Insolvent Estate Research Articles

Juridical Review of Actio Pauliana Against Bankrupt Boedal Becoming The Object Of Liability

The Bankruptcy and Postponement of Debt Payment Obligations Act of 2004 regulates the bankruptcy process, which involves the conversion of a debtor's personal assets into bankrupt assets. The court appoints a curator and a supervising judge to oversee all of the insolvent estate's assets. The curator may come across legal measures initiated by the debtor against the bankrupt assets during this procedure that might be harmful to creditors. Paulina's action is what the curator can do in these circumstances to ask the court to dismiss these legal actions. The purpose of this study is to comprehend how Paulina's intervention supports the rights of creditors, particularly with regard to mortgage rights.The study used normative legal research and conducted descriptive and qualitative analyses of both primary and secondary data. The findings revealed that Paulina's action can be used to protect the mortgage rights of creditors, provided that certain dejure elements are met. The study highlights the importance of consistency and synchronization of decisions based on the principles and norms of bankruptcy law to achieve legal harmonization.In conclusion, Paulina's action plays a critical role in safeguarding the interests of creditors in bankruptcy cases, particularly regarding mortgage rights. It empowers the curator to cancel legal actions that could harm the creditors and promotes legal harmonization. This study underscores the need for consistent and coherent application of bankruptcy laws to ensure the equitable treatment of all parties involved. Keywords : Actio Paulina, Legal Action, Bankruptcy Law

Comparative Notes on the use of Commercial Litigation Funding in Insolvency: Australia and South Africa

This article explores the application of third-party litigation funding (TPLF), also referred to as commercial litigation funding, in insolvency litigation by way of a comparison of the legal position in Australia and South Africa. It proposes that TPLF could offer significant benefits by enabling liquidators of insolvent estates to pursue and enforce claims through civil proceedings with the aim of swelling the assets of the insolvent estate, ultimately to the advantage of the creditors. Since both jurisdictions share elements of English law, both were confronted with the English law doctrines of champerty and maintenance initially being regarded as impediments to the development and/or use of TPLF. Currently, and mainly due to developments in terms of case law, the concept of TPLF has in principle been accepted in both jurisdictions. However, in Australia the development originally transpired in the field of insolvency litigation. In South Africa the context was more in the confines of general litigation. It is submitted that the South African system could benefit by considering various aspects of the Australian system regarding the use of TPLF in insolvency litigation. It remains a question whether or not the respective systems would benefit by adopting comprehensive regulatory measures to regulate TPLF.

Assignments of Receivables in Civil and Commercial Matters Under the Laws of the Slovak Republic

Background: Receivables play an increasingly important role in the financing of particularly small and medium-sized businesses. This importance has been recognised by many international organisations, including UNIDROIT, which is slated to adopt a Model Law on Factoring in 2023. The purpose of the Model Law is to encourage States to modernise their legal frameworks for absolute and security assignments, as well as pledges of receivables. The EU has been struggling to find common ground with respect to a regulation on the law applicable to assignments that would build on the Rome I Regulation. A modern receivables regime rests on several key foundation blocks that include the ability to describe receivables generically, achievement of third-party effectiveness by registration, and predictable priority rules. Much of the law of assignments is of contractual nature, which is suitable to party autonomy. Party autonomy in the field of contractual obligations is a recognised institution under the national substantive law of the legal order of the Slovak Republic. In some respects, the Slovak legal regime would benefit from modernisation, such as in requiring all types of assignments and pledges to be registered, which facilitates the determination of priorities. This article examines the law governing assignments of receivables in civil and commercial matters in the Slovak Republic. It not only analyses the statutory law but also surveys the relevant case law that fills gaps in the legislation. Methods: The author uses traditional scientific methods: logical methods - the method of analysis, the method of synthesis, the method of analogy, the descriptive method, as well as comparative method. First, the descriptive method was used to familiarise the reader with the applicable statutory provisions governing assignments of receivables in civil and commercial matters in the Slovak Republic. Second, the author analyses specific provisions with regard to current developments and practical applications. Third, the author uses a comparative method in highlighting the practical needs that incentivise the modernisation of the current legislation in light of recent developments, especially the upcoming adoption of the UNIDROIT Model Law on Factoring. Results and Conclusions: The Slovak regime for absolute assignments of receivables is governed by the Civil Code, which also applies to assignments in commercial transactions. The Code also recognises a security assignment of receivable. The pledge law reform in 2002 introduced a registration system for pledges of receivables. Special laws continue to govern specific types of receivables. Case law has addressed several aspects of transfers of receivables, particularly in insolvency. However, no statutory provision provides a priority rule among the statutorily-recognised types of transfers. Several other aspects have been clarified in case law. For instance, the Supreme Court of Slovakia defined a description standard for future receivables, which must be identified by the name of the transferor, debtor, and a category, such as a receivable arising from the following contract. The degree of specificity is driven by doctrinal considerations rather than the needs of practice. Several important practical aspects are neither grounded in a statutory foundation nor case law. One example is the lack of recognition of transfers of partial interests in a receivable, a practice that is common in the Slovak market. The law recognises and enforces an anti-assignment clause that would make a transfer ineffective. However, such a clause would be ineffective in the insolvency of the transferor, so the insolvency estate would include the receivable. In this aspect, Slovak law falls short of the international standards that override the effect of anti-assignment clauses. Since the pledge law reform over two decades ago, no statutory changes concerning transfers of receivables have been introduced. The interpretation of the existing framework by the courts exacerbates uncertainty. The lack of certainty and predictability embedded in the statutory framework that falls short of international standards are good reasons to consider reforming the framework.

