For companies in crisis, a viable restructuring plan enables them to change the situation for the better. Especially in the event of imminent insolvency, restructuring plans can help the company avoid standard insolvency proceedings.
In insolvency law advisory practice, it is therefore important to keep the possible restructuring of a company in mind at all times.
At each stage of crisis management specific aspects of the restructuring measures come into play.
In this article, we give you an overview of restructuring concepts in the context of our advisory work.
Do you need legal support or want to put your company on a legally sound footing? With years of experience, our law firm assists many clients in resolving liability issues and minimizing legal risks. Please feel free to contact us for a non-binding initial consultation.
What is a company restructuring?
The focus of a corporate restructuring is the goal of avoiding the break-up of the company in insolvency. Restructuring concepts therefore regularly consist of a bundle of legal, tax, economic, and practical measures. The primary goal of avoiding a break-up includes the sub-goals of restoring the company’s ability to act and returning it to profitability.
A restructuring can be an alternative to insolvency. What sounds simple at first glance involves a number of challenges. Above all, the time factor plays a significant role in a planned restructuring.
Legal basis and instruments in a restructuring
Corporate restructuring does not operate in a vacuum. First, insolvency law provides specific tools for restructuring within the framework of insolvency proceedings. These include, in particular, the insolvency plan in standard or debtor-in-possession proceedings, as well as transferring restructuring (asset deal), should be mentioned here. The so-called Protective shield proceedings is also of interest.
The Act on the Further Development of Restructuring and Insolvency Law (SanInsFog) opens the possibility of preventive restructuring – even before insolvency proceedings – with a restructuring plan.
The Time factor is critical in all restructuring measures. One principle always applies, no matter what stage of crisis a company is in: the earlier restructuring measures are started, the greater the chances of a successful restructuring.
Other important aspects in connection with a restructuring
It is essential to keep in mind the possible criminal liability of managing directors and other officers of the company. Especially from this perspective, the time pressure in designing a company’s restructuring can be considerable. Without competent advice and support, the many sub-tasks involved cannot be managed.
The restructuring of companies always represents a drastic upheaval for everyone involved. It makes no difference whether it is part of an insolvency or carried out beforehand to prevent standard insolvency proceedings.
Restructuring measures for companies must be individually tailored to the company’s specific situation. This, too, poses a challenge for the design of the respective restructuring concept. The more precisely the restructuring measures fit the company concerned, the greater the chances of preventing insolvency at the preventive stage or of successfully completing a restructuring during insolvency and saving the company.
The restructuring concept
The restructuring concept is the core of a restructuring. It summarizes the “roadmap” for the restructuring measures and describes the restructuring strategy. The concept therefore also includes an assessment of the company’s overall situation. This assessment is based on a diagnosis made before the restructuring measures are planned and the restructuring is designed.
The Analysis must allow a positive forecast for the company’s development under the restructuring plan. In other words: the restructuring plan must show that certain measures can make it possible to return the company to profitability.
The right prioritization is a key aspect of restructuring concepts. For example, certain obligations to social security institutions or tax authorities must continue to be met as a priority in order to limit liability risks for the company’s officers. The restructuring concept therefore often has to strike a balance between the legal framework and structural economic changes.
How do you develop a restructuring concept?
The concept is preceded by a professional assessment of the overall situation of the company in crisis. Many questions need to be answered:
- Is the company still at the stage of preventive restructuring, or can insolvency proceedings no longer be averted?
- Is there a risk that the company’s officers could face personal criminal liability if no insolvency petition is filed promptly?
- What opportunities and options does the company have for developing successful restructuring measures?
- What economic environment is the company in crisis operating in? Is a positive restructuring forecast realistic?
- Does the company have the appropriate human and other resources to implement a restructuring concept?
- What timeframe should be set for restructuring planning in the individual case?
- How quickly can the company start concrete measures once a restructuring concept is in place?
- What legal framework must be observed for the chosen restructuring route? This depends, among other things, on whether the restructuring is to be carried out as part of insolvency proceedings, in protective shield proceedings, or in some other way.
- What is the plan B if it turns out that the restructuring plan for the company is not effective? Alternative scenarios should be tested here.
- Which individuals, experts, and institutions should be involved in the company’s restructuring?
- Are all relevant figures and documents available for the decision on a restructuring and for planning?
- What short-term measures will maintain business operations once the restructuring begins?
- By what results is the success of the company’s restructuring measures measured?
- What measures are necessary to secure the success of a restructuring?
- What does a short-term, medium-term, and long-term restructuring strategy look like in the individual case?
- How can the motivation of everyone involved in the restructuring be maintained?
- Can the company bear the costs of the restructuring?
All questions must be answered for the individual case at hand. That is why restructuring concepts can look very different despite all their basic similarities.
