One of our recent assignments was the issuance of two opinions for the purpose of confirming or denying the state of insolvency of an entrepreneur. We were commissioned by the management of a joint-stock company against which one of its creditors had filed for bankruptcy.

As part of our cooperation, we prepared a comprehensive expert opinion on the economic and financial situation of the company and examined the prospects for conducting core business. One of its creditors had filed for bankruptcy, and we were to verify (confirm or deny) the state of insolvency referred to in Article 11(1-2) of the Bankruptcy Law.

In the study, we presented an analysis of the company’s economic and financial situation, including:

• analysis of revenues, operating expenses and financial results,
• structure of assets and liabilities,
• the value of equity.

Our experts also presented selected elements of the facts in order to present the position of the creditor and the position of the debtor.

In the report, we also presented a methodology for examining the prerequisites for insolvency, particularly in the context of Article 11 of the Bankruptcy Law. With regard to the liquidity premise, we checked whether – and if so, when and to what extent permanently – the company under examination ceased to pay the bulk of its contracted liabilities.

Analyses carried out in this regard:

• analysis of the time structure (delays in repayment of liabilities) of unpaid monetary obligations,
• analysis of realized payments/repayments of incurred liabilities, broken down by month,
• Analysis of enforcement titles issued against the company under review and pending court cases,
• analysis of concluded loan agreements to confirm or deny creditworthiness and service of financial debts on their due dates,
• determination of the prospects for the continued operation of the company.
  

We analyzed the issue of potential insolvency also in terms of the asset premise. We presented a test for establishing/denying the company’s insolvency status based on data from the company’s books and financial statements. We also took into account the information provided by the board of directors, and due to the need to recognize the value of individual assets at market valuation – due to the correct methodology for examining the moment of materialization of the asset premise – we again carried out the test account referred to in Article 11(2) of the Bankruptcy Law, making appropriate adjustments to the accounting records.

In our conclusions, we indicated that neither the property nor liquidity premise of insolvency has materialized in the company under review. The entity has real prospects for conducting business and is paying its liabilities on an ongoing basis, and bankruptcy proceedings should be conducted against an insolvent entity.