Offbeat Restructuring Act: Rescue for the big ones, bankruptcy for the rest?

09:10  28 october  2020
09:10  28 october  2020 Source:   wiwo.de

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After employees adjust to the new environment, the company can be in a better position for achieving its goals through greater efficiency in Below are two examples of corporate restructurings in which one involved a debt restructure through private equity and the other done by way of bankruptcy .

In the last video we talked about the scenario where a company, for whatever reason, it just couldn't pay it's debt holders. Maybe the management will hire another bank. And everyone's going to come up with bankruptcy plans. But bankruptcy plans are usually of one or more varieties.

A new law should make it easier to rescue financially troubled companies from January. But for many corona victims, restructuring outside of bankruptcy is becoming too complex and expensive.

Experten rechnen mit einem Anstieg der Insolvenzen. Ein neues Sanierungsgesetz wird daran wenig ändern. © imago images experts are expecting an increase in bankruptcies. A new restructuring law will do little to change that.

The goal is clear, but is the instrument the right one? Afflicted companies should be able to reorganize themselves from January 1st without going through insolvency proceedings, as long as they are not yet insolvent. A few days ago, the federal government presented the draft for the “Company Stabilization and Restructuring Act” - in short: StaRUG. The new law is intended to enable restructuring without the stigma of bankruptcy. The fear of this had made many companies and managers hesitate, often until it was too late to save anything. “Restructuring plan” is the magic word that companies can use to reorganize themselves without an insolvency administrator and, for example, to get rid of unfavorable contracts even against the will of a business partner.

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The aim of a prepackaged bankruptcy —which must be voted on by shareholders before the company files its petition for bankruptcy —is to save A company and its creditors can expect a resolution within a much shorter time frame under a prepackaged bankruptcy than a conventional one .

The Nelson Act of 1898 became the first modern Bankruptcy Act in the country. The next modern bankruptcy law was enacted in 1978 by the In the case of businesses, a troubled company may file or be forced by creditors to file for bankruptcy . After the petition is filed, the business ceases to exist

“Companies that are suffering from the economic consequences of the corona pandemic will particularly benefit from the new opportunities, even though they still have a convincing business model,” says Federal Minister of Justice Christine Lambrecht. In particular, the debt burden from Corona aid loans could be reduced via the so-called preventive restructuring framework, experts expect.

Alone, the new remediation instrument has a decisive disadvantage: It is unlikely to be an option for the majority of the pandemic victims. "The new procedure will certainly play a role in major financial restructuring, but it is certainly not suitable for saving small businesses such as restaurants or travel agencies that are now particularly suffering from the corona crisis," says Daniel Bergner, Managing Director of the Association of Insolvency Administrators Germany (VID ). While corporations and larger medium-sized companies should definitely use the new tools, do small and medium-sized businesses have to continue to go to the bankruptcy court? It's actually planned differently.

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The federal Parliament has authority over bankruptcy and insolvency while the provincial 2 103 doing business in Canada including the responsibility for determining the rights and remedies of 2. Restructuring A restructuring of a corporation s debt, or a workout, usually occurs in one of two

The Wall Street Journal. Subscribe Sign In. Warning that Sears Holdings Corp. is running out of time and money, CEO Edward Lampert is making his biggest push yet to restructure the retailer to avoid a bankruptcy filing, as a debt payment looms The Blank-Check Boom Poses Pitfalls for Investors.

The Federal Ministry of Justice wants to create “a checklist for restructuring plans”, “which is adapted to the needs of small and medium-sized companies.” But whether that helps a lot when a stand builder, taxi driver or start-up company wants to use the procedure seems to be questionable. The checklist provided for in the law "is not legally binding," criticizes restructuring lawyer Tom Brägelmann from BBL Brockdorff & Partner. For companies that want to use them, there remains a “considerable legal risk”. It would be better if small and medium-sized companies were given "a binding model that they can rely on". That would also reduce the consulting effort.

The regulations of the new law are too complex, too difficult to implement without adequate legal and restructuring expertise - and that costs. The preventive framework will therefore still not be an option for all companies, ”says Marion Gutheil, partner at the Mönning Feser insolvency law firm. "The consulting effort remains too high for that."

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8 One of the main reasons for Uruguay’s crisis was the Argentine crisis. As stated by the Bureau of Western. This could be a recipe for disaster, since many times bad publicity resulting from the disclosure requirements and the time that elapses from the beginning to the end of the restructuring

The insolvency administrator Christian Holzmann from the commercial law firm CMS Hasche Sigle sees it very similarly. "Access to the framework for micro and small businesses will be difficult in practice," Holzmann expects. "The new regulations are complex and extensive". As a rule, companies will therefore have to take advantage of professional advice, "both in day-to-day operations and in preparing and accompanying out-of-court restructuring". The associated cost burden will be problematic for small companies, said Holzmann.

Slimmed-down restructuring procedure for smaller companies

Restructuring expert Brägelmann therefore suggests “a kind of mini-StaRUG”, ie a simplified and thus more cost-effective procedure especially for smaller companies. In this way, the conditions for creating a reorganization concept or restructuring plan for certain company groups and sizes could be simplified. For companies with fewer than 100 employees or companies with less than a certain turnover and with simple debt financing, a 20-page restructuring plan could be sufficient. "The legislator should make it clear that such SMEs only have to meet minimum requirements," said Brägelmann. In addition, he proposes an out-of-court restructuring procedure specifically for corona-damaged companies. Binding standard templates could be used in both types of procedure in order to reduce the effort. Brägelmann believes that this is already possible through manageable changes in the draft law.

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Restructuring - Culture Paper - Free download as PDF File (.pdf), Text File (.txt) or read online for free. Cultural Matters in Fashioning a Cross-Border Workout - A collaboration by Allan Nackan, Paul Keenan Jr., Jean Baron and Rodrigo Callejas Fellows of INSOL International, [Published in the

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In general, however, the willingness to change in the Ministry of Justice seems to be manageable. Between the government draft and the previously published ministerial draft, there have been “some detail changes and clarifications,” said Gutheil. "Instead of six, the restructuring process can now take twelve months". In addition, the core element of the preventive framework, the possibility of terminating contracts, was specified. In addition, it was made clear that contracts will only be terminated if the restructuring plan is accepted, Gutheil said. In addition, contracts should only be able to be terminated if this is "appropriate".

According to Holzmann, too, the design “remained largely the same”. The CMS expert sees relevant changes in the liability regulations for the management and supervisory bodies of the company concerned. There are also adjustments at court level. In the draft bill, the judges should be personally responsible, which would have made a change of department rather impossible. "Now the departments are rightly responsible," says Holzmann. By linking up with the departments, potential responsibility problems, for example in the case of representation cases, are to be prevented.

On the other hand, numerous organizational problems remain unresolved, which could mean that the new restructuring process is available later than intended. Because "whether the law can come into force on January 1st as planned also depends on the Federal Council," says VID managing director Bergner. The regional chamber will have to check very carefully “whether it is possible at all times to set up the restructuring courts in close proximity to all higher regional courts by the beginning of 2021.”

More on the subject: Creditors from crisis companies fear for their money. But there are ways to protect yourself against the risk of bankruptcy.

Crisis summit with Transport Minister Scheuer: Airports and air traffic control are in financial distress .
The rescue of Lufthansa is not enough, warns the economy. Airports and air traffic control also suffer. The federal government invites you to the crisis summit. © Photo: imago images / Jörg Halisch Lufthansa has received state aid. Airports are now also demanding support. Now the next airline has got it. The fourth largest German airline Sundair has initiated protective shield proceedings - a restructuring that is intended to avert bankruptcy.

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