#

Resolving Insolvency in

Georgia

Below is a description of the time, cost and outcome of the most common insolvency proceeding in each economy under the case study assumptions, as well as the strengths and weaknesses in existing insolvency regulations in four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 190 economies. The most recent round of data collection was completed in June 2016.

Compare Georgia to 189 other economies.

  • Indicator Explanation Answer
    Recovery rate (cents on the dollar) 39.5
    Proceeding BizBank is most likely to initiate liquidation proceedings, because it would want to sell the assets as soon as possible. As a secured creditor, BizBank can prevent the use of reorganization procedure. It also holds 74% of the debt, which would allow it to select a representative to the Conciliation Council - a body that decides whether liquidation or reorganization should be pursued. liquidation
    Outcome Hotel's assets will be sold at a public auction. At the first auction, the assets must be sold as a whole. If they are not sold at the first auction, the creditors may authorize a piecemeal sale during the second auction and the price will be decreased (Article 38 of the Law on Insolvency Proceedings). It is likely to be difficult to find a buyer for the hotel as a going concern, therefore, the most likely outcome is a piecemeal sale. piecemeal sale
    Time (in years) It takes 2 years to complete liquidation proceedings in Georgia, because statutory deadlines are not always complied with. In particular, it may take a year for the first meeting of the creditors to take place. As a first step, BizBank will commence liquidation proceedings with the Tbilisi City Court. The court will review the materials and accept the case for consideration. Once the case is accepted, the National Enforcement Bureau will be appointed as a trustee/supervisor (Article 26 of the Law on Insolvency Proceedings) and the date for the first meeting of the creditors is set (Article 21 of the Law on Insolvency Proceedings). The trustee will inform the creditors about the opening of the insolvency proceedings by publication, will assume control over the management of the debtor company, examine its financials and prepare a report on the insolvency of the debtor (Article 26 of the Law on Insolvency Proceedings). Creditors submit their claims, and then present them at the first meeting of the creditors. The judge makes a decision whether to accept or reject the claim after consulting with the trustee (Article 29 of the Law on Insolvency Proceedings). Conciliation Council will be appointed (the debtor and the creditors will each appoint one member and the two will elect the third member) (Article 32 of the Law on Insolvency Proceedings). The Conciliation Council will decide whether to proceed with liquidation or with reorganization (Article 33 of the Law on Insolvency Proceedings). Once the decision to liquidate the debtor is made, the creditors will appoint a liquidation manager (Article 37 of the Law on Insolvency Proceedings). Debtor's assets will be sold at an auction organized by the National Enforcement Bureau. 2.0
    Cost (% of estate) Around 7% of the value of the estate will be paid to the National Bureau of Enforcement for their service as an insolvency trustee and 1% of the value of the estate will be paid to the National Bureau of Enforcement acting as an auctioneer (Article 9 of the Order No 144 of the Minister of Justice, dated July 30, 2010). Other expenses will include attorneys' fees and remuneration of the bankruptcy manager, if someone other than the National Bureau of Enforcement is appointed. 10.0
    Answer Score
    Strength of insolvency framework index (0-16) 6.0
    Commencement of proceedings index (0-3) 1.5
    What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may file for liquidation only 0.5
    Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? N/A 0.0
    What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) Debtor is generally unable to pay its debts as they mature 1.0
    Management of debtor's assets index (0-6) 3.5
    Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor? No 0.0
    Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0
    Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0
    Does the insolvency framework allow avoidance of undervalued transactions? No 0.0
    Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings? Yes 1.0
    Does the insolvency framework assign priority to post-commencement credit? (a) Yes over all pre-commencement creditors, secured or unsecured 0.5
    Reorganization proceedings index (0-3) 0.0
    Which creditors vote on the proposed reorganization plan? (c) Other 0.0
    Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation? No 0.0
    Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally? No 0.0
    Creditor participation index (0-4) 1.0
    Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative? Yes 1.0
    Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0
    Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative? No 0.0
    Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors' claims? No 0.0