If a person or company cannot cope with numerous payments and debts, then for them the best solution would be to start a bankruptcy procedure. It involves the use of various measures to repay the debtor's debts, for which his property is used. The procedure itself is divided into several stages, each of which has its own purpose. If there is an opportunity to improve the financial condition of the debtor, then external management is carried out. When it is used, various measures to restore the solvency of the debtor.
The concept of external management
Not always bankruptcy involves the complete annulment of debts that cannot be paid by the debtor. If there are prerequisites for improving its financial situation, then different measures are used to restore the solvency of the debtor with external management. They are aimed at ensuring that the company has the opportunity to independently cope with all debts.
External management is represented by a certain stage of bankruptcy, during which various actions are taken to help the company out of the crisis. A procedure is introduced for a period not exceeding 18 months, but in some cases its extension is allowed, but for a maximum of six months.
The purpose of external management is the organization of various measures to restore the solvency of the debtor in bankruptcy. Due to these actions, it is possible to get the organization out of a crisis situation, to restore its position in the market, and also to give the opportunity to independently pay off all debts in different ways, and it is often possible to even keep the company’s assets.
Therefore, external management is considered a process involving the use of rehabilitation measures to save the business, and not to close it.
Difference from Wellness
Both of these processes pursue the same goal, which involves improving the financial condition of the debtor.
When recovering, the initiator is the company itself. Measures to restore the solvency of the debtor taken by the owner are not always effective.
External management suggests that it is lenders or other other companies that are trying to improve the position of the company. In most cases, these actions are effective, as all actions to repay debts are suspended.
The external management procedure is applied by decision of the meeting of creditors or the court. After that, various measures are developed to restore the solvency of the debtor, for which its condition, direction of work and other factors are evaluated.
Planning
With external management, the provisions of the insolvency law are taken into account.
After approval of the manager, he is given a month to draw up a special plan, according to which it is necessary to act to improve the financial condition of the company. This document is considered at a meeting of creditors, and then approved by them.
The plan should include measures to restore the solvency of the debtor in bankruptcy. In addition, it includes various expenses for the implementation of all actions in life. The document is considered and approved within one month after its submission to managers. Then he goes to court, and this is given five days.
External Management Term
This stage of bankruptcy is strictly limited in time, so all actions must be implemented within 18 months. If there is reason to believe that it takes a little more time to improve the company, then this period can be extended for another six months.
The external manager initially analyzes the financial condition of a particular company, and then develops various measures to improve it.
Main measures
Measures to restore the debtor’s solvency are different actions, involving improvement of his financial situation, stabilization in the market, as well as prevention of various negative factors leading to a decrease in profits and an increase in debt.
These actions are numerous, so different measures can be taken in aggregate.
Property sale
This process is carried out after the inventory. Based on its results, it is determined what property the debtor has, and its assessment is also carried out to determine how much money can be received to pay off the debt.
Selling values is carried out only at open bidding, where different people have access.
Assignment Assignment
This procedure is carried out only on behalf of the appointed manager or the head of the company.
For its design, you need to draw up a contract of sale.
Transfer of obligations to third parties
What is the name of the measure to restore the solvency of the debtor in this case? It involves the involvement of insurance companies or guarantors, since they must pay off the debts of the company if it itself can not cope with this process.
This process can be carried out at any time before the end of the external management procedure by the debtor himself. To do this, write a written notice sent to the manager. Usually this action is effective, therefore, they do not meet dissatisfaction from the specialist.
Change of direction
Companies often realize that their chosen field of activity is not profitable and optimal. For this, the results of work, the existing sales market and other parameters are monitored. If it is revealed that when changing the direction of activity the financial situation of the company will be improved, then the manager can authorize the implementation of this process.
For its implementation, corrections are required in the charter documents and the register.
Closing unstable or disadvantageous units
All measures to restore the solvency of the debtor taken by an external manager should be comprehensive and universal. Therefore, all existing branches are checked. It often turns out that some units are unprofitable, therefore, their closed ones are considered optimal.
Initially, a thorough study of the results of the branch. Next, a decision is made to eliminate it, which will significantly improve the financial situation of the organization. Next, an order is issued by the head of the company, on the basis of which the branch is closed.
Increase the authorized capital
The founders of various companies are not liable for debts with their personal property, but they can use their savings and values to prevent the bankruptcy of the organization. To do this, they can invest them in the authorized capital for its significant increase.
It is funds from the authorized capital that are used to pay off debts, so if they are enough to cover all debts, then the forced liquidation of the company can be avoided.