Die kontrakterende insolvent in die ongelukkige skuldeiser

A creditor is often very careful to file a claim against the insolvent estate of his debtor due to the fear of contribution. A person who became the creditor of another only after the sequestration of that debtor’s estate is often uncertain about his legal position vis-à-vis the insolvent estate. This investigation looks at the duty of creditors of an insolvent estate to contribute with particular focus on the position of the sequestrating creditor. The view is taken that this creditor is always obliged to contribute, regardless of whether he has proved his claim, withdrawn his claim, or whether he is a concurrent, preferent, or secured creditor. In certain circumstances he may even be the only creditor to pay contribution. Regarding the conclusion of contracts by an insolvent after the sequestration of his estate, it is pointed out that certain contacts are valid and enforceable and others voidable by the trustee, rather than void. Among other things, the view is taken that the Master of the High Court must first determine under section 24(5) of the Insolvency Act 24 of 1936 which part of the insolvent’s salary or earnings are not or will not be necessary for the support of the insolvent and those dependent upon him, before the insolvent estate will be entitled to any payment from his salary. Prior to such determination, the insolvent has no obligation to contribute to the estate and the trustee’s consent is then unnecessary when the insolvent concludes contracts in respect of these earnings or the fruits thereof. It is the duty of the trustee to take steps to request a determination from the Master concerning the insolvent’s “surplus” salary. If the trustee fails in this duty, he, the estate and the creditors must bear the consequences. There is no authority that such a determination by the Master has retroactive force.

Failliet in de Republiek

Between 1643 and 1713, many cities in the economic core areas of the Dutch Republic introduced local ordinances concerning desolate boedels, insolvent estates. This article compares the contents of a substantial number of such ordinances and explains these legal innovations as part of broader patterns of institutional change. The introduction of majority compositions in this period substantially improved the chances for economic recovery of insolvent debtors. It also formed a violation of the creditors’ property rights. This article shows how this was compensated for by a much improved and stricter supervision of insolvency procedures and curators by local authorities. It is argued that these legal and institutional developments should be seen as part of an important shift in public mentalities: local authorities all over the early modern Dutch Republic sought to maintain public order and protect the common good by regulating ever more aspects of society.

The Payout of a Life Insurance Policy into an Unrehabilitated Insolvent's Estate: Malcolm Wentzel v Discovery Life Limited: In Re Botha v Wentzel (1001/19) [2020] ZASCA 121 (2 October 2020)

One of the consequences of sequestration is the vesting of the property of an insolvent person in the trustee of the insolvent estate. However, not all the property of the insolvent person vests in the trustee as there are some exceptions. Under section 63 of the Long-Term Insurance Act 52 of 1998, life insurance policy benefits are excluded from forming part of the insolvent estate and thus do not vest in the trustee and are unavailable for the payments of the debts of the insolvent. The exclusion of these benefits diverts property from the insolvent estate and, consequently, the creditors who could benefit from the property. This note discusses Malcolm Wentzel v Discovery Life Limited: In Re Botha v Wentzel (1001/19) [2020] ZASCA 121 (2 October 2020), and considers whether a beneficiary of a life insurance policy payout is required to hand over such payment to the trustee of his insolvent estate. Further, it highlights the conflicting provisions between insolvency legislation and insurance legislation and examines the effects of section 63 on an insolvent estate where the insolvent was married in community of property.

