Corporate restructuring with going concern forecast according to IDW S6

IDW S6: The standard for expert opinions on the ability of companies to continue as a going concern

The Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer, IDW) has developed a guideline for restructuring concepts with a going concern forecast and published it as IDW S6.

The three basic questions in restructuring cases are the question of need for restructuring, the question of ability to restructure and the question of worthiness to restructure. The first two questions must be answered clearly and substantiated by an IDW S6 expert opinion. The creditors and investors must decide on the last question themselves on the basis of the expert opinion.

Make sure that restructuring concepts are explicitly oriented towards this standard, because only then will they be accepted by capital providers.

How an IDW S6 expert opinion can help you

If your company is in a liquidity bottleneck and you either cannot explain the causes or cannot describe a comprehensible way to eliminate the bottleneck, your lenders will see a default risk. There is then a concrete probability that lenders will call in their loan commitments. In order to avoid such measures, it is advisable to have a restructuring concept with a continuation forecast prepared in accordance with IDW S6. Lenders often even demand such an expert opinion according to IDW S6. As a rule, by offering to have an IDW S6 report prepared, you will at least be able to agree to keep the lenders quiet until the report is available.

However, IDW S6 reports are not a mere formality. If they are prepared in an action-oriented manner, they are very helpful implementation guides that can facilitate the restructuring of companies and significantly increase the probability of restructuring success. A prerequisite for obtaining such a practice-oriented IDW S6 report is the right selection of the preparer. Do not try to prepare such an expert opinion yourself with your management team. It is to be expected that your management team will not be free enough to investigate the causes because the crisis situation itself has allowed them to do so.

However, a restructuring expert opinion not only requires considerable additional time and an unbiased view from the outside, but also a special professional expertise in crisis management that cannot be expected from your management team. In particular, both insolvency law and labour law as well as the previous case law of the Federal Supreme Court must be taken into account in the IDW S6 expert opinion.

In addition to reorganisation reports according to IDW S6, Continuation forecasts according to IDW S9 also have their justification.

For cases close to insolvency there is the possibility of a Evidence of the existence of reasons for opening insolvency proceedings according to IDW S11.


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