Continuation of business operations

In every company crisis and every insolvency (application) proceedings, the question arises as to whether the company must cease its operations or whether it can continue them.

Irrespective of the size of the company and its line of business, it is necessary to carry out both a short-term and a more thorough analysis of the economic and legal situation before the company can attempt to continue operating. This raises the following questions: Are there ongoing business operations? Does the management support the continuation of business operations? What liquid assets are immediately available? To what extent are fixed and current assets available and, if applicable, are these assets secured by third-party rights? Which debtors have outstanding receivables, are these recoverable in the short term at an acceptable value or have they been surrendered to third parties? To which creditors are liabilities owed and when are they due? What expenses must be paid immediately in order to prevent business operations coming to a standstill?

In close cooperation with the management, a profit and liquidity plan should then be drawn up for the period of jointly maintaining company operations. If this plan is updated continuously and, if possible, daily, it enables close monitoring of business transactions, revenues and costs. Negative developments can thereby be recognised, analysed and counteracted at an early stage.

Contact should also be made as soon as possible with the most important customers and suppliers in order to agree with them the conditions for further order placement and processing. If no more orders are placed, or if suppliers refuse to supply under the previous conditions, this can seriously endanger the continuation of company operations and thus ultimately also risk efforts to reorganise the company. 

Just as important is early communication with the employees. At staff meetings, employees should be informed about the current situation and motivated to do their best to ensure that the business can continue to operate. There is often an initial sense of worry among the workforce; rumours spread quickly and the fear of losing one’s job hovers over everything. Open communication and a transparent personnel policy make it possible to counter these developments. Prefinancing with insolvency advance financing is also an effective way to assuage employees’ initial worries. Without the willingness of a company's employees, every attempt to maintain company operations will fail. 

If the aforementioned conditions are met, the continuation of the company in insolvency can form the basis for successful reorganisation and is thus an opportunity for debtors and creditors alike.

The LEONHARDT RATTUNDE team has already successfully supported hundreds of company continuations in a wide variety of industries and of all sizes, thus laying the foundation for many successful reorganisations.

Earnings and liquidity planning form the core of successful consulting for the continuation of company operations in the event of a crisis.

Reference procedure

Cocoa manufacturers Euromar

The show must go on: A-Company reorganised with insolvency plan

Expertise

Preventive restructuring process

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