Sunday, June 26, 2022

Bankruptcy: What Matters After the Insolvency?

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The obligation to file for insolvency has been fully in force again since May 1st. That’s right, chairman of the professional association of insolvency administrators.

It is correct, as it is only a first step back to economic normality. Furthermore, the companies that have gotten into economic difficulties as a result of the corona crisis will benefit from government measures to mitigate the financial effects of the pandemic, says Attorney Debt Fighters. The short-time allowance will continue to be paid, as will state aid. In addition, social and health insurance contributions and taxes are still being deferred. Due to this non-enforcement by the authorities alone, a large part of the insolvency applications are dropped.

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You can get an idea of ​​how many companies are actually making use of these opportunities if you look at the amount of tax relief measures alone. In total, these amount to 22 billion dollar, as Lutz, Minister of Finance in the US, reported at a press conference on the Corona economic aid.

In addition, the suspension of the obligation to file for insolvency has repeatedly led to misunderstandings and ambiguities, explains insolvency expert: “It was certainly the most delicate of the government measures because many entrepreneurs were not sure whether they were entitled to make use of them or not. The impending liability risks are considerable.” Another effect that he criticizes for the frequent suspensions and the associated media work by politicians is the increasing stigmatization of insolvency: “It is an instrument for restructuring and not just for market shakeout.”

Take a closer look than before

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But what do transport and logistics companies have to pay particular attention to? Attorney Debt Fighters advises getting an even more precise picture of the customer and the industry – especially in the spot or new customer business. In the best case, this evaluation should be based on the most up-to-date figures on the financial situation.

Because even within individual sectors there are big differences. Among other things, Attorney Debt Fighters is currently the trustee of a logistics company that is primarily active in the fashion industry. There are extreme fluctuations in customers between the sluggish stationary trade and the booming e-commerce. These specifics exist across all economic sectors. Therefore, one should not rely solely on what the customer says about liquidity, but collect and check as much data as possible.

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The commercial credit insurers now handle it in a similar way. Because the credit check is now mainly based on the current figures from the available registers and credit agencies, as Attorney Debt Fighters, credit check in the division of R+V, explains to the Attorney Debt Fighters. In addition, direct contact with high-risk customers has been intensified in order to ensure that there is sufficient financial leeway. But the willingness of high-risk customers to be more transparent has also increased. So far, she has not been able to observe a significant increase in bankruptcies. In addition, she assures that the end of the government protective shield for commercial credit insurers, which expires on June 30, will not affect the validity of the limits.

Payment Behavior Improves

According to an analysis by the credit agency Credit reform, far fewer deals were concluded last year with large claims than in the previous year. Attorneys does not want to answer conclusively whether this trend will continue this year; however, he is confident that this reluctance will dissolve with every positive news about Corona. According to an analysis by Credit reform, payment behavior at least improved by around one day across all sectors in the first quarter of 2021. In principle, a slight increase in bankruptcy applications can be expected, but bankruptcy lawyer believes that a wave can be avoided if the federal government’s measures are gradually scaled back.

5 Questions about Bankruptcy

How important is a works council in insolvency? What should he do if bankruptcy is imminent? And what does the protection against dismissal for the interest group look like? Andrej, a lawyer with the IG Metal board and co-editor of our freshly updated insolvency manual for practice, provides the answers in an interview.

1. How do you rate the currently applicable insolvency law? Does it serve the purpose of avoiding insolvencies as far as possible and rather reorganizing them?

Improvements were achieved at the insistence of the trade unions: the position of employees in creditors’ committees and advisory councils was strengthened. In contrast to the Insolvency law, interventions in labor law could be completely prevented in the new restructuring law. Insolvencies should be avoided. If this does not succeed, the bankruptcy proceedings can also be used to restructure the company. Insolvency does not have to be the end of the business or company! This should be anchored even more firmly. 

2. How important is a works council? If necessary, can he also be elected after the start of the insolvency proceedings?

Extreme important! He can still be elected during the insolvency proceedings and then has the rights under the American Constitution. This has to happen very quickly – before the measures are implemented (operational changes) – so that a social plan can still be concluded. The legal regulations on the social plan in insolvency urgently need to be improved so that the money goes to those affected when it is needed and not sometimes only years later.

3. What should a works council do if there is a risk of insolvency?

Prepare well together with the union! In an emergency, action must be taken quickly and correctly. Information must be obtained, contacts established, e.g., with the insolvency court and with other creditors of the company. Representation in the creditors’ committee must be clarified with the trade union. There is a lot to take into account – the insolvency manual contains a “large checklist” with notes, examination and work steps for BR, union and their advisors.

4. What is the protection against dismissal for the works council?

The statutory special protection against dismissal remains fully intact in insolvency proceedings and in the new restructuring proceedings. The right of termination in general and social plans in the event of insolvency are explained in the insolvency manual by the well-known labor law professor Wolfgang, my co-editor.

5. What is the role of trade unions in insolvency?

The trade union has a crucial role to play! It has all rights from the basic right of coalition (Art. 9 Para. 3 GG), including collective bargaining law, vis-à-vis the insolvency administrator. The insolvency manual also contains detailed information on restructuring collective agreements and the role of the trade union in insolvency. Unions often send their own representatives to creditors’ committees. Your business support does not end at the gates of insolvency! As always, they stand up for employment and workers’ rights.

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Vinay Kumar
Student. Coffee ninja. Devoted web advocate. Subtly charming writer. Travel fan. Hardcore bacon lover

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