Sunday, May 22, 2022

The Obligation to File for Bankruptcy Applies Again – What Now?

Companies that have applied for corona aid to avoid the impending bankruptcy or over-indebtedness have been in the rain since May 1,The Obligation to File for Bankruptcy Applies Again – What Now? if the money has not yet flowed. Because the grace period due to the postponement of the obligation to file for insolvency is now finally over. What to do if you are still on hold for corona aid? You are on the verge of legality. And nobody helps. The Obligation to File for Bankruptcy Applies Again – What Now?

The corona aid is a long time coming. In some cases, according to a report by Economic Health, no aid was received from November 2021.The Obligation to File for Bankruptcy Applies Again – What Now? As a result, many applicants find themselves in considerable difficulties, possibly even in bankruptcy. The Obligation to File for Bankruptcy Applies Again – What Now?

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Back on the go? By Bankruptcy

What the legislature has not taken care of is a transitional regulation for the entrepreneurs concerned. Because there is no answer to these questions:

  • What if the approval for corona aid has not yet been received?
  • What if no money has flown yet?
  • What if I don’t know when the money will flow?
  • Is there a transition period?
  • What if the application for corona aid was submitted too late?
  • Or is the company already on the verge of legality?
  • What to do if your company has too little liquidity now or in the foreseeable future despite corona aid?
  • In the near future, deferred taxes, social security contributions or the first repayment installments for protective shield or bridging loans will have to be repaid. How does this affect liquidity and over-indebtedness? By when do these debts have to be paid back?

The chicken and egg problem For Bankruptcy

Entrepreneurs who have not yet received any or part of the corona aid and who become insolvent despite the aid must do two things immediately from May 1, 2022:

  • Check with a restructuring specialist you trust whether bankruptcy in self-administration is possible or whether regular bankruptcy must be applied for,
  • When submitting the application, inform the authorities to which corona aid has been applied for that they have applied for insolvency in self-administration or for regular bankruptcy.

Because under law, companies in difficulty have no right to corona aid. This planning uncertainty can increasingly become a liability problem for the entrepreneur or managing director. “It is unfair to let the entrepreneurs concerned appear”, says Thomas Planer, managing partner of Planer. “Why don’t the officially responsible people manage to create transparency and clearly tell applicants what consequences they have to expect? You are already punished enough. “

To make matters worse, most of those affected have not read the fine print, namely that they should have filed for bankruptcy through bankruptcy lawyer long ago because the corona aid is not enough to save them. Or that the suspension of the obligation to file for insolvency only applies if the applications for corona aid have been submitted by February 28. There are also exceptions to this regulation, but a layperson cannot see through this whole jungle of rules, cannot do that at all. “Letting those affected draw their prison card in an emergency like in Monopoly is not okay,” adds Thomas Planer.

What those affected can still do now

The good news: There are alternative courses of action. Because the legislature has created two instruments to cushion the consequences of the corona pandemic. Thus, within the framework of the Law for the Stabilization and Restructuring of Companies (StaRUG) outside of insolvency proceedings, however, restructuring can be carried out in a legally secured framework. In addition, the entrepreneur can use the restructuring tools of the Insolvency Code in an insolvency in self-administration or in a corona-related crisis with the so-called self-administration protective shield. “So, there are definitely ways and means to save a company and keep it going. In order for the entrepreneur to take the right steps, he should get an expert at his side who is familiar with both business and insolvency law issues,” says Planer.

With self-administered insolvency proceedings out of the crisis – creditors

In principle, it applies to all creditors that the self-administered procedure does not show any changes compared to normal insolvency proceedings with an insolvency administrator. All legal requirements and court orders must be implemented accordingly by the self-administrator and his advisors. The equal and best possible satisfaction is the ultimate goal of the bankruptcy code in self-administration and therefore all creditors are treated in the same way by the debtor and his adviser.

In larger proceedings, a pool of creditors is usually initiated, which is represented by a pool administrator and may also sit on the creditors’ committee.

All “professional creditors” are also represented in the self-administered procedure via the relevant departments and process their claims in accordance with the law.

The special problem of “transfer of sales tax in the provisional self-administered procedure” alone requires the knowledge and competence of the restructuring consultants or the special authorized representative.

Tax office and social insurance

agency Tax office and social insurance agency always feel at the forefront in insolvency proceedings because of their special position. Here it is up to the competence, experience and knowledge of the restructuring consultant (s) to structure concepts and processes in advance, if necessary, in order to e.g. to exclude or minimize personal liability of the management in self-administration.

The continuation of the company in self-administration and the planned restructuring presupposes that the debtor company has an intact organization and, in particular, the warehouse – invoices and accounting are up to date.

Creditors

committee Regularly active restructuring consultants will initiate a (virtual) preliminary (preliminary) creditors’ committee in the run-up to the application through contacts and discussions with relevant creditors.

It is not uncommon for small and medium-sized companies in self-administration to set up the preliminary (preliminary) creditors’ committee in advance – if necessary by means of a circular procedure. Then he can also give his or her vote to the court with regard to the administrator.

If there are courts that are anxious about the costs of the preliminary (preliminary) creditors ‘committee, the preliminary (preliminary) creditors’ committee can also waive the fee / expense allowance up to the opening of the preliminary proceedings or beyond.

When forming the committee of creditors, the legislature formally stipulated that

  1. the largest secured creditor
  2. a representation of the workforce (works council?)
  3. a small believer and, in larger proceedings, other creditors (tax office, social security agency, pension insurance fund, etc.) can participate.

In principle, it is always advisable that the creditors’ committee actually active has an odd number so that there is a majority in possible votes.

The committee of creditors has many tasks, the main ones being:

  • Support and preparation of the restructuring strategy
  • Support and preparation with an insolvency plan
  • The decision to carry out an M&A process
  • The ongoing control of the process with regard to liquidity and earnings
  • The (co-) support of decisions of essential importance within the framework of the procedure (personnel adjustments, partial closings of operations, closure of branches or mergers, etc.)

The other activities of the creditors ‘committee result regularly from the rules of procedure that the creditors’ committee issues or imposes on itself.

Restructuring consultants / special representatives of the management will exert a certain influence on the establishment or composition of the creditors’ committee in advance, so that not only a uniform decision-making structure is available at the end, but also a “felt” vote for self-administration and the following insolvency plan.

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