Crises often shake a company unexpectedly. Not infrequently, companies end up in the red. If the company cannot avert such a crisis on its own, a corporate restructuring can help improve liquidity and give the company a second chance.
A successful corporate restructuring with individual measures can make companies economically viable again and protect them from an impending break-up.
This way, not only you as an entrepreneur can regain courage, but also your creditors. We show you when a corporate restructuring can be beneficial.
Do you need support in restructuring your company? Together, we lay the foundation for a sustainable corporate restructuring. As an experienced business law firm for insolvency advice, reputation protection, compliance, and sustainability, we know what matters in a corporate restructuring. Contact us at any time for a non-binding initial consultation.
What is corporate restructuring?
Corporate restructuring serves to carefully analyze your company and determine the causes of the crisis that has affected it. The earlier such an analysis is conducted and appropriate measures are developed and implemented, the more likely it is that an insolvency procedure can be avoided.
In an ideal situation, corporate restructuring means that you and your company can avoid a costly insolvency procedure. But even in a insolvency proceedings restructuring your company is still possible. At the heart of a corporate restructuring are always the reorientation of the company and the sustainable establishment of strategies to restore economic viability and maintain it.
This can be achieved through measures such as increasing sales, reducing costs, or a complete restructuring of specific departments – even the entire organizational structure of the company.
When is corporate restructuring advisable?
If a company gets into an economic crisis, lacks liquidity, and faces illiquidity in the long term, a corporate restructuring is usually urgently needed in order to prevent insolvency.
Corporate crises can have completely different causes and develop quickly or slowly depending on the circumstances of the individual case. Causes of such a crisis can be, for example, both internal as well as external factors such as an economic crisis, rising commodity prices, or closures like those during the COVID-19 pandemic.
But a tense business climate, reorganizations that lead to a loss of quality, or product changes that have upset customers can also trigger such a crisis. In fact, any of these causes can lead to falling sales and thus become a serious threat to the existence of the company.
As early as when profitability targets are missed, operating losses persist over a longer period, or the operating result is negative, you should take stock and, where appropriate, after prior consultation, pursue a timely corporate restructuring.
How does a corporate restructuring process work?
Corporate restructuring involves several steps to determine which approach and measures are suitable for your individual business. To do this, a restructuring assessment is first prepared:
- Are there any reasons for insolvency? If there is a ground for insolvency, insolvency proceedings can be opened. In the case of a GmbH or an AG, the opening must even take place without undue delay (§ 15a InsO). If this is the case, the process continues in accordance with insolvency proceedings (see below).
- Analysis of the status quo: If the company is still liquid, a comprehensive analysis of the entire company follows. This includes past annual financial statements, the causes of the crisis, the company’s position in the market, and other factors that illustrate the company’s situation.
- Measures: Based on the company analysis, measures can be determined to enable the company to become competitive again. Possible measures could include, for example, downsizing, closing down locations, changing or reducing the product range, or investing in individual areas.
- Restructuring concept: The measures developed are embedded in a restructuring concept so that they can be implemented on an ongoing basis. It is important to ask whether continuing the company is possible and sensible at all. And: will the creditors allow such a restructuring?
- Implementation and Controlling: The measures are implemented and continuously monitored throughout the entire period. This means that implementation is constantly reviewed and analyzed to check whether the measures taken are effective or need to be adjusted. Only in this way will the restructuring achieve lasting success.
Our law firm supports you throughout this process and answers your open questions. You are always welcome to contact us.
Darius Dubiel – insolvency advisor and business attorney for crisis management – helps companies in existential crises not only to survive but to become successful again.
Restructuring of the company in the insolvency proceedings
A corporate restructuring is still possible even in insolvency proceedings. Such proceedings do not always have to lead to the liquidation of the company – a restructuring through an insolvency plan is certainly an alternative.
To do so, insolvency proceedings must first be opened. As a rule, an insolvency administrator is appointed, who takes care of securing the assets and further steps. If you are aiming for a restructuring, it can pay off to prepare and submit an insolvency plan early on.
After no more than 3 months the creditors then decide at a meeting whether a restructuring should take place or the company must be dissolved. In this decision, a good restructuring plan can have a positive influence on the decision of the creditors’ meeting .
Corporate crisis: Here's how to handle it
When a business faces difficulties, entrepreneurs often panic and lose their sense of direction regarding how to proceed. However, only those who act thoughtfully and strategically can avert a crisis early on and avoid insolvency.
The following steps serve as a general guide and do not replace individual advice. Please contact us directly if you need assistance.
- Look at the facts: First, you should take a closer look at your current situation and analyze exactly where things stand: How much debt do you have? How much money is needed? What is causing the losses? At this point, income and expenses must be looked at without any sugarcoating in order to determine the status quo.
- Try to increase the revenue: In a situation like this, it is difficult to increase revenue just like that. A good option may be to collect outstanding receivables and demand the money your customers owe you. If that is not an option, try to generate revenue elsewhere or cut expenses.
- Hire an attorney to prepare a restructuring concept: Once you have done your part, an experienced law firm can work with you to develop a sustainable restructuring concept. Individual measures are defined, a timetable is drawn up, and the implementation of these measures is initiated in order to make your company profitable again as quickly as possible – and for the long term.
Feel free to contact our law firm, which has years of experience in corporate restructuring. We will be happy to inform you about possible measures, costs, and all the advantages and disadvantages for your business.
Conclusion
- When companies get into a crisis, corporate restructuring can prevent the break-up of the business.
- Even in the case of existing insolvency such a restructuring of the company is possible.
- This allows the affected companies to once again make a profit and operate economically.
- A experienced law firm can help to develop a comprehensive and sustainable restructuring plan with the appropriate measures.
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.
Image credits: vinsm | Juan Moyano | canva.com
