a meeting of creditors within a month to consider the issue of filing a petition with the arbitration court to introduce external administration. If the meeting of creditors approves such a proposal, then such a petition is submitted to the court. It must contain information about the term of external management and requirements for the candidacy of an external manager. The arbitration court can approve such a decision, but only if the debtor has the property necessary to carry out independent economic activities. And finally, the order of repayment of creditors' claims has changed. The list of claims that can be paid out of turn at the expense of the bankruptcy estate has been expanded. To the obligations previously specified by Law No. 6-FZ for legal expenses, for payments to arbitration managers, for current utility and maintenance payments, as well as obligations to creditors that arose during the period after the acceptance of the application for declaring the debtor bankrupt, the following have been added:

• arrears of wages that arose after the arbitration court accepted an application for declaring the debtor bankrupt, and for wages of the debtor’s employees accrued during the period of bankruptcy proceedings;
• other expenses related to bankruptcy proceedings;
• expenses for carrying out measures to prevent the occurrence of man-made and (or) environmental disasters or loss of life (if the termination of the debtor’s activities may entail such consequences).

The same creditors whose claims are repaid after extraordinary debts are divided into three queues (unlike Law No. 6-FZ, which provided for five queues):

• first of all, they are formed by citizens to whom the debtor is responsible for causing harm to life or health, as well as for moral damage (in Law No. 6-FZ compensation for moral damage was not specified);
• the second priority consists of those who work or have worked under employment contracts, to whom the debtor must pay severance pay and wages, as well as persons to whom the debtor must pay remuneration under copyright agreements;
• in the third place, settlements are made with all other creditors included in the register (including creditors whose claims are secured by a pledge of the debtor’s property).

When external control is introduced

External management in bankruptcy actually begins to work after the official transfer of rights from the previous head of the company to the new manager. The approval of the candidacy of an external manager is carried out by the court by drawing up a ruling (Article 96 No. 127-FZ). In order for an enterprise to take advantage of the legal possibility of the procedure, it is necessary to prove to the court that it is possible to restore full solvency. The goal is not only to return the company to normal operations, but also to fully satisfy creditor claims.

External manager - rights and obligations (stat. 99 No. 127-FZ):

• Dispose of the bankrupt's assets in accordance with the external management plan and in compliance with legal restrictions.
• Conclude a settlement agreement on behalf of the bankrupt.
• Refuse to fulfill agreements previously concluded by the debtor.
• Apply to the court to recognize transactions previously concluded by the debtor as invalid and claim recovery of damages caused as a result of actions/inactions of the bankrupt’s management bodies.
• Other rights.
• Take inventory of the bankrupt's property.
• Include in the federal register data on the results of the inventory procedure within 3 days (working days) from the moment of its completion.
• Draw up and submit for approval to the meeting of creditors an external management plan.
• Maintain financial, statistical, accounting and reporting in accordance with legal requirements.
• File objections to creditors' claims.
• Take all possible measures to fulfill obligations to the bankrupt.
• Maintain data in the register of creditor claims.
• Carry out the activities provided for in the developed management plan and promptly inform the committee about the actions taken.
• Present the final results of the activities carried out to the meeting of creditors in the form of a report.
• Other duties.

Settlement agreement

As before, at any stage of bankruptcy, the debtor, bankruptcy creditors and authorized bodies have the right to conclude a settlement agreement. Now the Law regulates in detail the specifics of concluding a settlement agreement during each bankruptcy procedure (Articles 151-154 of the Law). The Law reveals in more detail the concept of the content of a settlement agreement, defines the procedure for appealing and reviewing the arbitration court's ruling on approval of a settlement agreement, and the procedure for terminating a settlement agreement.

In conclusion, we note that although the new Law did not close all the loopholes for fictitious or deliberate bankruptcy, and also did not resolve the situation when an enterprise falls under bankruptcy proceedings due to the fault of the state, which does not pay for the ordered products, nevertheless, this Law is an undoubted step forward for a number of reasons:

• the rights and legitimate interests of creditors are better secured;
• the rights of bona fide owners (founders, participants) of the debtor organization are protected;
• the status and procedure for regulating the activities of the arbitration manager have been changed in the direction of increasing his responsibility for his actions;
• the specifics of regulation of certain categories of debtors have been established;
• a new stage has been introduced - financial recovery;
• all stages of the bankruptcy procedure are regulated in more detail, etc.

However, only arbitration practice will show whether the provisions of the new Law will actually be fully implemented.
For the whole month