Insolvency Consulting

Insolvency does not have to be the end of a company! First of all we would like to note that our activities are geared towards avoiding long-term insolvency of the company and usually of the entrepreneur. However, if insolvency can no longer be avoided, the German Insolvency Regulations (InsO) still provide for a chance to start again.

Filing for bankruptcy may result in insolvency proceedings. The purpose of such proceedings is to either restore solvency or to deal with the situation in an orderly fashion, in the case of companies through dissolution and in the case of individuals ultimately through exemption from residual debt. Of course we will continue to advise you in this case. We will also be happy to provide you with details of law firms specializing in insolvency law. On the following pages you can read what insolvency means for the companies whose existence is under threat, and what customers, suppliers, creditors and employees will be faced with.

What leads to insolvency?
Potential or actual inability to pay as well as excessive indebtedness of the company. If no money is left a company is said to have gone broke, in colloquial terms. In this case the company or a creditor will apply for insolvency proceedings to be initiated at the District Court Colloquially you would say they have filed for bankruptcy.

What are the objectives of the insolvency proceedings?
The primary goal of the proceedings is to satisfy the creditors by utilizing the company's remaining assets and distributing the proceeds accordingly. If all creditors are paid in accordance with the defined insolvency quota the proceedings are closed and the company
deleted. However, in most cases - in particular in small companies - the remaining assets are not high enough to even initiate proceedings. Then the company is liquidated.

Why does insolvency not have to mean the end?
The insolvency law reform in 1999 added a further objective modeled after the US insolvency law with its "Chapter Eleven". The common term insolvency replaced the terms bankruptcy, settlement and collective bankruptcy proceedings (in the new German states), which were
commonly used up to then. At the same time better options for continuing generally viable companies were added: Such a regulation can be included in an insolvency plan. This means that insolvency does not mark the end but is at the beginning of a turnaround process with the aim of retaining as many jobs as possible. The company continues to produce and looks for investors who wish to take over the company permanently.

What is the process of insolvency proceedings?
Insolvency law is a field of civil law which substantively and procedurally deals with the rights of creditors if the debtor is unable to pay. As speed is often the essence, the court immediately appoints a temporary insolvency administrator who starts immediately, even before the insolvency proceedings are officially opened. He is granted special authorities and is the boss so to speak. He talks to potential investors and attempts to lower costs through savings plans. Business or production continues at this stage. At the same time the insolvency administrator has to attempt to convince the creditors of his plans. For this purpose dedicated creditor meetings take place.

Who can be considered as insolvency administrator?
The insolvency administrator is typically a lawyer and experienced business economist. There are not many experts that are entrusted with this tricky task: The Association of Insolvency Administrators in Germany (VID) has only 435 members according ti its own website.