Paths to corporate restructuring
According to the Federal Statistical Office, the number of corporate insolvencies in Germany between January and September 2023 has risen by 24.7 percent. In absolute numbers, this means that 13,270 companies have filed for insolvency during this period.
The increasing number of insolvencies, according to the law firm MTR Legal Attorneys, is an expression of the currently difficult conditions. A quick turnaround is not currently expected. As a law firm experienced in insolvency law, MTR Legal Attorneys supports companies in such crisis situations and shows ways to restructure. The primary goal is to avert impending insolvency.
Higher insolvency risk due to rising costs
During the Corona pandemic, there were still facilitations for companies regarding the obligation to file for insolvency, with the aim of preventing an insolvency wave. These effects are now less noticeable. In addition, new challenges have emerged that companies are struggling with. Rising energy prices and high interest rates are making themselves felt and cannot be compensated for by every company. The result is increasing numbers of insolvencies and open claims of creditors. According to the Federal Statistical Office, the claims of creditors from corporate insolvencies between January and September 2023 amounted to around 21.1 billion euros. This has almost doubled compared to the same period last year.
Given the geopolitical situation, a short-term improvement in the economic situation for companies in Germany is not to be expected. It is all the more important for companies to prepare for a crisis situation and to find convincing strategies for restructuring the company.
Options for restructuring
The legislator has provided various options for restructuring economically distressed companies:
Corporate Stabilization and Restructuring Act (StaRUG): StaRUG aims to enable companies to restructure without insolvency. A prerequisite for this procedure is that the company is at risk of insolvency, but it has not yet occurred.
Protective Shield Procedure: If a company is economically distressed but not yet obligated to file for insolvency, the protective shield procedure can be an option. However, the protective shield can only be deployed if there is a certification that the company can still be restructured. If this is the case, the management has three months to submit an insolvency plan together with a custodian. During these three months, the company is protected from creditors’ claims.
Self-Administration Insolvency: If an insolvency application must be filed, self-administration insolvency is an option. Here, the management stays in control, and a custodian is appointed to assist. The goal of self-administration insolvency is to restructure the company.
Corporate Insolvency: If no other option exists, the regular insolvency proceedings are opened, and the insolvency administrator takes over.
As a law firm experienced in insolvency law, MTR Legal Attorneys identifies the most suitable path and accompanies them in restructuring the company and in the insolvency proceedings.
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