State Enterprise Liquidation State enterprise liquidation is the most problematic of the three formal processes. It is almost entirely controlled by debtors. In the cases surveyed, state enterprise liquidation is proving to be significantly slower than bankruptcy. Firms continue to operate far longer than in the bankruptcy process, and more assets eventually end up under the control of managers and employees of the original firm. The process, though on paper designed for solvent firms, is often used as a way to get around bankruptcy and keep debtor management in control of assets for as long as possible.
Creditors are the big losers.
They have no power. The loophole of state enterprise liquidation needs to be plugged if the other formal processes are to work as intended. It should be strictly limited to solvent firms. If this is not feasible, the process should be eliminated altogether because of the abuse it invites. This alternative appears to have played a very limited role, however.