The Payout of a Life Insurance Policy into an Unrehabilitated Insolvent's Estate: Malcolm Wentzel v Discovery Life Limited: In Re Botha v Wentzel (1001/19) [2020] ZASCA 121 (2 October 2020)

One of the consequences of sequestration is the vesting of the property of an insolvent person in the trustee of the insolvent estate. However, not all the property of the insolvent person vests in the trustee as there are some exceptions. Under section 63 of the Long-Term Insurance Act 52 of 1998, life insurance policy benefits are excluded from forming part of the insolvent estate and thus do not vest in the trustee and are unavailable for the payments of the debts of the insolvent. The exclusion of these benefits diverts property from the insolvent estate and, consequently, the creditors who could benefit from the property. This note discusses Malcolm Wentzel v Discovery Life Limited: In Re Botha v Wentzel (1001/19) [2020] ZASCA 121 (2 October 2020), and considers whether a beneficiary of a life insurance policy payout is required to hand over such payment to the trustee of his insolvent estate. Further, it highlights the conflicting provisions between insolvency legislation and insurance legislation and examines the effects of section 63 on an insolvent estate where the insolvent was married in community of property.

CANCELLING AN INSTALMENT SALE OF LAND Merry Hill (Pty) Ltd v Engelbrecht 2008 2 SA 544 (SCA) Van Niekerk v Favel 2008 3 SA 175 (SCA)

Chapter II of the Alienation of Land Act 68 of 1981 (“the Act”) governs instalment sales of land (as defined in the Act) where the purchase price is payable in more than two instalments over a period longer than 12 months. The Act affords the purchaser special protection, given the risks arising from instalment sale transactions. Perhaps the biggest risk is that the owner of the land may be sequestrated prior to transfer of the property to the purchaser, after the latter has paid the owner a portion of the purchase priceby way of a deposit and/or instalments. At common law this would leave the purchaser with no more than a concurrent claim for damages against the insolvent estate, should the trustee decide to abandon the sale: Glen Anil Finance (Pty) Ltd v Joint Liquidators Glen Anil Development Corp Ltd (1981 1 SA 171 (A)). Special provision is therefore made in the Act to safeguard the purchaser’s interests in the event of the owner’s insolvency. But there are also a number of other equally serious risks, including the unexpected implementation of a payment acceleration clause, cancellation of the agreement or a claim for damages, all of which could, depending on the wording of the agreement, be triggered by an isolated (even unknown) breach of contract on the part of the purchaser.

INTELLECTUAL PROPERTY AS THE DEBTOR’S PROPERTY IN THE BANKRUPTCY CASE

Recently, there has been a large amount of news related to the withdrawal from the Russian market of foreign organizations with branches in Russia. In this case, there is a risk of bankruptcy in relation to organizations that have assets in the form of intellectual property. However, the very question of the legal regime of intellectual property in a bankruptcy case is rarely in the range of scientific research. The purpose of the article is to analyze the legal regime of intellectual property in a bankruptcy case and find out whether they have specific features in insolvency estate or not. The work is interdisciplinary in nature, written at the intersection of intellectual property law and bankruptcy law. The main issue of the legal regime of intellectual property comes down to the specifics of foreclosure and the sale of the debtor’s property. In this regard, the authors proposed a new classification of intellectual property, which is based on the criterion foreclosure possibility. It is also noted that the practice of selling intellectual property in bankruptcy cases is represented mainly by trademarks. However, the problems of such objects remain unresolved due to the rarity of this category of litigation (and, as a result, a small number of jurisprudence). The presented results of the research work will be of interest to practitioners in the field of bankruptcy (including bankruptcy trustee) and civil law.

