Berlin In the energy crisis, the government wants to help companies in trouble with changes to insolvency law. The restructuring industry believes that this is correct, but does not assume that there will be harsh measures like in the corona crisis again.
"The situation is by no means better than at the peak of the pandemic, but the government knows that it cannot suspend competition again," said the spokesman for the Gravenbrucher circle of leading German reorganizers and insolvency administrators, Lucas Flöther, the Handelsblatt. "That's why there shouldn't be a strong tranquilizer this time."
The Association of Insolvency Administrators and Trustees in Germany (VID) assumes that the number of insolvencies will increase sharply. VID Managing Director Daniel Bergner explained: "Far-reaching steps such as the complete suspension of the obligation to file for insolvency are not apparent at the moment." The government is apparently concerned with avoiding "unnecessary insolvencies due to uncertainty".
Federal Minister of Justice Marco Buschmann (FDP) is currently planning relief for companies, which are coming under pressure from rising energy and commodity prices as a result of the Russian war of aggression in Ukraine. In the future, if over-indebtedness is the reason for insolvency, it will apply that the company's continued existence no longer has to be predominantly probable for twelve months, but only for four months.
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By shortening the forecast period, the obligation for companies to file for insolvency can be omitted for the time being. However, the inability to pay remains as a reason for insolvency.
Apparently, the Federal Ministry of Justice (BMJ) is also examining simplifications for an important restructuring tool: insolvency under self-administration. The debtor can transfer the company under the supervision of a trustee and dispose of the insolvency estate himself.
Previously, a plan had to be submitted to ensure the company's continued existence for a period of six months. Here, too, the period could be reduced, for example to one or two months.
The simplifications in insolvency law are to apply for a limited period of time. The time span up to April would be possible to get through the winter. A regulation until the end of 2023 would also be conceivable.
It is currently still unclear whether the changes will be introduced via a formulation aid from the federal government for the Bundestag or via an independent draft law, the BMJ said.
Stronger intervention in Corona and flood
In the corona crisis, the government had taken stronger measures than is currently the case. First, the obligation to file for bankruptcy was completely suspended. The regulation therefore applied to cases of over-indebtedness and insolvency as a result of the Covid 19 pandemic.
Later, the suspension of the obligation to file for insolvency only applied to over-indebted companies and finally to companies in which difficulties were caused by the pandemic, but which could count on state aid being paid out.
There was also insolvency protection after the heavy rain and flood events in July 2021. Insolvency administrator Flöther said: "It would be a serious mistake to suspend the obligation to file for insolvency again for months."
In the corona crisis, it was right for a while at least, “so that the managing directors don’t run to the insolvency court in panic”. But that should not be repeated in view of the competition.
In August, the number of regular bankruptcies applied for rose by 6.6 percent compared to the previous montht, as the Federal Statistical Office announced on Monday. According to the final results, the German district courts reported 7113 company bankruptcies in the first half of the year.
In a survey by the industry association BDI, more than 90 percent of the companies surveyed stated that the increased energy and raw material prices were an existential or major challenge for them.
40 percent plus possible in the event of company bankruptcies
VID Managing Director Bergner described the federal government's plans in insolvency law as a sensible step. "But it will not save Germany from an increasing number of bankruptcies," said Bergner.
The VID assumes that corporate insolvencies could increase by up to 40 percent within the next twelve months. In a long-term comparison, however, that would be a "mild normalization", because at the beginning of the decade there were twice as many insolvencies as today.
The aim of the current changes are companies that were constantly struggling with their continuation forecast in the crisis situation, but actually still had sufficient liquidity.
The traffic light is also mainly about avoiding “structural breaks”, i.e. that “entire sectors suddenly die off catastrophically”, such as the German ceramics industry or the German glass industry.
However, Bergner recognizes "currently no willingness to intervene again on a large scale with help", which speaks against further simplifications in insolvency law. Because with Corona or the flood, further measures were always linked to aid payments.
There are specific promises of aid, but not - analogous to Corona - the assurance that no company that was healthy before the start of the war should go bankrupt because of the sharp rise in energy costs. There are currently too many crisis factors for that.
Crisis protective shield required
Frank Grell, board member of the German Restructuring Society (TMA) and partner at the law firm Latham & Watkins, describes the shortening of the forecast period as a "correct and important step" in combating unnecessary insolvencies.
The managing directors of companies would have to concentrate on the operational business, which is particularly challenging in these times. Don't be distracted by threats of liability.
Grell even considers a temporary suspension of the obligation to file for insolvency due to over-indebtedness to be consistent, coupled with an orientation of the management to the interests of the creditors.
The TMA board member explains: "Companies are faced with an existence-threatening combination of exploding energy costs, rising interest rates and reluctance to buy." It is the task of politicians to take measures to prevent a wave of insolvencies. However, Grell warned: “Despite the dramatic situation, we should definitely avoid talking about a wave of insolvencies.”
As a spokesman for the Gravenbruch district, Flöther advocates the creation of a temporary crisis protective shield procedure: "That would not just be a sedative pill, but affected companies could use real restructuring tools." This would make a real haircut possible.
For this purpose, the regular protective shield procedure, in which the company concerned is protected from access by creditors for three months, should be extended to six months.
Flöther says: "For companies that are now stuck in the energy crisis coming out of the corona crisis, that would be the better help."