The company is at the center of our Competence Center Restructuring’s (CCR) activities. All stakeholders such as shareholders, managing directors and banks are interested in a prospering company.
In order to make a recommendation which is appropriate for the company’s current situation, the CCR considers the company from different perspectives. Such different perspectives are possible due to the CCR’s interdisciplinary approach. Interdisciplinary means, first of all, that both highly specialized lawyers and public accountants work hand in hand. It also means, however, that pronounced industry experts assess the company's performance situation and, based upon their expertise, are also able to implement measures derived from the interdisciplinary analysis.
For borrowers and investors: tax consultants, lawyers, restructuring consultants and financing experts work close together for your way out of the crisis.
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Banks and bank employees are regularly among their customers’ first points of contact when these are facing problematic or challenging situations with their business. In these situations, the bank is often consulted for advice and assistance. Baker Tilly has years of proven expertise in developing customized solutions for businesses, whether in restructuring situations, prior to an impending generational transition, or in loan refinancing. The Baker Tilly Options Review leverages such expertise for you and your borrowers quickly and cost-effectively!
Interdisciplinarity also enables the CCR to support the company during relevant stages of its development. This means, first of all, that the CCR uses its network in order to acquire the financing which is required for the company’s growth but which, on the other hand, can also be helpful in a turn-around situation. The CCR’s activities are focused on restructuring consulting from an economic and legal point of view. Economic restructuring consulting is based on an analytically clearly derived restructuring concept which reflects not only financial restructuring but also includes performance-related measures which will be subsequently implemented promptly and professionally. Legal restructuring consulting focuses on the avoidance of liability for damages or Avoidance actions. The CCR also uses this know-how for restructuring in insolvency via debtor-in-possession management and insolvency plans. The CCR masters debtor-in-possession cases because, in addition to the appropriate personalities, it has the fundamental skills, particularly with insolvency accounting, which are required – and expected by the insolvency courts – for restructuring in insolvency.
In this context, the CCR takes into account the client’s special position, unless the company is the client. The managing director is mainly responsible for decisions within the company and his liability risk is accordingly high. Therefore, crisis situations especially call for professional, committed advice to the managing director. In insolvency, shareholders are exposed to the risk of having to repay contributions on shareholders loans and the shareholders may lose their shareholder rights during insolvency. The CCR advises prior to insolvency and helps to preserve the position of existing shareholders by means of smartly structured insolvency plans, and also helps existing and new shareholders, such as PE investors, to restructure or acquire their shareholder position by means of insolvency plans. The financial institutions involved in reorganizations receive from the CCR objectively comprehensible and reliable assessments of reorganization concepts, which prevent liability or even the repayment of credit tranches. In order to achieve this, restructuring concepts are prepared in accordance with both IDW S6 and BGH (German Federal Court of Justice) case law.
Today, a company’s planning is a central corporate management tool and regularly serves as basis for financing or investment decisions. Such planning regularly combines various strategic, operational and financial sub-plans. A neutral, professional plausibility check of such planning by Baker Tilly is often required in order to validate the corporate planning’s viability towards the company’s external partners, for example, financing partners such as financial institutions: it is also required if the management, due to special challenges, wishes to document its diligence. The external validation by Baker Tilly guarantees a neutral assessment of the planning, creates the transparency required for future decisions, thus enhancing trust. Baker Tilly’s experts review the planning assumptions on the basis of substantiated market and industry data; furthermore, they verify the planning process’ individual steps. In doing so, they can rely upon many years of experience from various, successfully implemented restructuring projects.
Project financing has gained more and more importance over the last years. Baker Tilly advises you on the feasibility study and the transaction’s structuring. The preparation or auditing of complex financial models is our daily business. Our network of German and foreign banks, investment companies and family offices enables us to arrange the relevant financing contacts.
