Verified counterparty is better than litigations

Institute of Bankruptcy loses its effectiveness

The current bankruptcy law has turned out to be untenable. The statistics of asset recovery through court action is constantly decreasing, the measures for financial rehabilitation do not work. The only effective way to protect assets is to check business partners in advance and monitor constantly.

Less bankruptcies, more outstanding claims. According to the Information and Analytical system Globas-i® of the Information agency «Credinform», the court's decisions to start a bankruptcy proceeding were made against 15 000 legal entities in 2016 (in 2015 – against 18 600). A little more than 3 500 of such decisions were made for the 1st quarter of 2017. However, despite the decline in the number of bankruptcies, the statistics of debt collection in insolvency cases is also decreasing. According to the Unified Federal Register of Bankruptcy Information, the total share of cancelled claims of creditors (except bankruptcy cases of banks) to debtors – legal entities and individual entrepreneurs was only 3,2% (19,5 billion rubles from the declared 610 billion rubles) in 2016 and decreased by more than 2% in comparison with 2015 (then 5,4% of claims were cancelled: 25,5 billion rubles from 472,5 billion rubles). Experts agree: the effectiveness of the bankruptcy procedure fall constantly, to recover assets becomes more difficult, while the solvency restoration instrument also does not work.

Ineffective bankruptcy. There are several reasons for such bad statistics. Firstly, it is a lack of assets by debtors. The practice of doing business in Russia today is such that often only the necessary minimum of assets is concentrated on each business entity, which before the beginning of the bankruptcy procedure can be quickly replaced with an illiquid or just withdrawn, and creditors hardly will be able to count on anything. However, even an available property is often not easy to dispose, therefore the auctions are delayed, and the final reduction of price can reach 70%. Secondly, the monitoring procedure, being intended to rehabilitate the debtor's solvency, turns out to be also ineffective: it can drag on for more than a year, this time will be enough for unfair bankrupts to withdraw assets and destroy documentation. At the same time, too long procedure of monitoring prevents timely transition to recovery. Thirdly, the low level of professionalism of insolvency officers prevents the effectiveness of the bankruptcy procedure. And, finally, an important problem is the unappealable statutory right of creditors to decide the debtor's fate, that discourages him to keep his assets, that is why he goes for to withdraw them by any means.

Protection of assets is in the timely verification of business partners. First of all, the correction of the legislation is required to change the situation for the better. Currently, amendments to the bankruptcy law proposed by the Ministry of Economy are being approved. It is important to pay attention to improving the quality of work of insolvency officers. However, for radical improvement of the situation it is necessary to change the perception of the bankruptcy institute by the business community. And for this the general economic situation in the country should change, when the laws steady and effectively work over the decades, and the market operates under transparent and uniform rules for all participants. It will take a significant amount of time, meanwhile experts are solidarity in one point: for safe business it is necessary to take care of the reliability and solvency of business partners in advance, not relying on the possibility of debt collection through court action, including also during the bankruptcy procedure. Timely verification of new counterparties and permanent monitoring of existing ones will save the business from losses much more efficiently than any legal proceeding. An effective method of preventing risks of cooperation with unreliable business partners is the use of the Information and Analytical system Globas-i® , containing information about legal entities and individual entrepreneurs around the world, but, that is more important, has a wide range of analytical instruments, which allow to solve the problem of minimizing the risks of business cooperation rapid and effective.