On the Issue of the Concept of Bankruptcy

Abstract

The paper justifies the statement concerning the multiplicity of the concept of “bankruptcy”, and interpretes the relevant meanings. The author states that bankruptcy can be considered as: 1. an economic condition, failure to satisfy creditors’ claims, including the failure recognized by the court; 2. a procedure; 3. an objection on behalf of the debtor; 4. a basis for a special settlement regime with creditors and such a special settlement regime itself; 5. a type of enforcement proceedings; 6. a way of authorizing insolvency; 7. a model of administration; 8. a basis and order of liquidation of a legal entity. A preliminary agreement concerning the meaning of the term “bankruptcy” is necessary at all stages of the life of law: when a rule of law is created, applied and when it is being subjected to doctrinal debates aimed at identifying its meaning. Particular attention in the paper is paid to the concepts of insolvency and property insufficiency. The author argues that it is necessary to distinguish the signs of bankruptcy from insolvency, and the former from the grounds for initiating proceedings. In author’s opinion, the introduction of the category of insufficiency of property in 2009 as grounds for mandatory filing for bankruptcy by the debtor’s principal was a step backwards and does not meet the needs of the modern economy. To remedy the situation, the Supreme Court of the Russian Federation introduced the category of objective bankruptcy that is also ambiguous. The paper also focuses on bankruptcy as a special settlement regime with creditors based on the application of the principle of equality of creditors (pari passu). It is stated that this principle is the reason for the emergence, along with the executive proceedings, of a special regime, namely: bankruptcy.