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| FINANCIAL RESTRUCTURING |
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The issue of increasing efficiency in enterprise management is one of the most critical in the nowadays Ukraine. This matter gained utter significance with the completion of the mass privatization that left a large number of the newly established open joint-stock companies without the protective shield of the state ownership. Despite the growing market awareness, the companies under the state ownership were allowed to continue practicing the outdated management methods characteristic of the “planned economy”, reporting directly to the respective ministry as opposed to private owners.
However, the state in its current position is unable to use the centralized financing to compensate for the inefficient management methods used by the enterprises. Additionally, privatization allowed the state to free itself from the burden of liabilities as the enterprise owner. Thus, majority of Ukrainian enterprises are left to their own devices in their attempts to overcome the difficulties accumulated over the past years, the difficulties against which their only protection used to be the state ownership.
Among the problems experienced by the majority of enterprises in Ukraine are the low level of solvency and the constantly growing overdue liabilities to the State Budget and extra-budgetary funds, banks and suppliers, as well as lack of systems for regulation of accounts receivable.
The risk factor of each of the above listed categories of accounts payable depends on both specific and general factors for every enterprise individually:
The following factors fall into category of general:
· Liabilities to the budget – rock-ribbed state policy with regard to the defaulters (introduction of tax pledge regime, blocking enterprise bank accounts, which can negatively effect the production cycle or, even completely disable the production activity of the enterprise);
· Liabilities to legal and natural entities – creditors – development of legal environment and extensive application of judiciary law for collection of overdue liabilities (being stimulated by the effective tax legislation with regard to creditors – legal entities; in particular, the Law of Ukraine “On Enterprise Profit Tax” determines that initiation of bankruptcy case in the arbitration court is a an essential requirement for write-off of overdue liabilities by the creditor as bad debts used to decrease the amount of taxable profit).
Click here to download full version of Debt Restructuring Training Manual in Microsoft Word format (1 452 Kb).
Source Government of Ukraine/ World Bank EDAL Bankruptcy and Liquidation Project. |
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