How can I protect my company from insolvency?
July 11, 2024 | 70,00 EUR | answered by Daniel Netz
Dear Lawyer,
My name is Johann Halbscheffel and I am the managing director of a medium-sized company in the automotive supply industry. In recent months, the economic conditions have deteriorated significantly due to the Covid-19 pandemic. Our sales have drastically decreased and we are facing major financial challenges.
The current situation of our company is concerning, as we are already experiencing losses and facing liquidity shortages. I am concerned that we may become insolvent if the situation does not improve soon. Therefore, I am looking for ways to protect my company from insolvency and secure our existence.
What measures can I take to prevent the insolvency of my company? Are there legal and economic instruments that could help us stabilize our financial situation? What steps should I, as the managing director, urgently take now to minimize the risk of insolvency?
I am grateful for any advice and support you can offer me in this difficult situation. Thank you in advance for your help.
Sincerely,
Johann Halbscheffel
Dear Mr. Halbscheffel,
Thank you for your inquiry and for trusting in my expertise in the field of business law. The Covid-19 pandemic has undoubtedly presented many companies with significant economic challenges, and it is commendable that you are proactively seeking solutions to protect your company from insolvency.
To avoid the insolvency of your company, there are various measures and instruments that you can take. Firstly, it is important to conduct a thorough analysis of your company's financial situation. This includes reviewing current liquidity, liabilities, and potential for revenue growth. Based on these analyses, you can then develop a strategy to stabilize your financial situation.
An important legal instrument available to you is the application for a reorganization procedure under the Law for Further Facilitation of the Reorganization of Companies (ESUG). Through such a procedure, you have the opportunity to negotiate with creditors and create a restructuring plan that will get your company back on track in the long term.
Furthermore, you should consider whether you may be able to take advantage of government support measures to improve your liquidity. This may include loans with government guarantees or support programs for companies in crisis.
As a managing director, you should also work closely with your finance and accounting departments to conduct an effective cash flow analysis and identify potential cost-saving or optimization opportunities. It is important to act quickly and, if necessary, take unpopular measures to minimize the risk of insolvency.
I strongly recommend that you also consult with an experienced insolvency advisor or auditor to receive professional advice and work together with experts to develop a plan to save your company.
I hope this information is helpful to you and I am available for any further questions.
Sincerely,
Daniel Netz
Business Law Attorney
