Filing for bankruptcy
Filing for bankruptcy is a major and often sensitive step for an entrepreneur or company. When a company is unable to pay outstanding debts and the financial and business prospects are bleak, it can be decided to file for bankruptcy. A creditor too can file a petition for bankruptcy, for example, in the event of a debtor’s failure to pay. However, legal conditions are attached to this.
Who can file a petition for bankruptcy?
Various parties can file a petition for bankruptcy. A company or entrepreneur can of course opt to start bankruptcy proceedings of their own accord. Creditors too can file a bankruptcy petition. Who can file a petition for bankruptcy against a company or organization? • Creditors • The Public Prosecution Service • The administrator in the event of a suspension of payment • Shareholders of a company
Having a company go bankrupt: the advantages
Often, a bankruptcy announces itself well in advance. A company that notices that the demand for a product or service is decreasing or that it is no longer profitable can prevent worse by acting in time. Having a company go bankrupt or filing for bankruptcy yourself is a sensible solution in various situations. By terminating a company prematurely, high debts are prevented so that after the bankruptcy, an entrepreneur does not have to suffer the long-term consequences of a bankruptcy or be crushed by a sky-high debt burden. After the bankruptcy, a bankruptcy trustee focuses on selling assets and collecting funds to pay the creditors.
Disadvantages of filing a petition for bankruptcy
Filing a bankruptcy petition has drastic consequences. If a company is declared bankrupt, the owner or entrepreneur loses control over the equity and the business assets. A bankruptcy trustee determines what happens to the assets and possessions and takes care of the winding-up of the company. In the period from filing the bankruptcy petition to the settlement of bankruptcy proceedings, affected entrepreneurs or companies are not permitted to take business decisions on their own initiative. They are declared legally incompetent at this stage.
Conditions to filing for bankruptcy
There are several conditions attached to filing for bankruptcy as a sole proprietorship or for your own company. A condition for filing for bankruptcy is that an entrepreneur or company has stopped paying outstanding debts and has two or more debts with different creditors, or it is at least foreseeable that this situation will arise. At least one of these debts must be due and payable. In other words, the payment term of the outstanding debt has expired. These conditions explicitly apply when a creditor wants to file a petition for bankruptcy against a company or organization.
Filing a petition for bankruptcy against a private limited company
When a company cannot meet its payment obligations and this situation is not expected to structurally improve in the short term, the organization can file for bankruptcy. When a private limited company files for bankruptcy, the company must provide various documents, or copies of them. These include articles of association, the shareholders’ register and the minutes of the shareholders’ meeting in which the decision to proceed with the bankruptcy petition was taken. Other documents that must be submitted include (if applicable) the approval of the Supervisory Board and an overview of the company’s current financial situation.
Why file for bankruptcy?
Filing for bankruptcy has a negative connotation but in many cases, it is in fact done to limit damage, both for the debtor and the creditor. The purpose of the bankruptcy is the settling of debts. After a company or organization has been declared bankrupt by the court, a bankruptcy trustee is appointed. The latter aims to repay outstanding debts of creditors as far as possible by collecting claims and selling assets. The debts are settled on the basis of a statutory ranking of creditors using the proceeds of the trustee’s efforts.
Advice on bankruptcy proceedings
Is your business in financial difficulty and do you want to file a bankruptcy petition or would you like to receive more information about bankruptcy proceedings and your position as a creditor? The specialists in bankruptcy law and insolvency law at Fruytier Lawyers in Business will provide you with specific advice. Is bankruptcy the best solution for your business? Or can you prevent bankruptcy by means of a reorganization or restructuring of the organization? In this precarious situation, our committed lawyers will examine every option to provide you with tailor-made advice for the most favourable outcome.