Over-indebtedness – Recognize the first signs and act
Companies can get into financial difficulties for various reasons. Two of the most common causes are excessive indebtedness and insolvency . But what exactly do these terms mean and how can companies take countermeasures in good time?
What does over-indebtedness mean?
Over-indebtedness occurs when a company's liabilities exceed its available assets. According to Section 19 of the Insolvency Code (InsO), this is a reason for opening insolvency proceedings if there is no positive forecast for the company's continued existence.
When is an over-indebtedness check necessary?
An over-indebtedness check should be carried out if there are signs such as a drastically falling equity ratio or high losses. Particularly for capital companies such as GmbHs or AGs, over-indebtedness can become a compelling reason for insolvency.
What is insolvency?
A company is considered insolvent if it can no longer service its due liabilities . This is the most common reason for filing for insolvency. Insolvency is regulated in Section 17 of the Insolvency Code and obliges managing directors to file for insolvency within three weeks.
indicators of insolvency
- High outstanding debts from suppliers
- Delayed wage payments
- Claims that can no longer be collected
How can bankruptcy be avoided?
The early preparation of a going concern forecast can help to avert insolvency. It shows whether the continuation of the company is realistic. In the best case scenario, solvency can be restored through integrated financial planning and a restructuring concept .
What role does the tax advisor play?
An experienced tax advisor supports companies in preparing the going concern forecast and calculating liquidity plans . The tax advisor is also responsible for correctly presenting the financial situation and minimizing possible liability risks.
restructuring and reorganization measures
If there is a risk of over-indebtedness or insolvency, restructuring measures such as cost optimization or negotiations with creditors can help. In many cases, companies can be saved through out-of-court restructuring before insolvency occurs.
Restructuring steps:
- preparation of an over-indebtedness balance sheet
- review of subordination agreements
- negotiations with banks and creditors
- cost optimization and complexity management
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