Regspraak: Regsontdaning kragtens ’n akte van dading, soos ’n huweliksvoorwaardekontrak, beliggaam ’n ooreenkoms gebaseer op wilsooreenstemming en dít word beheers deur die beginsel pacta sunt servanda – mits die afstanddoener dan handelingsbevoeg is

Regspraak: Regsontdaning kragtens ’n akte van dading, soos ’n huweliksvoorwaardekontrak, beliggaam ’n ooreenkoms gebaseer op wilsooreenstemming en dít word beheers deur die beginsel pacta sunt servanda – mits die afstanddoener dan handelingsbevoeg is

Termination of Dollateralized Obligations as an Illegal Action in Case of Bankruptcy: Problems of Criminal Law Assessment

There is a general rule according to which if the claims of some creditors on the debtor’s property are knowingly satisfied to the detriment of other creditors, it constitutes an illegal action in case of bankruptcy provided that such an action inflicted major damage. In its turn, the size of the inflicted damage coincides with the size of satisfied claims minus the share that would have been due to the creditors who satisfied their claims this way if the insolvency estate has been distributed according to the insolvency law. At the same time, the corresponding crime may be committed not only through the due performance of an obligation, but also through the termination of bail bonds on other grounds. When the authors analyze illegal actions in cases of bankruptcy committed through the provision of release property, they conclude that if the market value of the release property exceeds the size of terminated obligations by the sum equaling major damage, the actions should be classified as multiple offences under Parts 1, 2, Art. 195 of the Criminal Code of the Russian Federation. As for the order of determining the size of damage when satisfying claims secured by the debtor’s property, the authors pay attention to the privileged status of the pledge holder: a part of proceeds from the sale of pledged property must be used to satisfy their claims on the principal plus interest. Thus, for the corresponding part of the value of the object of pledge, no damage is inflicted on other creditors in connection with satisfying the claims of the pledgee. In some circumstances, the claims of the pledge holder are satisfied by a part of the proceeds from the sale of the object of pledge designated for the satisfaction of other claims, which cannot be overlooked when determining the size of the inflicted damage. The exceptions are the cases when, as a result of satisfying the claims of the pledgee, their claims on compensating damages and (or) paying financial sanctions were also satisfied. The satisfaction of the abovementioned claims in the size equaling major damage constitutes a crime under Part 2, Art. 195 of the Criminal Code of the Russian Federation. At the same time, if the difference between the size of pledge requirements terminated by the provision of release property, and the value of the transferred assets equals major damage, the actions must be classified as multiple offences under Parts 1, 2, Art. 195 of the Criminal Code of the Russian Federation.

THE NEED FOR VIGILANCE IN BANKING TRANSACTIONS IN THE LIGHT OF PREVALENT FRAUD, MISREPRESENTATION AND PONZI SCHEMES IN THE BUSINESS WORLD The Trustees of the Insolvent Estate of Grahame Ernest John Whitehead v Dumas Case 323/12 [2013] ZASCA 19 Unreported

Numerous persons are inclined to take a risk by making short-term investments that promise substantial profit returns within the shortestpossible time. In this respect people take a gamble and try their luck at whatever opportunity that presents itself. With this growing trend has also arisen fraudsters, whose business is to prey on possible investors by making investments in non-existent business ventures, and large numbers of “investors” have lost vast amounts of money in these get-rich quick schemes. One such example is found in the recent SCA decision of The Trustees of the Insolvent Estate of Grahame Ernest John Whitehead v Dumas (The Trustees of the Insolvent Estate of Grahame Ernest John Whitehead v Dumas GNP (unreported) 2013-03-20 Case no 323/12). The case involved a specialist medical practitioner, Dumas, who made an investment into a fraudulent scheme, having been misled through a misrepresentation by an agent of Whitehead, mastermind behind thefraudulent Ponzi scheme. As a result thereof, Dumas lost a couple of million Rands into the insolvent estate of Whitehead. As illustrated by this case note and the age-old adage that says “a fool and his money are soon parted”, unwary persons could easily lose their hard-earned money. Hence, this case note seeks to enlighten would-be investors of the pitfalls of Ponzi schemes, such as huge financial loss as was experienced by Dumas, and encourage vigilance in making financial transactions. This it does through a critical examination of the Dumas judgment. It especially concerns the legal principles pertaining to monies that are transferred from one bank account to another bank account owing to fraudulent misrepresentation. Primarily, the case note takes a critical view of the manner in which the court applied theselegal principles. While the court, in the authors’ view, properly set out the legal framework, which is sound and correct, it nevertheless went wrong in its application of the law. Therefore, the authors contend that, judged from these very legal principles that the court set out, it nevertheless came to an incorrect conclusion. If left unchallenged, the effect of the judgment will be to set a precedent inappropriately and wrongly that could amount to an unwarranted curtailment of legal protection afforded to persons who are induced by fraud and misrepresentation to transfer money into other people’s bank accounts. In this case note the authors examine the canards of the judges’ reasoning leading up to their decision. As a starting point we examine the factual background of the case, then we move on to the critique and we conclude with the advice.