The German SME sector is well-known for its innovative products and outstanding developments throughout all industries. Yet, it constantly faces the challenge of finding an appropriate and flexible corporate financing at reasonable interest conditions. In light of the bank’s ever stricter requirements due to the “Basel” regulations, this is not an easy task, in particular if the SME is undergoing a special situation such as growth or restructuring. Baker Tilly supports you in finding the optimal financing structure and the best possible financing mix for your company. Our expansive network and our expertise from various successful financing projects help you in finding and winning your future financing partner.
In special situations, such as growth or restructuring phases, a company often requires additional funds without being able to provide its credit institutions with the required additional collateral. In such situations, a guarantee furnished by a German federal state (“Landesbürgschaft”) serves as additional hedging instrument. The federal state’s objective is to support the company in implementing its projects and the related financing which would not be possible without the public guarantee. Filing an application for such a public guarantee together with a credit institution requires a lot of preliminary work and comprehensive consulting expertise in order to avoid such complex process’ various pitfalls. Baker Tilly supports you during the application process. From first talks, to the compilation of all relevant documents, support during coordination meetings with the federal state, to the implementation in loan agreements, we will securely guide you and your company through the entire public guarantee process.
Baker Tilly analyzes and assesses the collateral situation, determines free assets of the company and evaluates them in a decision-oriented manner, both from a business and legal perspective. This does not only provide reliable value assessments, but also the basis for collateral application and allocation with capital providers.
In challenging economic situations, a reliable assessment of the situation is the first step towards a successful solution. Based on our experience from a wide range of restructuring projects, Baker Tilly presents, after a cost-effective brief analysis, the available legal, financial and performance-related alternative courses of action as well as possible restructuring strategies.
Baker Tilly stands for a holistic restructuring approach. Sustainable financial stability can only be achieved through a functioning business model. Baker Tilly therefore screens all relevant corporate functions and makes clear recommendations for optimization, whether in production, purchasing, or marketing and sales. We translate the findings into realistic action plans in order to quickly restore economic strength.
When financing or acquiring a company, credit institutions and investors want to know whether the customer’s or target’s business model works and how efficient the relevant company is.
For that purpose, Baker Tilly provides decision-oriented analyses the scope and content of which we individually discuss and agree with the respective addressee.
As objective experts independent of the company, we typically examine the following content and create the necessary transparency:
- Analysis of the company’s current financial situation and identification of opportunities and risks
- Analysis of the market and competitive situation
- Assessment of the corporate strategy and the business model’s future viability
- Assessment of the company's performance and identification of fields of action and potential for improvement
- Plausibility check of corporate planning with sensitivity analyses and scenario calculations
- Derivation of the company’s ability to service its debt
- Identification of alternative courses of action
Based on our experience as partner for every possible corporate situation, we provide the stakeholders with a reliable decision basis for their further course of action. In particular with regard to international financing, we have most recently fulfilled the international standards for IBRs.
In difficult economic situations, creditors often demand a reorganization concept according to the Institute of Public Auditors in Germany’s (Institut der Wirtschaftsprüfer; “IDW”) Standard 6 (IDW S6). Such reorganization concept provides you and your creditors with an independent and objective assessment of your company’s potential for restructuring if the three main questions for the company’s ability to continue as a going concern, competitiveness and ability to generate returns can be answered positively. A qualified reorganization report pursuant to IDW S6 provides new scope of action for all stakeholders. In this context, Baker Tilly stands in particular for a quick implementation of the defined restructuring and reorganization measures.
Successful restructuring requires a solid and feasible concept; the largest challenge, however, is implementation. Baker Tilly primarily considers itself as a restructurer, not as a mere concept creator. We initiate the implementation of the first immediate measures already during the concept development phase. Due to our interdisciplinary approach, we have the technical, legal and economic know-how which enables us to not only control the restructuring measures’ implementation, but to perform such measures ourselves. In doing so, we follow up on the measures’ effectiveness within the scope of restructuring controlling, transparently report on such follow-up and use our findings for further implementation.
