There are two ways for enterprises to withdraw from the market is the dissolution or bankruptcy. In fact, many companies often choose the method of declaring the dissolution, but this does not mean the dissolution is the optimal option. Enterprises are regarded as falling into bankruptcy without the ability to pay due debts to creditors’ request. Bankruptcy is not completely bad, sometimes it is a tool to protect the "debtor", to help enterprises to withdraw from the market in an orderly manner.
First, this is an opportunity for enterprise to "revive". After the opening of bankruptcy proceedings, company is not forced to liquidate assets that are immediately applicable business recovery procedures. Any creditor or person receiving obligations to business activities recovery of enterprises has the right to draft recovery plans and submit to the Court.
Second, since the decision time of the Court to open bankruptcy process, all of the debt claims are suspended and settled under a common procedure for the Court. It helps to reduce the pressure for company to pay debts.
Third, bankruptcy can reduce the financial burden. Except for private companies and partnerships, responsibility to pay the debt applied to other enterprises are limited in existing assets. Debts will be paid in order: cost of bankruptcy; wages, severance benefits, social insurance as prescribed by law and other rights under the collective labor agreements and signed labor contracts; the unsecured debts. For debts is not due for payment at the time of liquidation proceedings will be considered as due debts without interest for the due period.
Fourth, bankruptcy can help the company get rid of debts in a legal way. For dissolution procedure, to declare the dissolution, enterprise must pay all debts. As for bankruptcy, company debt need to pay only within the limits of its property. Except for private enterprises and partnership, for other enterprises, after the Court made decision on their bankruptcy, the debts have not been paid in full which can be considered as paid in full and creditors will have no right to claim the debts.
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