CONSULTING ON THE BRINK OF INSOLVENCY

Every business crisis has a unique origin, calling for a unique course of action. Recovery management demands customised solutions, interdependent on a how far a crisis has progressed. In some cases, an extrajudicial recovery without bankruptcy proceedings is unavoidable. This always occurs when you cannot reach a settlement agreement with your creditors. Insolvency, however, does not necessarily mean the death penalty for you and your company. The new insolvency regulation supports options for recovering your company via planned, structured insolvency procedures. Two such procedures are debtor-in-possession or the protective umbrella (section 270a and 270b German Insolvency Statute (InsO)). Both follow the ultimate objective of granting creditors a better settlement than a bust-up would provide. Company preservation is priority in this instance. The current management remains in office, court consent allowing, and steers the company through the turnaround. TMC reinforces preparations by drawing up a sustainable, well-founded recovery concept – a crucial component of the insolvency plan.

We are wholly committed to steering you through the entire recovery process. Should it serve you best, we will conduct your insolvency plan implementation. We would be happy to lend our professional support during the compulsory negotiations with creditors, lenders, insolvency administrators or new investors. Our uncompromising services include:

  • Generating and inspecting insolvency and pre-packaged plans
  • Preparing protective umbrella and debtor-in-possession procedures
  • Clearance letter complying with section 270b para. 1 clause 3 German Insolvency Statute (InsO)

INSOLVENCY PLAN AND PRE-PACKAGED PLAN

An insolvency plan offers an alternative to regular insolvency proceedings, not only within the framework of an extrajudicial recovery, but also during open proceedings. The objective is to solve the insolvency case outside of the Insolvency Statute’s liquidation regulations, more often than not attaining a better settlement for creditors.

A pre-packaged plan is drawn up and pre-negotiated or settled with creditors before being submitted to the courts along with the insolvency petition. Once approved by the court, planned measures can be executed immediately, greatly expediting the insolvency plan.
Two advantages to a pre-packaged plan is its transparency for creditors and the shareholders’ participation in recovery success.

TMC inspects and draws up insolvency and pre-packaged plans. Having successfully closed a great many projects for companies undergoing near-insolvency crises, we are equipped with profound expertise and experience, able to react quickly to unforeseen developments. We support you with the following services:

  • Generating the required planning calculations (i.e. integrated continuation plan, plan comparison calculations)
  • Detailed mapping out segments of the insolvency plan (section 220 German Insolvency Statute (InsO))
  • Elaborate management analysis of insolvency and pre-packaged plans
  • Examining and validating the management analysis of generated insolvency plans for insolvency administration

PROTECTIVE UMBRELLA

The protective umbrella procedure (section 270b German Insolvency Statute (InsO)) is based on the USA Chapter 11 procedure. The protective umbrella procedure is a derivative of the provisional debtor-in-possession procedure and limited to the time frame between petitioning for insolvency and opening insolvency proceedings. Accompanied by an insolvency monitor, the debtor has three months in which to develop a recovery plan. Thus, the protective umbrella procedure is literally outside of the insolvency proceedings. The primary objective of this procedure is to trigger an early recovery, establishing a debtor-in-possession status.

This offers you, as debtor, the opportunity to assume responsibility and influence your company’s recovery. According to section 270b German Insolvency Statute (InsO), the prerequisites for a protective umbrella procedure are:

  • A substantiated personal application
  • Filing a petition for debtor-in-possession
  • Applying for a three-month maximum provision to submit a recovery plan
  • A realistic, clearly feasible recovery concept

Our in-depth experience serves you by preparing and drawing up applications and a recovery plan. We guide your company management through recovery proceedings, ensuring you have the most suitable insolvency monitor. Should it serve you best, we assume executive or CRO responsibilities to, among others, build stakeholder confidence or dissipate risks to your management.

DEBTOR-IN-POSSESSION

The debtor-in-possession procedure is intended to facilitate your company’s recovery. The essential right of disposal, the responsibility and control over the recovery remains with the company’s executive management and does not, upon opening insolvency proceedings, pass onto an insolvency administrator (section 270 para. 1 cl. 1 German Insolvency Statute (InsO)). Recovery, including administration and asset disposal lies in the hands of the debtor, under an insolvency monitor’s supervision.

Debtor-in-possession is only feasible when its setup is free of disadvantages to creditors. Specific stipulations must be fulfilled, which we skilfully inspect and appropriately prepare for and with you, such as:

  • Making evident that there are no creditor disadvantages
  • Illustrating to creditors the economic benefits of debtor-in-possession
  • Generating the application for debtor-in-possession

A debtor-in-possession procedure demands more than determination in executing recovery measures. You also need substantial economic and legal acumen. TMC has both to fortify you as auto-administering CEO as well as your insolvency monitor.

CONFIRMATION PER SECTION 270B PARA. 1 CL.3 INSO

Upon petitioning for a protective umbrella order, you must present a confirmation issued by an experienced insolvency consultant, auditor or solicitor. This document confirms that your company does not yet qualify as insolvent, but is threatened by insolvency or excessive over-indebtedness. Furthermore, your company must be classified as capable of recovery. The section 270b para. 1 cl. 3 German Insolvency Statute (InsO) confirmation is a prerequisite for a protective umbrella procedure. We are fully authorised to produce this confirmation, in accordance with the IDW standard (Confirmation according to section 270b German Insolvency Statute (InsO) - IDW S9).

Top