A restructuring concept may have to be adjusted along the way if unexpected factors arise. In some cases, however, an adjustment is not possible.
Darius Dubiel – insolvency advisor and business attorney for crisis management – helps companies in existential crises not only to survive but to become successful again.
What are the particular opportunities and risks of restructuring concepts?
Restructuring is fundamentally an opportunity for a company, but no guarantee of success. It is not always possible to foresee every aspect of a development, primarily in the economic sphere. The concept is always a forecast, a plan. Its implementation can fail for various reasons:
- The plan may not be implemented in the right way.
- General economic or industry-specific factors come into
- play that could not be taken into account in the concept.
- The restructuring initially succeeds according to the
- restructuring concept. Later, however, the company slides back into
- crisis because structural changes did not go deep enough or
- problematic influences have arisen anew.
- The company and those involved lack the stamina to carry the
- restructuring through consistently to a successful conclusion.
The risk of a restructuring concept lies primarily in the planned measures not achieving the intended success. It is therefore advisable to have insolvency experts provide advice and assessment throughout the entire restructuring process. Restructuring success does not come overnight, even if a restructuring concept is optimally tailored to the company’s situation.
The situation must be monitored at all times, especially during preventive restructuring measures, in order to effectively limit, above all, the criminal law risks for the company’s officers, such as the managing directors.
We are here for you: Restructuring and financing of companies in crisis
There are many different factors that can cause economic difficulties for companies. To determine whether a company can be continued, it is first necessary to identify the causes of these difficulties.
For all those involved, such as entrepreneurs, employees, and business partners, the question of the company’s continued existence takes center stage. This often also involves how to ensure funding for the future in order to overcome the crisis in the long term.
In such situations, the parties involved are exposed to civil and criminal legal risks that must be recognized and avoided in order to minimize liability risks. Our firm has extensive experience in assisting companies in crisis situations. Our attorneys are available to answer your questions about this complex topic with their legal and business expertise.
Our comprehensive range of services for the financing and restructuring of companies includes:
- Detailed analysis of the reasons for an economic crisis
- Identification of all civil and criminal legal risks
- Development of a plan for measures and financing for economic restructuring
- Assistance with the implementation of the action package
- Introduction of potential investors and cooperation partners
Conclusion
Restructuring a company is always an opportunity to secure the survival of the organization beyond the crisis. A suitable restructuring concept serves as the core of the restructuring and is indispensable.
As a restructuring plan for the company, the concept must combine the most diverse aspects. How well that ultimately succeeds is reflected in the success of the restructuring for the company.
What makes designing restructuring concepts particularly demanding is the significant time pressure, under which restructuring measures for companies have to be structured. Much depends on the precise preparation of the restructuring concept, including an unsparing analysis of the company’s current situation.
Our law firm supports you in all phases of the restructuring. We make viable restructuring concepts possible and help you develop a concept for the restructuring.
FAQ
What is a restructuring concept?
A corporate restructuring aims to prevent a company’s insolvency and to put it back on a sound economic footing. It involves legal, tax, economic, and practical measures to restore the company’s ability to act and make a profit. This can be an alternative to insolvency, but requires thorough planning and implementation. Legal instruments such as insolvency plans and debtor-in-possession proceedings (self-administration) are relevant here. Timing is crucial, and professional advice is often indispensable.
Who prepares a restructuring concept?
Restructuring concepts are usually prepared by a team of professionals, including insolvency attorneys, management consultants, tax advisors, and auditors. This team analyzes the company’s financial situation, identifies the causes of the crisis, and develops strategies for stabilization. Collaboration with insolvency experts is important because they are familiar with the legal aspects of the restructuring process. In some cases, the company’s management may also be involved in developing the restructuring plan.
How do you develop a restructuring concept?
Developing a restructuring concept requires a thorough analysis of the company’s situation. Various questions must be answered:
– Timing of the restructuring: Is preventive restructuring possible or unavoidable?
– Risks for the company’s officers: What criminal liability risks exist?
– Opportunities and options: Which measures can ensure the success of the restructuring?
– Economic environment: Is a realistic restructuring forecast possible?
Resources: Does the company have the necessary resources and expertise?
– Timeframe: How quickly must the restructuring concept be implemented?
– Legal framework: Which laws and procedures apply?
– Plan B: Which alternative scenarios should be considered?
– Persons and experts involved: Who needs to be involved in the restructuring?
– Documentation and monitoring: What measures are necessary to ensure success?
Do you need support in your company? Our experienced law firm provides comprehensive support with your questions and concerns. Thanks to our specialization in business law and insolvency advice, we have already helped countless companies with their challenges and found a way out of crisis together. Schedule a non-binding initial consultation on your case now.
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