Supreme arbitration court offers the business to enter into out-of-court settlements more often

The Plenum of the Supreme arbitration court (SAC) has prepared the draft decree «About conciliation procedures». This project should help the parties reach an agreement, and at the same time to «unload» arbitration courts.

The statistics of recent years testifies to underdevelopment of conciliation procedures in domestic jurisprudence. Thus, in recent years the share of out-of-court settlements is no more than 3% of the total number of cases.

The decree prepared by the SAC Plenum contains numerous statings of desirability of out-of-court settlements in order to decrease the burden on courts. However, there is no mechanism for forcing the parties to conciliation in the draft decree, as well as there is no leading role of court in the conciliation of parties. Now therefore, this procedure attaches to disputing parties, which are given the freedom to formulate the terms of the settlement agreement. The interference of the court in the conciliation process is allowed first of all for prevention of procedural abuse, for example, in those cases, when one of the parties, as a rule, the defendant, uses formal conciliation procedures for protraction of hearing of a case. In this situation the party may be fixed with court costs, that should serve as a deterrent to commission of illegal actions.

The draft decree organizes and develops approaches worked-out during the judicial practice concerning questions, arising at the conclusion of settlement agreements. The key provisions for the business are provisions regarding conciliation procedures with public authorities, in particular, tax and competition authorities. As of today the conclusion of settlement agreements in such categories of dispute occurs rarely. Suggested project prohibited the conclusion of settlement agreements, aimed at changing of tax consequences of taxpayer’s activity, in particular, application of the reduced rate, change of the principles of estimation of penalty fee, tax exemption, and others. However, the parties can come to an agreement for the recognition of expenses for the purposes of formation of the tax base, for the recognition of methods of tax optimization of a taxpayer as acceptable, and so on.

Special mention should be made of the question as to whether the parties can apply to courts again, if the previously concluded settlement agreement hasn’t solved all problems. In this regard, the draft decree of the Plenum of the Supreme Arbitration Court of the RF contains two opposite versions. Selecting one of them in the final version of the decree should have a significant impact on the judicial practice on conclusion of settlement agreements.
In summary, it should be noted that the suggested decree will be useful first al all for those participants of proceedings, who really want to make an agreement, as well as will unload arbitration courts, therefore will speed up their work.

Overall liquidity ratio of the companies engaged in production of household appliances

Information Agency Credinform has prepared the ranking of the companies engaged in production of household appliances.

The largest enterprises in terms of revenue were selected according to the data from the Statistical Register for the latest available period (for the year 2013). Then, the companies were ranged by decrease in annual revenue.

Overall liquidity ratio (х) - is a ratio of total working capital to short-term liabilities. The ratio shows the sufficiency of the most easily marketable assets - working capital for repayment of debts, maturity date of which is less than two months. The recommended value is from 1,0 to 2,0.

Ratio value equal 1 assumes equality of the current assets and liabilities. However if to take into account the fact that the degree of liquidity of various current assets is significantly different, it is possible to allow that not all assets will be immediately released or released by full cost; as a result, threat of deterioration in the financial condition of the company is possible. Moreover the company must have a certain amount of inventory in order to continue its production and business activities after fulfillment of all current liabilities.

For the most full and fair opinion about the company’s financial condition, not only the average revenue values should be taken into account, but also the whole set of financial data.

Table. Revenue, overall liquidity ratio and solvency index of the companies engaged in production of household appliances
Name RegionRevenue, mln. rubles, 2013 Overall liquidity ratio, (х)Solvency index Globas-i®
INN 5075018950
Moscow region 92 573,5 1,4 192 The highest
INN 4025413896
Kaluga region 56 757,2 3,1 221 high
ИНН 4823005682
Lipetsk region 18 080,6 1,7 196 The highest
INN 4703119938
Saint-Petersburg 8 893,2 1,2 261 high
INN 7804157910
Vladimir region 7 818,8 1,1 240 high
6 LLC Partner Energy
INN 7723642517
Moscow region 7 655,9 1,0 241 high
INN 7819301797
Saint-Petersburg 6 932,2 0,4 326 satisfactory
INN 4703066115
Leningrad region 4 402,0 3,1 172 The highest
INN 3301015292
Vladimir region 3 664,7 1,0 318 satisfactory
10 OJSC Krasnoyarsk Refrigerator Plant Biryusa
INN 2451000695
Krasnoyarsk Territory 2 905,4 3,0 264 high

production of household appliances

Picture 1. Revenue, overall liquidity ratio of the companies engaged in production of household appliances 

According to the latest financial statements, the revenue of the largest household appliances manufacturers (Top-10) amounted to 209,7 bln. RUB. In 2013 the total revenue of Top-10 enterprises increased by 3,9% from the level of 2012. 

Today the world's leading brands of home appliances, which are in the Top-list, have localized production in Russia. This is such companies as: Samsung, LG, Indesit, Ariston.

LG ELECTRONICS RUS is the leader of Russian market by total revenue. Its plant in Moscow region carries out assembly and provision of retailers with wide variety of household appliances under brand LG (TVs, refrigerators, etc.). The overall liquidity ratio (1,4) says that the company strikes the balance between working capital and short-term liabilities and is ready to pay off with the contractors, without harming of financial condition.

The second place by total revenue takes SAMSUNG ELECTRONICS RUS KALUGA (Samsung brand). The company’s financial policy is rather discreet, while total short-term liabilities are much less than current working capital. Such fact speaks about low debt load of the company and the existence of considerable amount of free resources, which were formed by own sources. From the position of creditors, such way of working capital formation is the most appropriate option. From the position of manager, the significant stock accumulation and diversion of funds to accounts receivable may be connected with inefficient assets management. At the same time, the enterprise perhaps may not fully use the abilities for obtaining the loans.

Other leaders of the market (except OOO BSH BYTOWIJE PRIBORY), have shown acceptable overall liquidity ratio (the ratio value is equal 1 or above)

OOO BSH BYTOWIJE PRIBORY (the manufacturer of refrigerators and washing machines under the Bosch and Siemens brands) shows the excess of current liabilities over current assets. There is a risk that the company won’t be able to pay off with the creditors, using their most liquid assets.

According to an independent assessment of the Information Agency Credinform, eight out of ten participants from the Top-10 list received the highest and high solvency index. Such fact speaks about ability of the largest market participants to meet its obligations on time and fully, the risk of unfulfillment is low.

VESTEL-CIS LTD (brand VESTEL) and OOO BSH BYTOWIJE PRIBORY have satisfactory solvency index. It should be taken into account the possibility of financial difficulties in the nearest 12 months.