Bankruptcy is a condition of a company in which it is unable to fulfill its obligations to creditors and is insolvent.

If the company is insolvent, the board of the company is obliged to immediately file a bankruptcy petition with the court and initiate bankruptcy proceedings. The creditors of the company may also file for bankruptcy if they have reason to believe that the company is insolvent.

If the board of the company filed for bankruptcy in a timely manner, this will allow them to avoid personal liability for the consequences of bankruptcy. If the board does not file a bankruptcy petition in time, then the board's personal liability for the resulting damage cannot be ruled out.

In the framework of bankruptcy proceedings, creditors' claims are satisfied at the expense of the alienation of the enterprise's property.

Bankruptcy stages

• filing an application with the court by a board member or creditor of the company;

• the court publishes the announcement of the bankruptcy petition on the official state portal Ametlikud Teadaanded;
• within 10 days after the submission of the application, the court appoints a bankruptcy administrator, who, as a confidant of the court, controls the economic activities of the insolvent debtor, manages the bankruptcy property and protects the rights and interests of all creditors. The bankruptcy manager becomes the debtor's representative in all property disputes and receives the right to manage all the debtor's assets;
• the court makes a decision on declaring the debtor bankrupt. The corresponding message is also published by the court on the portal Ametlikud Teadaanded;

• the date of the meeting of creditors is set, within which the bankruptcy administrator will make decisions on the full or partial satisfaction of creditors' claims at the expense of the debtor's property, in accordance with the bankruptcy law.

Consequences of bankruptcy

All property and assets of the debtor become bankruptcy property, and the right to manage it is transferred to the bankruptcy manager. In the future, claims of creditors are covered at the expense of the debtor's assets. Upon the declaration of bankruptcy, the accrual of interest and penalties on claims against the debtor is completely terminated. The debtor loses the right to independently make any transactions.
Upon completion of the bankruptcy procedure, the debtor company, as a rule, is liquidated.
In order to avoid bankruptcy, on the initiative of the company and with the approval of the court, the procedure of rehabilitation (reorganization) of the enterprise can be initiated, if it is possible to satisfy the claims of creditors by reorganizing the work of the company.

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