With the self-administration proceeding, the Insolvency Statute (InsO) provides a mechanism that ensures that the power of disposition over the company is not transferred to an insolvency administrator. The board of management remains in office and is not restricted in its power of disposition by court order. At the same time, however, the company is protected from creditors accessing assets and objects of business operations, which ensures that the company is kept together and operations are maintained. This gives the company some breathing room and allows a precise analysis of the situation to be carried out. Reorganisation options can be examined, and solutions weighed up. At the same time, the company organs that are required to file for insolvency are able to comply with their legal obligations and can thereby avoid liability.
In place of an insolvency administrator, the court appoints an insolvency monitor who has the task of supervising the management of operations. In the first stage, the initial proceedings, the court appoints a provisional insolvency monitor. In the second stage, the opened proceedings, the court appoints the insolvency monitor.
As the self-administration proceedings continue, tried ,tested and known reorganisation instruments such as asset deals (transfer of entire operations to a new legal entity) or submission of an insolvency plan (alternative means to satisfy creditors while preserving the legal entity) can then be considered as ways to implement reorganisation. The question of which instrument should be chosen always depends on each individual case. Nevertheless, this should be considered as early as possible in the proceedings.
The Insolvency Statute enables the affected company to dispose of contracts and obligations that are no longer required and to use the monies thus saved to ensure the payment of those suppliers and service providers whose services are of increased importance for the continued existence of the company. Prefinancing of employees’ wages is an instrument that enables a company to not pay its personnel costs for a period of up to three months and to use this liquidity elsewhere.
In order to take advantage of the self-administration proceeding, the company must first apply for it. This application should be made as early on as possible. The earlier and the more decisively the company acts, the better its reorganisation options will be. A well-prepared application allows the insolvency court and the appointed insolvency monitor to immediately get an overall picture of the situation, to familiarise themselves with the case, and to initiate the reorganisation of the business together with the board of management.
The insolvency administrators at LEONHARDT RATTUNDE are regularly entrusted by the courts with taking the role of a (provisional) insolvency monitor. However, we also advise companies seeking to utilise the self-administration proceeding on their application, and on the implementation of the procedure from its initial steps all the way up to completion, as well as on the selection of suitable reorganisation instruments. We have decades of experience in the field of corporate reorganisation and bring with us both legal and business management expertise.
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