ResTech: innovative technologies for crisis resolution

The use of financial technologies (FinTech) by financial market participants fostered a discussion among public authorities on the use technologies for regulatory (RegTech) and supervisory (SupTech) purposes. This paper discusses the application of innovative technologies to crisis resolution (ResTech) and sets out its potential scope of application. ResTech is the application of technologies: i) to support the work of resolution authorities in developing resolution plans and in resolving financial firms; and ii) to allow financial firms to achieve regulatory compliance and better risk management in a more effective and automated manner. This paper also argues that the features and market dynamics of resolution differ from those of RegTech and SupTech: there is little market incentive for the private sector to foster innovation in the area of crisis resolution. The lack of private sector incentives to invest in R&D on how to resolve a firm’s crisis leaves the task to resolution authorities. In addition, resolution-technologies may support the identification of optimal liquidation strategy for small and medium-sized financial firms, by ensuring the maximisation of creditors’ proceeds out of the insolvency estate.

The intersection between taxation and insolvency — The South African Revenue Service’s preference

When a debtor’s estate is sequestrated or an insolvent company is wound up, insolvency and taxation intersect whenever the debtor or company has an outstanding tax debt. This article considers whether the South African Revenue Service should, or could, be provided with a better standing in cases of insolvency. From a comparison of the situations in South Africa, Mauritius, Australia and the United Kingdom, it is clear that South Africa’s approach of determining the order of distribution in relation to tax claims based on the type of tax is in line with the approaches of Mauritius and the United Kingdom. However, s 179 of the Tax Administration Act and ss 114 and 147(1) of the Customs and Excise Act may have an impact on a claim by the South African Revenue Service in the event of insolvency. In this respect, we argue that, in instances where a taxpayer is sequestrated or wound up due to insolvency, the Insolvency Act and the Companies Act should take precedence. Since the Insolvency Act provides for a clear order of distribution both in respect of the insolvent estates of natural persons and when an insolvent company is wound up, tax legislation in South Africa should not be used to deviate from this order of distribution.

The Impact of Cryptocurrencies on the General Powers and Duties of South African Insolvency Practitioners

Within the context of the fourth industrial revolution, cryptocurrencies pose several challenges in the framework of corporate insolvency law. In South African law, no statutory framework vis-à-vis cryptocurrencies, such as Bitcoin, currently exists. This has however not prevented entities from engaging in the cryptocurrency market. The specific dilemma is that insolvency practitioners do not have legislative guidelines to assist them in dealing with the subject of cryptocurrencies. Consequently, international judicial developments must be consulted and analysed with the aim to close the gap between the legislature and Industry 4.0. This article unpacks the South African legal position on cryptocurrencies within the context of the statutory powers and duties of insolvency practitioners. It engages in an analysis of selected international courts cases that have dealt with the concept of cryptocurrencies within the context of insolvent estates and continues to make recommendations for the development of an efficient and effective regulatory model.

LENDING RIGHT AND INSOLVENCY ESTATE

The article analyzes the practical aspects of inclusion the lending right into the insolvency estate. Based on the analysis of existing legal regulations and judicial practice of their application, there are existing restrictions on the inclusion of lending rights in the insolvency state. These restrictions are analysed from a balance of interests of the owner, the debtor and his creditors, as well as the correct distribution of economic costs while providing priority protection to each of these entities. Based on the concept of flexible legal regulation, the author formulates possible approaches (de lege ferenda and de lege lata) to solving this problem. The article focuses on the definition of the elements of the theoretical concept of a flexible system of protecting rights in insolvency. This concept includes, for example, the following aspects: firstly, the need to relativize those absolute defenses that can directly negatively affect the general economic well-being (In this case, the insolvency estate), secondly, the enforcement search for the scope of the protection provided should be carried out by judicial weighing and procedural assessment of various relevant factors, as well as the corresponding gradation of legal consequences, which should be identified by legislator or superior court.

