German law · English information
Corporate insolvency affects management, employees, lenders and trading partners. Early decisions must be based on current liquidity information and an assessment of the statutory insolvency grounds.
When an application is required
Illiquidity and, for the entities covered by the legislation, over-indebtedness are key grounds. Section 15a InsO requires filing without culpable delay, subject to maximum periods of three weeks for illiquidity and six weeks for over-indebtedness. These are not automatic waiting periods. Associations and foundations are subject to particular rules under section 42(2) BGB.
Opening proceedings and interim measures
The court examines admissibility, insolvency grounds and whether costs are covered. It may order protective measures, appoint a provisional administrator or allow provisional debtor-in-possession proceedings. The court order determines the powers involved. Rejection for insufficient assets does not remove other liability or winding-up obligations.
Business continuation or realisation
Ordinary proceedings do not necessarily mean closure. An insolvency plan or sale of the business may enable continuation. If the financial basis is missing, an orderly realisation must be assessed. Creditor interests remain central. Supply details of the legal entity, representation, cash flow, contracts, employees, enforcement measures and any deadlines.
Related information
Procedures overview · Creditor rights · Corporate insolvency
Official German Insolvency Code · Official StaRUG
Practical implementation
Preparing a reliable filing record
Preparation requires complete information on assets, receivables, liabilities and ongoing contracts. Corporate debtors also need an assessment of management responsibility, insolvency grounds and filing duties. The court and preliminary administrator require reliable contacts and current documents. Bank accounts, stock and accounting records must be preserved and controlled. A debtor's application differs from a creditor's petition. Missing or inconsistent information may obstruct the process and create further risks; incomplete books should be addressed promptly rather than concealed.
Continuation, sale or orderly closure
Opening proceedings does not necessarily mean immediate closure. Continued trading, a business sale or liquidation depends on funding, orders and realistic alternatives. Court orders govern the preliminary stage. New commitments, payments and assurances must reflect the authority actually available. Employees, customers and suppliers need accurate information rather than unsupported guarantees. Management should assess which restructuring routes fit the facts and ensure that operational promises are consistent with the financial position.
Four practical examples
The following scenarios are illustrative examples, not reports of client matters. The outcome depends on the facts and applicable rules.
Example 1: Assets but no cash
A company owns machinery but cannot pay due invoices. Asset realisation, payment dates and available finance need examination. Valuable equipment does not automatically resolve illiquidity. Filing decisions, payments and continued trading require a common current evidence base.
Example 2: A creditor files first
A supplier learns that another creditor has petitioned for insolvency. It should assess its claim, security and future deliveries. Management cannot simply assume that a third-party petition removes its own duties; the procedural position needs review.
Example 3: An urgent customer order
A customer wants production to continue after filing. Authority to accept the order, production finance and preliminary court measures need checking. A binding commitment should reflect actual access to materials, employees and payment arrangements.
Example 4: An investor proposes a purchase
A competitor wishes to buy a business division. Assets, employees and contracts must be identified. A short timetable does not remove the need to examine ownership, permits and security or to fund operations until completion.
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