In an unstable economy, it is important to recognize in advance the signs of bankruptcy of a company in order to avoid financial losses and cooperation with unreliable counterparties. Falling liquidity, growing debt, arbitration claims − all this may signalize the looming problems.

In the Newsletter, we will explore the key signs of possible bankruptcy, the distinction between legitimate and illegitimate bankruptcy, and the consequences of illegal bankruptcy. You will know how Globas helps to identify future bankrupts by analyzing arbitration cases, financial indicators and other important factors.

Bankruptcy is a procedure for declaring a legal entity or an individual entrepreneur as financially insolvent, in other words, unable to fulfill its or her/his obligations to creditors. The process begins when a company accumulates debt that it cannot pay off.

In Russia, the minimum amount of debt for initiating bankruptcy proceedings is RUB 2,000,000 for legal entities and RUB 500,000 for individuals.

Bankruptcy proceedings can be initiated by:

After filing an application, the Court appoints a receiver who assesses the financial condition of the debtor, analyzes its assets and liabilities and takes measures to recover debts.

After the initiation of bankruptcy proceedings, a register of creditors' claims is being formed by the Court. Any organization or person that has confirmed debts to the bankrupt can claim their rights to collect the debt. For this, they submit an application to the Court within the prescribed period. Depending on the stage of the process, creditors have rights to:

Bankruptcy can be legitimate when a company is really unable to fulfill its obligations and undergoes the procedure according to the law. However, there are also schemes of illegitimate bankruptcy, when debtors deliberately withdraw assets, create fictitious liabilities or apply illegal debt cancellation schemes.

Illegitimate bankruptcy is divided into two types:

Russian law provides for serious sanctions for deliberate and fictitious bankruptcy:

1. Criminal liability (Articles 196 and 197 of the Criminal Code of the Russian Federation):
• a fine of up to RUB 500,000 or in the amount of the convicted person's income for a period of up to 3 years;
• imprisonment for up to 6 years (on a very large scale of damage).

2. Administrative liability (Article 14.12 of the Administrative Code of the Russian Federation):
• fine for the legal entities up to RUB 300,000.

3. Civil liability:
• cancellation of transactions aimed at deliberate bankruptcy;
• the duty to compensate the losses to creditors.

4. CEO disqualification:
• a ban on holding senior positions for up to 3 years.

Decrease in the company's liquidity level. If a company does not have enough current assets to cover current liabilities, this is the first red flag.

Worsening of the financial condition based on the analysis of ratios. Important indicators, such as ratios of current and absolute liquidity, financial stability and liability coverage ratio, make it possible to identify the worsening of the situation long before the crisis.

Growth of number of arbitration cases in disputes related to fulfillment of obligations. The presence of many debt collection claims indicates problems with solvency.

The appearance of active writs of execution for overdue debts, taxes and wages. If a company does not meet its obligations to employees and public authorities, this is a clear indicator of financial difficulties.

Excess of liabilities over assets. If the company's long-term and short-term liabilities exceed the value of its assets, this indicates possible insolvency.

Losses of previous years. If a company accumulates losses from year to year without taking remedial actions, this increases the likelihood of bankruptcy.

Growing debt load. If the debt load is constantly growing, and the profitability of the company falls, financial stability is threatened.

Globas provides a set of risk assessment tools:

Using Globas allows you to recognize in advance the financial problems of the company and make informed decisions. Monitoring of arbitration cases, financial ratios and Liquidity Index helps to avoid cooperating with problem counterparties and minimize risks.

In recent years, there has been a significant transformation in the publicity of data on companies registered in various countries. If previously most states sought maximum transparency of corporate information, providing free access to data on owners, shareholders and beneficiaries, today the trend has changed. More and more countries are restricting access to this information, which complicates the screening and compliance procedures.

This trend is largely related to global political and economic instability, increased international sanctions and geopolitical risks. Open data makes it easier to impose sanctions, so many states prefer non-disclosure in order to ensure internal security and protect their companies from external pressure. As a result, screening of foreign counterparties become more complex and require specialized tools and methods.

Understanding new challenges and effectively using available tools is the basis for building safe and reliable business relationships.

Screening of foreign counterparties is based on internationally recognized standards and best compliance practices. Key aspects include:

Information and Analytical system Globas offers effective solutions for comprehensive check of foreign companies, allowing to compensate for the lack of public data and reduce risks when doing business in the international arena. Globas provides the following tools:

Besides Russia checking for companies from Belarus, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Tajikistan and Ukraine is available in Globas subscription. The data includes factors 'Require attention', the possibility of checking managers, shareholders, beneficiaries, assessing sanctions risks, the availability of licenses, data on branches, subsidiaries, affiliates, information on inclusion into various lists, financial indicators and financial statements, legal proceedings in the Russian Federation, etc.

For companies from Belarus, Kazakhstan and Kyrgyzstan, data on planned and extraordinary inspections carried out by supervisory authorities are additionally available, which is important for analyzing the identified violations and assessing potential operational risks.

Online report can be ordered for more than 527 million companies from Europe, America, Africa and the Asia-Pacific region. Basic information about companies worldwide is provided.

For a more detailed check, you can place an off-line order for fresh investigations, which are prepared by Credinform experts. Offline reports contain key data, including registration data (date of registration, number, status), contact details, data on management, shareholders, types of activities, authorized capital, financial statements if available, banks, etc.

Additionally, our experts screen for the following data:

You can quickly find and receive detailed information about companies from China within 1-2 hours. Globas instantly provides basic information, and if necessary, you can place an order for detailed information directly from the search results.

The service provides a number of advantages:

Legal Risk Reports for companies registered in Bahrain, UAE, Oman and Saudi Arabia are available. The reports include data on litigation (parties, court, amount of claims), bankruptcy and liquidation information, corporate events (change in authorized capital, change of name, cancellation of license), as well as information on registration of real estate pledge.

Globas helps to effectively overcome the limitations associated with the shortage of public data, providing a comprehensive compliance check of foreign counterparties. Use Globas to increase trust and reduce risks when building international business relations.