European Court of Justice Jurisprudence in the Field of Avoidance Actions with International Elements for Filling the Insolvency Estate

Abstract With the development of the internal market, the need to establish rules ensuring the protection of creditors in insolvency proceedings with a cross-border effect is increasing. Mechanisms at national level are difficult to provide the desired protection for foreign creditors. Since 26.06.2017 EU has a new Regulation 848/2015 which repeals the current Regulation 1346/2000. Despite the radical changes, it is attempting to implement this legislative act, the main objective of insolvency proceedings remains unchanged, namely, to achieve fair satisfaction of creditors. One of the mechanisms for the realisation of this objective are avoidance actions with international element for filling the insolvency estate. In view of the specifics of the procedure, the standard civil law mechanisms such as the Actio Pauliana are not impossible but are extremely inadequate and difficult to prove. In the practice of the Member States, many issues arise concerning the determination of jurisdiction and applicable law, creation of preconditions for the abuse in searching the most favourable legal system (forum shopping), there are differences in the so-called ‘suspicious periods’ and transactions concluded with affiliates. On this basis a fundamental jurisprudence of the CJEU has been enacted, the achievement of which will be the subject of this paper.

The Failed Hopes of Disintermediation: Crypto-Custodian Insolvency, Legal Risks and How to Avoid Them

This paper explores the legal risks involved in depositing cryptocurrency with crypto-custodians such as crypto-exchanges. These risks materialize most acutely in case these crypto-custodians fall insolvent, which has happened over the last decade in several instances. Recent years have witnessed the demise of crypto-exchanges such as Cryptopia (New Zealand), QuadrigaCX (Canada), BitGrail (Italy), Cointed GmbH (Austria) and a host of other crypto-exchanges around the world. These cases reveal that the qualification of the contractual and property law rights of crypto-investors is problematic. This is why this article discusses which rights crypto-investors can and should be able to assert in case a crypto-custodian falls insolvent. To answer this question, the (legal) qualification of bitcoin is analysed (can it be owned and if so, how can such ownership be created and transferred?) and the status of deposited bitcoins is discussed (do stored crypto-assets form a part of the crypto-custodian’s insolvency estate or can they be revendicated by customers?). Private international law aspects form the starting point of the legal analysis (which court has jurisdiction to open insolvency proceedings and hear crypto-investors’ claims, and what law applies to such claims?) and the analysis is based on the current terms and conditions of major crypto-custodians.

Conflicts of interest, intra‐group financing and procedural coordination of group insolvencies

AbstractModern insolvency law instruments recognise the specificity of enterprise group insolvencies, premised on the existence of close operational and financial links between group members. It is widely accepted that maximisation of insolvency estate value and procedural efficiency depend on coordination of insolvency proceedings opened with respect to group entities. Such coordination is prescribed in the European Insolvency Regulation (recast), the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Enterprise Group Insolvency and the recently reformed German insolvency law. Yet in insolvency, group members retain their own insolvency estates and pools of creditors. This is based on the traditional company law principle of entity shielding. Active communication and cooperation between insolvency practitioners and courts do not sit well with the separate (atomistic) nature of insolvency proceedings, as well as different and oftentimes conflicting interests of creditors in such proceedings. As a result, communication and cooperation may be restricted in a situation of conflicts of interest. This article explores how in the context of group distress the risks arising from conflicts of interest can be controlled and mitigated, while ensuring efficient cross‐border cooperation and communication to the maximum extent possible. It analyses three cutting‐edge coordination mechanisms, namely (a) cross‐border insolvency agreements or protocols, (b) special (group coordination and planning) proceedings and (c) the appointment of a single insolvency practitioner. It concludes that both the likelihood and significance of conflicts of interest correlate with the degree of procedural coordination. Therefore, conflict mitigation tools and strategies need to be tailor‐made and targeted at a specific level and coordination mechanism.

The role of stakeholders on rejection of bankruptcy applications in the case of “poverty” of the estate: A Polish case study

AbstractThe aim of this article is to supplement the Law and Economics area of science with regard to the scope of the ex ante effectiveness of bankruptcy law using the example of Poland. Bankruptcy law is effective in the ex ante stage when it eliminates from the market insolvent entrepreneurs who cannot even afford to cover the costs of bankruptcy proceedings. In these cases, the bankruptcy court should dismiss the petition for bankruptcy because of “poverty” of the insolvent estate. As a result, the insolvent debtor should be liquidated and deleted from the register of companies. This paper investigates entities whose bankruptcy petition has been rejected due to “poverty” of the insolvent estate. The study shows that, after the filing has been dismissed, the majority of these entities are not liquidated. To determine who is responsible for this state of affairs, the article identifies the stakeholders at the time that applications are filed for bankruptcy proceedings and also after the bankruptcy petition has been rejected. The article highlights stakeholders' diverging interests, strengths, and weaknesses to assess their potential impact on bankruptcy procedures that should be dismissed due to “poverty” of the insolvent estate.