Remediation is a series of legal, financial, economic and organizational measures aimed at improving the financial condition of enterprises in order to prevent bankruptcy. This term comes from the Latin word sanatio, which in translation means recovery. Remediation is a system of measures that is especially necessary for many enterprises in the context of economic crises. However, these measures are applicable only to firms that have a certain potential for restoring their solvency.
Basically, there are three cases when reorganization is carried out.
- The company, on its own initiative, is trying to overcome the crisis.
- The company applies to arbitration in order to recognize its bankruptcy and conduct recovery.
- The decision of the arbitral tribunal on the basis of applications received from creditors.
The main goals of recovery
- Repayment of debt to creditors.
- General debt restructuring.
- Improving the state of finance and the restoration of economic activity.
- Change in the structure of the enterprise.
Events are pre-trial and judicial.
Pre-trial rehabilitation is a measure of reorganization of an enterprise using the financial assistance of owners or creditors, which is aimed at restoring solvency. Pre-trial measures also include independent recognition of the bankruptcy of the company. However, this requires the written permission of the creditors. If at least one of them does not agree, then the head of bankruptcy must go to arbitration to recognize bankruptcy.
Judicial reorganization is the declaration of bankruptcy by applying to the arbitration court with the subsequent transfer of authority to manage the company to an external manager. Improvement cannot last longer than 18 months. If the situation does not change and solvency cannot be restored, then the company is finally declared bankrupt and bankruptcy proceedings begin.
Recovery plan
The main document, according to which the enterprise is being reorganized, is its plan. It substantiates the main goals, and also outlines ways to achieve them. The rehabilitation plan is an example of what actions need to be taken to restore the solvency of the company and return it to productive economic activity. The main objectives of the plan are the technical re-equipment of the enterprise, the increase in production volumes and its successful implementation. These methods provide for the complete recovery of the debtor. Timely rehabilitation is a complex of measures that can save an enterprise from complete bankruptcy. It can be carried out both without changing the legal status of the debtor, or with its change.
The main methods of healing.
- Decrease in share capital and reduction in the issue of new shares.
- Getting loans, loans, government subsidies.
- Merger or takeover of a larger structure.
- Liquidation of the company and the creation of a new one.
Remediation is an effective tool that helps enterprises overcome the crisis and continue normal economic activity.
