Demonstration of the circumstances required for the decision on the ban on business activity

Demonstration of the circumstances required for the decision on the ban on business activity

Creditors and even their professional attorneys often forget that simply submitting an application to the Court for a ban on business activity does not mean that such a decision will be issued. The applicant is obliged to prove the circumstances justifying the prohibition decision, and also have an impact on its duration.

Formal requirements for an application for a prohibition order

When filing an application for a prohibition decision, the creditor should prove that the entity obliged to do so did not file an application for declaring bankruptcy within the statutory time limit by fault of its own (Article 373(1)(1) of bankruptcy law). Additionally, it should prove that failure to submit the application within the deadline caused a reduction in the economic value of the bankrupt company and increased the extent of the injured creditors (Article 373(2) of bankruptcy law). Otherwise, the Court will reject the creditor’s application pursuant to article 6 of the Civil Code due to the failure to prove the above mentioned circumstances.

Demonstration of a reduction in the economic value of the undertaking

While it is relatively easy to prove the guilt of a given person in not filing an application for bankruptcy within the time limit, it is more difficult to prove the reduction of the economic value of the insolvent company and the extent to which creditors are harmed. In order to prove the circumstances, it would be necessary to have access to the accounting records of a given entity and then to request evidence from an expert who will analyse the financial data contained in the documentation obtained.

Obtaining information on the economic situation of the company

Creditors usually do not have access to the accounting records of an economic entity and the entity itself will not make them available voluntarily. In order to prove the circumstances required by law, we may request the Court to ask e.g. the Tax Office and the Social Insurance Institution whether a given entity is in arrears with the payment of its due liabilities, whether enforcement activities have been carried out and with what effect. We may also address the same inquiry to the appropriate bailiff. If our debtor is a commercial company, we may obtain some of the information from the company’s register files.

The indicated actions will enable us to gain knowledge about, among others, the number of creditors, payment arrears and assets. Additionally, they will constitute the material on the basis of which an expert court will determine the date of insolvency of a business entity and determine whether in the audited period the economic value of the company has decreased and the size of the damage suffered by creditors has increased.

Proof of an expert opinion

It should be emphasized that simply obtaining the documentation allowing to prove guilt in the failure to submit an application within the deadline is not sufficient for a ban on conducting business activity. The court does not have the accounting and financial expertise to establish the extent to which creditors have been harmed and the reduction of the economic value of the company, even on the basis of the entrepreneur’s accounting records. It is therefore very important to apply for expert evidence already at the application stage.

 

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