Bankruptcy of legal entity

Liquidation of legal entity because of insolvency is possible if the company is not able to pay off debts of 300 000 rubles or more and consists of the following procedures:

• supervision procedure;
• financial sanation;
• external management;
• bankruptcy proceeding;
• settlement agreement.

Practically only supervision and bankruptcy proceeding are applied in most cases.

However, company’s activity before the first procedure is introduced is very important for subsequent proceedings as well as company’s activity after notification of its intention to file for bankruptcy.

If signs of insolvency are obvious, then creditor’s application is satisfied, and supervision procedure is introduced.

At the supervision stage, debtor’s financial condition is analyzed, creditors’ claims are established, and their first meeting is held. This stage must be completed within 7 months from the date of filing the claim. At the same time, after this procedure is introduced, penalties, fines and other sanctions are not accrued for non-compliance with monetary obligations and payments, except for current ones, payment of dividends, income as well as profit distribution between the founders are not allowed, and other consequences take place.

Having examined financial standing of the company, court most often concludes that company is insolvent and introduces bankruptcy proceedings. The main task of this stage is to satisfy creditors’ claims as much as possible. It is introduced for 6 months but can last for years. This often occurs due to unfair actions committed by participants of the process.

At this stage inventory and assessment of debtor’s property is carried out as well as its’ auctioning.