Lowering the volume of assets of companies before their entry into insolvency proceedings
Lowering the volume of assets of companies before their entry into insolvency proceedings
Objectives
This work aims to contribute towards the confirmation or refutation of the hypothesis according to which the assets of commercial companies are artificially reduced during the period when their real economic results suggest the probability of their bankruptcy. This reduction is organized both from the side of the management and the side of the proprietors of commercial companies. The point of these processes is thus the reduction of yields for creditors from enforcement of receivables, and primarily reduction of entrepreneurial losses for the proprietors or unauthorized yields for the company management.
Data/Methods
Owing to the fact that there is at present no authoritative data in the Czech Republic that would enable sophisticated monitoring of activities of commercial companies before and during insolvency proceedings, selective research of a sample of cases of companies in insolvency proceedings shall be described in the first part of the study. This sample shall be attained on the principle of time selection. This means that further research shall include cases of such commercial companies that have reached a certain phase of insolvency proceedings in a selected timeframe. This timeframe shall be the first three weeks of September 2012; a decisive moment for inclusion in the selection, then, shall be the approval of the so called closing report of the insolvency court. A statistical sample shall then be compiled from cases of commercial companies (and natural persons – entrepreneurs listed in the commercial register), in which the assets of these companies from the time prior to the declaration of bankruptcy (approximately 12 months prior to the declaration of bankruptcy) and the assets of the same companies, which were monetized during the insolvency proceedings and the resources gained subsequently used to cover the expenses of the proceedings and to satisfy the creditors, shall be compared.
Then, in the second part of the study, an analysis of gained data shall be undertaken and a model estimate of asset volume transferred from the assets of the debtor to the control of other subjects (whereas it can be assumed that these are subjects controlled by the debtor or the management of the debtor) shall be created.
The data gained shall then be aggregated and compared with certain statistical data made public within the boundaries of international comparison.
Results/Expected Results
Among the assumed results of the study is primarily the creation of an estimate of the volume of debtor assets which are removed from the debtor’s assets before it is possible to utilize these to satisfy creditors’ demands (based a partial survey of a statistically appropriate sample of cases selected on the basis of the coincidence in time of these cases). An estimate of the tax impacts of these activities shall subsequently be created.