We have specialized in advising crisis-hit companies for many years. We are therefore well-acquainted with the options for protecting companies from dissolution and guiding them back to success.
The main options in this respect include:
- out-of-court preventive restructuring;
- reorganization during insolvency;
- cessation of loss-making divisions and activities.
Preventive restructuring
In Germany, out-of-court restructuring can currently only take place on a voluntary basis by means of private autonomous agreements. While this practice has been proven to work well, it does have its limits, particularly in circumstances where numerous creditors are involved and each is required to pay a restructuring contribution.
At EU level, work is currently underway on the introduction of a largely standardized preventive restructuring framework. The framework seeks to combine the advantages of out-of-court restructuring measures (e.g. no insolvency stigma, low costs) with those of insolvency proceedings (possibility of stays of execution and majority decisions).
The draft EU Directive was first published in 2016 but is unlikely to be incorporated into German law before 2019.
Should you have any questions on the Directive and the possibilities it will give rise to, please don’t hesitate to contact us.
Exploiting the advantages of insolvency proceedings
Where overindebtedness or insolvency are not yet impending, out-of-court restructuring on the basis of an Andersch restructuring report tends to be the best option. There are exceptions to this rule, however. These can be ascertained by conducting a comprehensive analysis of available options.
In-court proceedings may prove a more effective means of preserving enterprise value where
- key contracting partners, e.g. suppliers, cannot or will not agree to out-of-court restructuring measures;
- disadvantageous long-term debt obligations or intercompany agreements exist;
- there is a large number of small creditors with different interests.
The earlier restructuring is planned, and the better those plans are, the greater the chances of success. The first stage in the restructuring process involves conducting an expert audit of the insolvency grounds per IDW Standard 11, determining how urgent the situation is, and ascertaining the options available to the management. Based on the results of our investigations, we will suggest different options, for example umbrella proceedings as per Section 270b German Insolvency Act (InsO) or restructuring within the scope of an insolvency plan.
Umbrella proceedings as per Section 270b InsO
Where insolvency or overindebtedness are imminent, umbrella proceedings may well be the most effective means of obtaining restructuring contributions from third parties–something that would not be possible in out-of-court proceedings. As a certified assessor, Andersch can issue the certification required for umbrella proceedings.
Insolvency plan
After (preliminary) insolvency or umbrella proceedings have been initiated, we put our operational, financial and performance-specific expertise at your disposal and, working closely with you and your legal counsel, put together an insolvency plan. We also assist you during negotiations on restructuring contributions from creditors, enabling you to benefit from the expertise and excellent reputation that we have garnered over our many years in the field.
Putting a stop to loss-makers
Often, it’s just a few loss-making activities that cause a healthy company to fall into difficulties. Getting rid of these quickly and effectively can prove decisive to that company’s recovery.
In these circumstances, it is important to first conduct an analysis of the options to ascertain what makes more sense: sale or restructuring. Should neither of these options be possible, we help wind up the pertinent loss-making activities—be they individual divisions, whole operations or entire subsidiaries—by means of a sound liquidation plan. If required, we can also assume the role of registered liquidator.
The main steps in this process are as follows:
- we determine the best possible approach, taking into account the legal and business relations in place between the healthy company core and the loss-making unit.
- we then put together a detailed plan of action and, based on this, begin carefully laying the groundwork for the termination process. This process will differ depending on the legal form of the loss-maker concerned: if it is a division or operation, it will be wound up; if it is a legal entity, it will be liquidated.
- we can also, if required, assume executive responsibility as an appointed, registered liquidator, and as such take charge of implementing the termination plan.