A company or other debtor that is unable to pay its debts may be declared bankrupt. Bankruptcy is a form of insolvency proceedings covering all the liabilities of the debtor, in which the assets of the debtor are used in payment of the claims in bankruptcy. When a debtor is declared bankrupt, the debtor loses the right to govern its assets. The court appoints an administrator to manage the assets and the administration of the bankruptcy estate. The assets are liquidated and the assets used to pay the debts.
The Bankruptcy Act (120/2004) is a comprehensive general act, which includes provisions on
the prerequisites for the initiation of bankruptcy,
the different phases of the bankruptcy proceedings,
the claims in bankruptcy,
bankruptcy administration and
the management and sales of the assets of the bankruptcy estate.
A natural person or an organisation, foundation, or any other legal person may be declared bankrupt. A death estate and a bankruptcy estate may also be declared bankrupt.
Bankruptcy is the correct option for a company that has become permanently unable to meet its financial obligations, and its operations can no longer be made profitable. Corporate reorganisation may be an alternative to bankruptcy , if it possible to make the business viable through rehabilitation.