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How can you declare insolvent and rebuild your business?
What is the alternative of liquidating the company?
Is bankruptcy the end of the business?
The stereotype about the inevitability of liquidation in case of default and bankruptcy has become deeply rooted in the consciousness of entrepreneurs and business people from the Republic of Moldova.
What is the alternative of liquidating the company? Can creditors be stopped to give you time to rebuild your business?
What is the alternative of liquidating the company? Can creditors be stopped to give you time to rebuild your business?
Until 2013, any initiation of bankruptcy or insolvency proceedings presumes from the outset the liquidation of the company
In the Republic of Moldova, until the changes made in the field of insolvency in 2013, any initiation of bankruptcy or insolvency proceedings presumes from the outset the liquidation of the company for the payment of creditors on account of the goods sold.
In other words, there were no alternatives for those who got into financial difficulty but wanted alternatives to bankruptcy, methods of preventing insolvency.
Since 2013, with the amendment of the Law on Insolvency in the Republic of Moldova, for the first time a judicial proceeding for the prevention of insolvency was introduced.
What is its applicability and what are the advantages for your business?
For example, you have a business in which you are running with neither profit nor loss, and the economic forecast foresees an increase only after one year. At the same time, you have 10 creditors to whom you owe a total of MDL 1 million, which you have to pay off in about 6 months.
The value of your company allows you to recover about MDL 1 million in a sale of assets and to pay off the 10 creditors in full, but you are left without resources, therefore you cannot keep your employees, offices, rents and you cannot invest in the future you are waiting for.
One of the options is to default on your debts even when they are due in order to try to invest in the near future and make an effective breakthrough in business prosperity.
The risk of default to one or more creditors will generate the creditors to start enforcement proceedings, and in the case of 10 creditors, we have 10 proceedings, 10 bailiffs, 10 enforcement files with separate expenses. On the background of enforcement proceedings, which essentially cannot be stopped, the chances of getting out of the economic decline and not ending up in default are minimal.
The value of your company allows you to recover about MDL 1 million in a sale of assets and to pay off the 10 creditors in full, but you are left without resources, therefore you cannot keep your employees, offices, rents and you cannot invest in the future you are waiting for.
One of the options is to default on your debts even when they are due in order to try to invest in the near future and make an effective breakthrough in business prosperity.
The risk of default to one or more creditors will generate the creditors to start enforcement proceedings, and in the case of 10 creditors, we have 10 proceedings, 10 bailiffs, 10 enforcement files with separate expenses. On the background of enforcement proceedings, which essentially cannot be stopped, the chances of getting out of the economic decline and not ending up in default are minimal.
What do insolvency prevention proceedings offer?
Imagine a proceeding where the court states "for a certain period of time, we stop all enforcement and creditors are not entitled to receive any individual payment".
Temporarily stopping the creditors and enforcers to gain that economic advantage and time for maneuver.
Imagine a proceeding where the court states "for a certain period of time, we stop all enforcement and creditors are not entitled to receive any individual payment".
If the creditors are under relative control of the actions, of course you will manage to gain time without risking the loss of company resources.
In the Republic of Moldova, such a proceeding is called - accelerated restructuring proceeding and is intended, according to the text of the Law, for "rescuing the debtor in financial difficulty so that she/he can continue the activity, keep jobs and pay off debts by implementing a plan".
Two key issues are important for the application of the proceeding:
1
Lack of incapacity to pay of the company that must be able to pay its debts.
2
Prior negotiation with creditors of a debt-restructuring plan.
Therefore, the application of the insolvency prevention proceeding to your company involves 3 distinctive steps:
1
Prior negotiation with creditors of a debt restructuring and payment plan with the filing of a court case in the insolvency court;
2
Judicial confirmation of all creditors and vote on the final restructuring plan;
3
Application of the restructuring plan according to the agreed payment terms.
What are your advantages for such a proceeding:
1
Stopping the economic decline of the company;
2
Avoiding insolvency and/or bankruptcy;
3
Stopping individual creditor enforcements;
4
Planned and gradual payment of debts;
5
Investing in the development of the business and restructuring its assets.
Care ar fi avantajele creditorilor și argumentele tale de ai convinge în asemenea proceduri?
Argument for creditors - increased chances to receive 100% of the debts
Essentially the advantage and argument is increased chances to receive 100% of the debts, compared to the situation when the company will be liquidated, and following the sale of the assets, the creditors will receive proportionally from the liquidation result.
In the European area or Western business culture, it is normal to have so-called crisis managers who reorganize and restructure the business so that it remains viable and does not fall prey to liquidation proceedings.
Unfortunately, a culture of insolvency prevention proceedings and implementation of crisis plans is less developed, mostly due to the previous lack of appropriate legal regulations. It is precisely because of this that in practice we have a very low percentage of application of the accelerated restructuring proceeding.
Do you think your business is in economic difficulty? Do you think you need some maneuvering space, time and money? How do you use the given mechanism?
Easy!
You start the negotiations with creditors and the lawyers ensure the restructuring planning and the start of legal proceedings.
You start the negotiations with creditors and the lawyers ensure the restructuring planning and the start of legal proceedings.
Moldova, mun. Chișinău
str. București 31
str. București 31
Contacte
gheorghe.macovei@macovei.legal
Moldova, mun. Chișinău
str. București 31
str. București 31
Contacte
gheorghe.macovei@macovei.legal