Insolvency plan

The procedure is a treasure trove of opportunity for all stakeholders: the debt-ridden company has the opportunity to realign its business and have "a fresh start" in the business. Creditors usually receive the opportunity to have their claims satisfied to a greater extent. Investors have easier access to shares of the debt-ridden company and thus may take part in the restructuring process.

 

All the more important is the prerequisite that the core business of the company should be viable, which means that the company must have in place a reasonable and money-making business model that will allow it to quickly respond to the challenging conditions and keep its head above water. Business-related restructuring measures, which can be taken also outside of insolvency proceedings, e.g. purchase of new technology, narrowing down the scope of business activities to include only the core business, innovation-driven development, implementation of a new marketing strategy etc., can be combined in the insolvency process with specific instruments of the insolvency proceedings, such as e.g. termination of onerous contracts, reduction in employee stocks where necessary or capital-related measures. Insolvency can thus serve as a very efficient way of restructuring company's debts so that liabilities are reduced to a degree of the burden that the company can shoulder. This means that the company's liabilities to third parties are aligned with its actual or estimated profitability and the remainder is written off – in some cases if part of the debt is paid (so-called part payment).