Progress in the German reorganization culture

The Adler fashion chain is the first company in bankruptcy to receive a government support loan of €10 million from the German government’s economic stabilization fund.

This is a good sign and represents progress in the German reorganization culture.

Since the beginning of the pandemic, government assistance has been reserved exclusively for companies that were not in bankruptcy. The communications from the federal government have reinforced the stigma of insolvency in Germany during the coronavirus pandemic. Instead of highlighting the reorganization possibilities of these proceedings, the federal government’s crisis communications have focused on avoiding insolvency. This was made particularly clear, for example, on the website of the Federal Ministry of Finance where No. 5.1 “Special Cases” under “FAQ on Bridging Assistance III” answers the question “What should be done in the event of a cessation of business operations or insolvency?” as follows: “Payment of grants to companies that have ceased business operations or have filed a petition for the initiation of insolvency proceedings is precluded.”

In other words, entrepreneurs who wait in the hope of receiving further financial support — even though they may essentially be insolvent and are consequently taking substantial liability risks — have the opportunity to receive state support while entrepreneurs who seek competent support from restructuring and reorganization consultants, trustees, or even insolvency administrators during the crisis must master the reorganization on their own and without support.

The granting of the government loan to the bankrupt Adler fashion chain with its more than 3,000 employees gives rise to the hope that in the future other insolvent companies with a well-thought-out restructuring concept will also be supported on their way to sustainable reorganization.

As we stand for a modern reorganization and insolvency culture, BRRS Attorneys-at-Law welcomes this decision.

Bild: brais seara / photocase.de

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