THE CRISIS OF BANKRUPTCY INSTITUTION: WHAT MEASURES ARE TO BE TAKEN?

Tatiana Ryabtseva, Director of the Moscow Center for Bankruptcy Prevention and Business Protection, prepared a material about the crisis state of the bankruptcy institution and measures that should be taken to improve the situation.

2020 is a year that turned out to be a litmus test that clearly demonstrated all the problems that have accumulated in society and in all areas of it. What has been talked about for a long time, but somehow quietly and not so publicly, now thunders at all venues and cannot be ignored.

As the director of the Moscow Center for Bankruptcy Prevention and Business Protection, I am extremely worried about the situation in the bankruptcy environment: disunity of opinions in the professional community, lack of a common understanding of what will happen next. The dialogue of state bodies with the professional community of insolvency managers is minimized or doesn’t exist at all and the system of self-regulation in the industry is discredited by the law enforcement practice.

The Moscow Center for Bankruptcy Prevention and Business Protection was created by us in the midst of a pandemic in order to protect business and prevent a catastrophe that could hit the business environment (and, by the way, taking into account the moratorium on bankruptcy, there is still no clear understanding of what will happen next)

Unfortunately, over the long-term practice of conducting bankruptcy procedures, the number of enterprises, the activities of which were resumed as a result of the restoration of the solvency of organizations is minimal.

Rehabilitation procedures (financial recovery, external management, amicable agreement) are practically not applied, they are regulated by law only in technical sense and the liquidation process goes through bankruptcy proceedings, a clear and undisputed leader.

The ineffectiveness of the application of rehabilitation procedures is related to the fact that first of all, entrepreneurs seek help from lawyers as an extreme measure, when they are already in such a crisis that it is no longer possible to save them from drowning. Refusal to use anti-crisis measures and turning to lawyers when everything is fine is still a long way off for our mentality. But we form the mentality and pass it on from one generation to another. As the director of the Bankruptcy Prevention Center, I urge you to seek first of all not for help, but for advice. The problem is much easier to prevent than to pick up a broken glass piece by piece.

The second reason for the ineffectiveness of bankruptcy rehabilitation procedures is the clearly liquidation orientation of the bankruptcy institution.

Currently, an insolvency manager is a person that is placed in a very strict framework, where each of his or her steps is clearly regulated. Restoring solvency is about the economy, it is about the risks of entrepreneurial activity, it is about the non-standard decisions of the manager, and what kind of freedom of action we can talk about if the administrative responsibility of managers is often so formal and ridiculous that the state itself does not provide them with the opportunity to save it.

The main goal of bankruptcy as an institution, in my opinion, is to have an impact on the economy in order to reorganize it, but not to destroy it. This is what we must strive for.