REORGANIZATION AS A BUSINESS PHILOSOPHY

Abstract

The most common problems faced by business societies are the inability to pay or carry out the obligations to third parties, i.e. their creditors. When an economic entity is unable to settle its obligations, creditors and third parties cannot regularly collect their receivables and then bankruptcy occurs.

Changes in business conditions in the world, especially if business conditions deteriorate, will raise the issue of opening and efficiency of bankruptcy proceedings. The condition for initiating a pre-bankruptcy proceedings is insolvency, where, as a rule, debts are greater than the value of the debtor’s assets. Today, the economic entity, in accordance with the provisions of the applicable Law on business societies, is responsible for all its obligations with its assets. So, when it becomes unable to pay, it has mainly two alternatives, bankruptcy or possibly, the possibility of reorganization if its creditors deem it to be more expedient. The aim of bankruptcy is to remove those economic entities which do not achieve even the minimum of profitability doing their business and which are incapable of normal work and business. The overhaul of the bankruptcy debtor is a newer institute of our bankruptcy law. It includes the transformation of debtors at several levels such as legal-organizational, management and financial. The Institute of Restructuring is based on the debtor’s contract with creditors, giving him/her an opportunity to recover economically and avoid bankruptcy, i.e. deletion from the registry of legal entities, and it enables more favourable settlement of receivables.