Once insolvency proceedings are opened, the insolvent company is entitled to three months of insolvency benefits (Insolvenzgeld) from the Federal Employment Agency. Additionally, employment and civil law contracts can be terminated under simplified conditions, and liabilities incurred before the insolvency filing date are effectively “disconnected.” These relief measures can be used by the self-administration team—or by the insolvency administrator in regular proceedings—to enable successful restructuring. The time gained can help to sell the business in whole or in part.

The demands on management quality during a crisis are high: it must master the often highly complex legal and operational elements, structure them specifically for the company under extreme time pressure, and implement the resulting measures with precision and speed. Over time, a range of proven approaches—best-practice standards—has emerged in pre- and out-of-court crisis management:

• Early crisis detection
  The earlier a crisis is identified, the better the chances of overcoming it. Management requires effective tools for early crisis detection to ensure high transparency both internally (e.g., through controlling) and externally (e.g., through market monitoring). Only a correct diagnosis—identifying the true causes of the crisis—allows the later “treatment,” in the form of a restructuring strategy, to be effective.

• Reliable liquidity forecasting
  An ongoing liquidity forecast that meets the requirements of insolvency law is essential to recognize payment bottlenecks in time. Reporting cycles should be kept short.

• Strategic planning
  Even during a crisis, management must have a clear target vision and will usually define and calculate multiple scenarios. Ideally, this is done using integrated financial planning.

• Proactive organizational restructuring
  Crisis and insolvency situations require the company’s organization to be adapted quickly and systematically. Such measures should be planned and calculated with a lead time of around three months. Expected liquidity and cost effects must be precisely determined and formalized in a binding financial plan.

  This allows for continuous monitoring during the implementation phase to determine whether objectives are being achieved. This is especially relevant in self-administered insolvency proceedings, where the insolvency plan submitted to the court must be adhered to.

• Complex coordination
  Crisis situations necessitate overlapping planning and implementation processes to coordinate a large number of stakeholders simultaneously. The resulting tasks must be properly anchored within the company’s organization or managed through a dedicated project organization.

• Operational excellence and speed
  Restructuring plans and measures are meaningless if management cannot ensure their precise execution. Time proves to be a critical success factor in any form of crisis management. Meeting deadlines and maintaining speed are of utmost importance. The same applies to the quality of implementation, for example when business units are closed or assets are liquidated.

• Structured M&A processes
  As part of legally regulated restructuring and insolvency proceedings, companies or parts of companies are frequently sold. It is therefore crucial to adhere to the principles of successful M&A processes, which include the timely selection of M&A advisors or support, careful M&A planning, targeted approach to potential buyers, and professional negotiation and contractual execution.

• Compliance
  During insolvency, strict attention must be paid to compliance with legal requirements and regulations. For example, in cases of impending insolvency or self-administration, payment transactions must be strictly regulated to comply with all statutory payment prohibitions. It is advisable to define the permissibility and approval of payments in a detailed work instruction.

• Insolvency Governance
  In self-administered insolvency proceedings, the interaction between corporate bodies and stakeholders changes fundamentally. Insolvency advisors often appointed as general agents, managing directors or board members, shareholders, and creditor representatives (or the creditors’ committee) must cooperate seamlessly. Additional functions, such as insolvency accounting and creditor claims management, are introduced. To ensure smooth cooperation among participants, it is sensible to establish routine meetings and communication formats. The same applies to integrating the court-appointed trustee into the company’s governance structure and coordinating operationally with their team at the working level—particularly important in managing payment transactions.