To increase capital, you will need to make appropriate changes to the Charter and other documentation. Additionally, it is necessary to adjust the information available in the register.
Debt collection
Often a crisis in a company arises from the fact that the company has significant receivables. Debtors do not give funds in a timely manner, so there is doubtful or even bad debt.
The process of collecting funds from debtors is divided into stages:
- initially determined by the amount of debt;
- relations between firms are analyzed;
- claims are sent to debtors, on the basis of which they must return the funds in a short time, which can prevent the bankruptcy of the company;
- if the claims do not lead to the desired result, then you have to go to court to enforce the recovery of money.
Such measures used to restore the solvency of the debtor are effective, since many organizations do have significant receivables.
Issue of securities
Another effective way to improve the financial condition of the company is the issuance of additional shares. The process is carried out only in private subscription. It is carried out exclusively within a maximum of three months after a decision is made on the issue of shares.
To apply this method, you need to make changes to the registration documents of the company.
Pre-trial rehabilitation
This method relates to other measures to restore the solvency of the debtor. It is implemented during the financial recovery of the company, therefore, it is carried out before direct appeal to the court to close the organization.
The main objective of this process is the repayment of debts by allocating money by third parties. The initiators are usually business owners themselves, but lenders can also engage in this process.
The result of the procedure is the repayment of past debts with the simultaneous formation of new obligations that differ in more favorable and simple conditions for the gradual repayment of debt.
Other required actions
Measures to restore the solvency of the debtor may be compulsory or voluntary. Mandatory actions are:
- the head of the company is removed from his post, and he can be dismissed or transferred to another job in the company, and the basic provisions of the labor law must be observed;
- the trustee accepts obligations to manage the assets of the enterprise;
- management bodies of the company lose their authority;
- these powers are divided between the manager and the meeting of creditors, therefore, all actions related to the interests of creditors are used only with their preliminary approval;
- accounting papers, company values, stamps and seals are handed over to the temporary manager;
- founders are charged with the need to increase the authorized capital, for which they must contribute their funds;
- measures are being taken to restore the solvency of the debtor associated with the removal of the seizure of property so that it can be sold at auction.
Other actions may be used if they receive the approval of the meeting of creditors, and it is also planned that they will really be effective.
Imposing a moratorium on satisfying creditors' claims
What is the name of the measure to restore the solvency of the debtor, suggesting the absence of the need to pay off debts? It is represented by a moratorium, therefore, the satisfaction of all claims of existing creditors is temporarily suspended. This feature is considered the most significant advantage of external management.
Based on this process, approximately 1.5 years are given for the company to manage all the money for the development and stabilization of its condition, and not for paying off debts.
Often, dishonest business owners intentionally for fraudulent purposes take the opportunity to use a moratorium during fictitious bankruptcy initiation in order to dispose of all cash proceeds for their own purposes. The moratorium applies only to those debts that existed before the start of the recovery of the company.
This measure to restore the solvency of the debtor has some limitations:
- fines and penalties accrued due to the fact that debts were not returned on time and in full are not written off;
- executive documentation is still valid.
The moratorium does not apply to the payment of salaries or to cover moral or physical damage.
How is solvency restored by external management?
The external control procedure itself is carried out by sequential actions:
- initially appointed specialist for the temporary management of the company;
- he forms a special program for a month, which indicates all actions to improve the state of the company;
- the plan is agreed with the creditors, and then sent to court;
- the direct implementation of various measures to restore the solvency and stability of the organization;
- the manager regularly sends notifications to creditors about the achievement of certain goals of the plan;
- a meeting is held in which all the achieved results are discussed, and the results of such a meeting are recorded;
- the manager presents various plans and reports, and if it is proved that the financial condition of the debtor has been improved, then through the court it will not be possible to declare the company bankrupt.
Only an uninterested specialist who is well versed in the features of the work of the existing enterprise is appointed to the post of external manager. He should not be an employee of the company, therefore he usually acts as a visiting lawyer.
Thus, to prevent bankruptcy, various methods are often used to improve the financial condition of the company. Measures to restore the solvency of the debtor are: sale of property, a moratorium on the requirements of creditors, changing the scope of activities and other methods. They are implemented only in the framework of interim management, and all actions are agreed in advance with creditors. If they give the necessary result, then this becomes the basis for the termination of the bankruptcy procedure. Some unscrupulous business owners use some of these measures, as this allows them not to pay funds for existing debts for a long time.