In some countries, under defined preconditions, there are special forms of insolvency proceedings which leave the entrepreneur with some degree of automomy. As a reference, in Germany, a major advantage of insolvency proceedings in self-administration for many entrepreneurs and managing directors is that planned insolvency proceedings are not published. Applicants are therefore not stigmatized in the public eye as insolvent companies. However, suppliers naturally know how to classify insolvency proceedings in self-administration and exercise the due caution they apply to their customers’ regular insolvency proceedings.
Another advantage of insolvency proceedings in self-administration is that there is no mandatory limitation of enforcement protection to three months.
Careful and proper preparation is also required for insolvency proceedings in self-administration, without which local courts will reject the applications. It is therefore advisable for insolvency proceedings in self-administration to enlist professional support.
The costs of insolvency proceedings in self-administration are lower than the costs of regular insolvency proceedings. As a result, liquidity is preserved and the chances of reorganization increase. A larger distributable mass can be formed. The duration of the proceedings is usually shorter (6-7 months). This is better for business relations.
To apply for insolvency proceedings in self-administration, you must explain in a comprehensible manner that creditors will not suffer any disadvantages as a result of self-administration compared to regular insolvency proceedings.
As with regular insolvency, the management of a company close to insolvency must also file an application for insolvency proceedings in self-administration. And, as in the case of regular insolvency, a trustee is appointed by the local court as the provisional insolvency administrator. In each case, the creditors’ committee must approve the choice of administrator. The company is usually granted protection against execution by the local court to prevent individual creditors from executing against the insolvency estate during the ongoing restructuring proceedings.
As in a regular insolvency, the insolvency money is usually paid to the employees by a pre-financier. The employees must assign their wage claims to this pre-financier, which the pre-financier uses as collateral for refinancing. The advantage for employees is that they receive their insolvency benefits in the short term.
In addition, if certain requirements are met, the protective shield proceedings are available as an alternative to regular proceedings and insolvency proceedings.
In each country, local regulations should be applied.