1.1 The problems of bankruptcy: theoretic approaches.

The determination of property rights in a situation where financial markets do exist cannot be regarded as complete, or even, quite simply, clear enough without finding solutions to problems associated with companies’ insolvency. To which degree the “automatic” functioning as such, of the market mechanisms or the actions of the legal agencies undertaken in accordance with existing legislation are capable of protecting the interests of an owner of debt notes? And to what degree those bankruptcy procedures, which are being offered as the “optimal” ones, are capable not only of determining the range of an owner’s rights, but also of ensuring a sufficiently active protection of his interests?

The economic and legal regulation of problems arising as a result of company’s insolvency belongs to the category of key issues pertaining to the functioning of private property and market relations; in particular, smooth of the system of settlements and payments, as well as the intensity and profundity of the development of financial markets depend on efficiency of such regulation. Nevertheless, so far the issues of bankruptcy, obviously, have not become fully reflected in standard neoclassical theory. In day-to-day life and in the actual strategies of banks, corporations-borrowers and other participants in the economic process, the prospects of potential bankruptcy and its expected results usually are assigned a far more important role that in refined theoretic models of corporate behaviour. ¹

1.2 Concepts and features of the insolvency of the legal entity. Conditions, criteria and reasons for bankruptcy.

Insolvency (bankruptcy) - a recognized or declared by an arbitration court  debtor's inability to fully satisfy the claims of creditors on monetary obligations and (or) to fulfill the obligations to make mandatory payments.

As follows from the definition, and also from analysis of bankruptcy law, under the bankruptcy procedure are involved only insolvent entities.

Debtor (individual or a legal person) is unable to satisfy claims of creditors on monetary obligations (duty of a citizen - to pay to the creditors a sum of money for the civil contract, and any other grounds provided by the Civil Code of the Russian Federation and (or) to fulfill the obligation to pay  mandatory payments if corresponding responsibilities are not fulfilled it within three months from the date of their execution.

To arbitral court adopted a statement on the bankruptcy of the debtor must prove certain signs of bankruptcy, that is to decide on the criteria of insolvency.

Under the law establishes the following criteria of the entity’s insolvency:

-If at maturity the debtor fails to satisfy the legitimate claims of creditors to pay debts and fulfill other obligations (for goods, services, etc.) in full; -If at maturity the debtor refuses to satisfy these requirements in full; -If at maturity the debtor is unable to satisfy these requirements in full; -if the amount exceeds the amount of liabilities of the debtor's assets so that the debtor's balance structure is not satisfactory. As stated above, the debtor's ability to pay its debts does not matter.²

In world practice there are two opposite approaches to the criterion of insolvency. They are expressed in the legislative recognition of the insolvency of either criterion of irredeemable. Within each criterion can distinguish certain system features:

Irredeemable - is a situation where the cost of the debtor's property is less than the cost of his obligations, that all of the debtor not enough ready to satisfy the creditors' claims. Irredeemable criterion comes from the fact that only a debtor may be declared as insolvent (bankrupt).

Insolvency - the fact of non-payment by the debtor the creditor's claim.  Criterion for non-payment capabilities allow the recognition of the debtor's bankruptcy on the basis of only the fact of default regardless of the presence or absence of the property and its cost.

Turns out that it is possibly to recognize debtor to be bankrupt, having a significant amount of property, but for some reason does not satisfy the creditors and impossible the bankruptcy of the debtor , almost  having no property, but find ways to timely satisfy the requirements.

Each of these criteria has both positive and negative consequences.

Positive sides of insolvency criteria are that:

• criterion makes it very easy stop the activity of the insolvent debtor, since it does not need to implement complex calculations and compare the cost of of property and liabilities.

• the threat of bankruptcy on this criterion improves discipline execution of obligations.

• probability of satisfaction the requirements in the competitive process is sufficiently large, which helps protect the interests of creditors.

Negative sides of insolvency criteria are that:

• small probability of excitation of bankruptcy proceedings against the very wealthy debtors, leading to unnecessary loss of time and money, both of  the debtor and creditors.

• high possibility of abuse by creditors who want to harm the debtor, since the excitation of the competitive process can have very negative impact on the image of the debtor and its property’s cost .

• is not excluded the situation where the debtor may aggravate the situation and its creditors that the purpose of obtaining money goes to the risky operation, take considerable interest loans, that is, in any way trying to pay the claims which are presented without thinking about consequences.

• at an advantage would be more active creditors or more knowledgeable, it is unfair in relation to other