Liquidation of company for any reason is a complicated legal process resulting the exclusion of company from the State Register and cancelling all of its rights and obligations. Sometimes the liquidation may be implemented through a reorganization process like merger with another entity or simple change of founders.
When a company does not able to settle accounts payable due to lack of cash and other liquid assets the bankruptcy proceedings may be initiated. The Law of Turkmenistan “On Bankruptcy” (Article 32 paragraph 2) says that an external expert must carry out appraising of debtor’s property (assets) and liabilities.
Appraising for bankruptcy purposes
At bankruptcy, company’s intangible assets (know-how, licenses, trademarks) lose most of their value. Therefore, company’s tangible property becomes core assets in terms of insolvency and, as a fact, to be valued by experts during their work.
Bankruptcy does not result a complete liquidation of company in definite way. The legislation of Turkmenistan provides for a number of measures, which may prevent a bankruptcy through, for example, reorganization procedures like the provision of financial aid for modernization and restructuring of the company. In this case an external expert may be involved in appraising of financial aid materials granted to the insolvent company.
Appraising of the insolvent company’s financial status can be made for both (i) the defining of property value for sale and (ii) for defining company’s entire business value, which may operate and generate cash flows or may be used for secured lending.
Appraising bankruptcy risks
Sometimes it is reasonable to appraise a probability of bankruptcy i.e. to define bankruptcy risks. This preventative measure improves the company management quality, allows detecting any deterioration factors and their reasons, and helps for elaborating best solutions for reducing bankruptcy risks immediately.
Creditors, customers and suppliers strive to protect themselves when choosing a reliable and promising partner, and thus are express a great interest to appraising bankruptcy risks. Appraisal of bankruptcy risks is of a great interest both actual and potential company shareholders as well. Because, this will allow them making decisions on placed and unplaced investments.