An individual or a company goes bankrupt when they are unable to pay their debts. For individuals, bankruptcy means that your valuables will be sold and your debt restructured, but that doesn’t necessarily mean you will become debt-free. For companies, bankruptcy means that everything will be sold, the creditors will get what they can, and the story ends there. Well, you might end up being banned from starting other companies for 1-3 years.
As a company owner, it is your obligation to keep an eye on the relationship between costs and income, as you are required by law to go bankrupt if you pass the “point of no return,” where there is no prospect of getting enough income to catch up with the debts. If it’s proven that you have continued operations after the “point of no return,” you can become personally liable for the debts.
What is the procedure for declaring bankruptcy? First, make sure your accounting is up-to-date to avoid being temporarily banned from starting other companies. Then, get a court date to submit your bankruptcy application (you can participate physically or via telephone, but make sure to be present somehow, as failure to show up leads to jail time). Finally, a curator will be assigned to take over your company, including access to the company bank account. The curator might already take over while you are in court proceedings to ensure no assets are removed from the location, for example.
- You have the right to buy the company assets from the curator (especially because they will have a low price as they need to sell fast).
- A bankruptcy procedure can last two years or longer.
The distinction between personal and company bankruptcy highlights the different legal and financial responsibilities individuals face compared to businesses, affecting the process and consequences of debt resolution.