Report on the company
It is to the advantage of a company petitioning for reorganisation if there is an existing report on its finances and prerequisites for business operations, made as recently as possible by an external expert.
A TMA (Turn Around Management) analysis can be used as the basis for the report. The costs of the report are usually covered jointly by the company to be reorganised and/or its creditors.
Initiation of reorganisation proceedings
A court decides on the initiation of reorganisation proceedings. The application to the court can be filed by the company or by a creditor. Usually, the debtor is the applicant, and the creditors are provided with an opportunity to provide a statement on the application. If the debtor's application is supported by two major creditors (covering at least 20% of the liabilities), the proceedings can be initiated immediately, without consulting the other creditors.
The debtor's application must include
the required report on its business activities and creditors,
the main reasons for the financial difficulties, and
a preliminary plan on how the reorganisation is to be implemented.
The preparation of the application usually requires expert assistance.
Determining the prerequisites and obstacles
The court examines the prerequisites and obstacles for initiating the reorganisation proceedings.
The proceedings cannot be initiated, if
the company's insolvency cannot be prevented by reorganisation,
the company does not have sufficient assets to pay for new debts and the costs of the reorganisation, or
it is unlikely that a reorganisation programme can be established due to a lack of confidence by the creditors.
If the decision is made to start the proceedings, the court appoints a receiver and may also appoint a creditor committee. The initiation of reorganisation proceedings results in the interdiction of repayment, debt collection or enforcement regarding the reorganised debts. Adverse administrative sanctions, such as removal from the prepayment register, or the revocation of a transport licence or the licence to serve alcoholic beverages, are also prevented.
Preparation of the reorganisation programme
The purpose of the interdictions resulting from the initiation of reorganisation proceedings is to provide a quarantine period, during which the company may submit a proposal for the reorganisation programme to its creditors for approval. During this time, the company continues to operate under the supervision of the receiver.
The role of the receiver is initially to prepare a basic report on the company's standing. The receiver also supervises the company's activities and takes care of various notification tasks.
The main task of the receiver is to prepare the reorganisation programme proposal. The receiver works in close cooperation with the debtor and the creditors. The receiver should try to take the interests of both parties equally into account.
The reorganisation programme should provide a comprehensive solution for the rehabilitation of the debtor's business, indicating both the recovery measures and the debt restructuring for the company.
Processing and confirmation of the programme
The receiver submits a programme proposal to the court, which hears the relevant creditors and, if necessary, organises a vote on the approval of the programme. The reorganisation programme is confirmed if it is approved by all the creditors. The programme can also be confirmed if it is approved by the majority of all the creditor groups. With a specific minimum of support, the programme can also be confirmed even without the consent of all the group majorities.
The reorganisation proceedings and the related interdictions end when the reorganisation programme is confirmed. The reorganisation programme replaces the terms and conditions of the original reorganisation debts. The duration of the programme is usually several years. The court may also appoint an official receiver for the execution of the programme.