Insolvent Enterprise Will Go Bankrupt and Then Get Liquidated Despite Its Debts to Creditors

Insolvent enterprise will go bankrupt and then get liquidated despite its debts to creditors and it will be regulated by the Court.

A new article was added to the Law about Processing the Case of Insolvency which states that if the Court estimates that by time of lodging the suit the debtor does not have enough property to cover the procedural expenses the Court will refuse the applicant to submit a suit about insolvency and passes judgment on the liquidation of a debtor. This judgment gets basis for the annulment of enterprise registration and the relevant application shall be submitted to the registration body within 30 calendar days.

“The amendments were introduced to the law due to existing shortcoming in it and relevant court practice. Acting in accordance to the Law about General Goals of Bankruptcy, the court does not cancel the processing of bankruptcy if it concludes that the enterprise does not own enough property to cover the bankruptcy expenses. Additionally, sometimes due to lack of common funds of partners in industrial cooperation, it is impossible to make decision on liquidation. Thus, on the one hand partners cannot make decision on liquidation, and on the other hand the director executes his obligation to appeal to the Court for bankruptcy; if the Court refuses to start processing because the enterprise does not have enough property to cover bankruptcy property,”  lawmakers said.

They added that even though partners decide to declare the enterprise bankrupt, the provision of the Law about Entrepreneurs is serious barrier for them which states that “after the process of creditors’ reimbursement is finished the authoritative person/s shall pass decision on the liquidation of the enterprise which should contain information about reimbursement of all known creditors. The decision document will be submitted to the registration body and it will become basis for the annulations of the enterprise.”

“It is clear that if the enterprise does not have enough funds to cover the bankruptcy expenses, it will not be able to reimburse the creditors either. In similar situation on the one hand we have an enterprise whose existence has neither legal nor economic grounds and on the other hand there is no legal way to cease its functioning. Our legislative amendments proposed lawful resolution of the problem to eradicate the current legal gap,” the lawmakers clarified.

The authors of the draft-law, of course, are “legendary” lawmakers MP Kakha Anjaparidze, Zviad Kukava and Andro Alavidze.

 News Agency “Pirveli”