In the wake of the coronavirus pandemic, many companies ran into financial difficulties and could only be kept alive “artificially” by bridging aid. The Russia-Ukraine war has dramatically worsened the situation for many companies once again. Exploding energy prices, supply bottlenecks and sharp price increases are pushing companies to the brink of insolvency.
Despite government aid measures, in many cases expenses can no longer (or soon will no longer) be covered. A corporate crisis is often only recognized when the financial difficulties are already very serious. The last resort is then often only insolvency proceedings. In addition, there is the personal liability and Criminal liability of the management.
By detecting the signs of a crisis in time and initiating the necessary measures, you will get through these challenging times well.
I. Is your company in crisis?
First, it is necessary to determine whether your company is in a crisis. Currently, some companies are at least in a strategy and sales crisis They will be thinking about how to deal with the loss of customers and stagnating results. It is necessary to conduct an analysis of the market and of their own product portfolio. Are both still compatible at the moment? What can you change?
In the earnings crisis the result in your income statement drops sharply. If this is not stopped, it is followed by the liquidity crisis and your company is increasingly having difficulty meeting its payment obligations.
If you do not successfully counteract it, what follows is the insolvency of your company. This means: your company is illiquid and/or over-indebted.
II. Crisis: what now?
First, it is necessary to become aware of the actual situation.
Denying or even concealing the crisis has far-reaching consequences for the company and the managing director personally. In addition to losing the basis of one’s livelihood, there is the threat of prison sentences for delayed filing for insolvency and heavy fines.
So how should one behave?
For every crisis situation, there are appropriate countermeasures and behavioral options if one correctly assesses one's situation.
- Recognizing your situation
Together with a suitable advisor, you analyze the current situation in your company. Only when the situation is properly assessed can the necessary measures for rescuing the company be initiated.
With the relevant indicators and demand-oriented measures, your company is then well prepared for the future.
- (Early) advice
It may be difficult to admit that the company is in crisis. However, early communication with advisors is indispensable.
A restructuring consultant can help you keep an overview in this challenging situation and will support you with expert advice on the decisions you need to make.
Without knowledge of insolvency law, you cannot determine precisely in the individual case when illiquidity is impending and when payments are still permitted.
Bring in an advisor early. They can reliably tell you which payments may still be made and when you would expose yourself to liability risks. The advisor helps you identify the necessary steps out of the crisis and supports you on your way out of it.
- Adhere to strict insolvency regulations
In addition, you should always keep the deadline for filing for insolvency in mind. At three weeks after the onset of illiquidity, it is very short.
If payments are made after this deadline, you as an entrepreneur are liable with your own assets and may face criminal liability for delayed filing for insolvency.
III. Getting out of the crisis with professional advice
In a period of economic crisis, quick and smart action is necessary. Therefore, it is highly recommended to seek advice from a consultant who is knowledgeable in insolvency and restructuring matters.
Experienced advisors help you properly assess the situation in your company and initiate the necessary steps. Attorney Dubiel has 15 years of in-depth experience and expertise in advising entrepreneurs in crisis.
We are happy to assist you with advice and help on your way out of the crisis.