Under a mutual security trust, the collateral – which may be shares in the company or physical collateral – is transferred to the trustee. The trustee holds this collateral for the benefit of creditors on the one hand and the company or shareholder on the other.
As a facilitator and mediator, Baker Tilly monitors compliance with the financial covenants agreed upon in the loan agreements and, if necessary, also the operational restructuring steps defined in a reorganization report. If required, we initiate and manage a professional M&A process.
For bondholders and holders of other financing instruments eligible for the capital market, we hold both company shares and non-cash collateral of the respective issuer.
The trustee has a special function when banks pool collateral.
As a neutral third party, Baker Tilly assumes the management of bank pools. In the pool manager’s function, we manage the pool and prepare the decision-making bases. Furthermore, we provide, manage and liquidate the syndicated collateral. If required, we also serve as security agent.
During a corporate crisis, it is vital to continuously monitor whether the company is factually insolvent and as such required to file for insolvency. Only a professional monitoring can exclude liability risks or even criminal liability of the management. In addition to legal provisions, this requires a profound knowledge of the applicable BGH (German Federal Court of Justice) case law. One must distinguish between (imminent) insolvency and overindebtedness. The Institute of Public Auditors in Germany’s standards (IDW S11) are particularly relevant for the audit’s methodology. At Baker Tilly, we have both the legal and the business-related know-how in order to early identify the existence of reasons for filing for insolvency and reliably advise the management accordingly.
A corporate crisis is a very special situation for every managing director. Non-compliance with legal duties results in personal liability or even consequences under criminal law. Taking into account the economic situation, Baker Tilly develops realistic options for action for you as managing director; our objective is to minimize liability risks without disregarding the possibility of ensuring the company’s survival outside of insolvency.
If a business partner becomes insolvent, this does not only involve the threat of default on outstanding receivables. Often, the insolvency administrator reclaims amounts which have already been collected or declares to challenge other payments made by the debtor prior to filing for insolvency. At Baker Tilly, we do not only have a profound knowledge of the legal regulations and the permanently changing case law of the highest courts. From our practical experience as insolvency administrators, we also know the weaknesses in enforcing claims within the scope of avoidance actions and are able to evaluate when a defense against these claims promises to be successful. If necessary, we will also represent you in corresponding legal disputes.
During a corporate crisis, personnel cuts can generally not be avoided. Our labor law specialists have many years of experience in planning and implementing the related personnel measures. Labor law advice starts with strategic planning, continues with negotiations with trade unions and works councils and extends to the implementation of terminations and dismissals as well as the conduct of legal proceedings for protection against dismissal.
In addition to performance-related reorganization measures, restructuring situations generally also require comprehensive changes in a company’s financing and shareholder structure. In this context, entrepreneurs must also bear in mind these adjustments’ tax consequences in order to avoid additional tax burdens. Our tax specialists advise companies and potential investors on the tax structuring of financing measures for refinancing and improving the company’s equity base. If the restructuring plan provides for changes in the shareholder structure, reorganization measures or the conclusion of intercompany agreements or business management contracts, we contribute our know-how in order to support you in the tax optimization of these processes.
Often, a company’s business purpose is fulfilled, and the company’s maintenance only incurs costs. This is in particular the case with holding companies or companies established for a specific investment purpose.
Baker Tilly offers you to liquidate the company on your behalf. We prepare a liquidation plan which, on the basis of a detailed budget which has been agreed with you in advance, shows the liquidation of the company’s assets against its debts. Furthermore, Baker Tilly is ready to appoint a liquidator who will liquidate the company instead of the managing director.
Any liquidation should only consume as much liquidity as required according to a reasonable and plausible liquidation plan. Since such liquidation plan will be prepared by Baker Tilly as independent third party, Baker Tilly can indemnify the managing director or the shareholders against any liability risks resulting from the liquidation. Thus, the managing directors’ liability due to a delayed filing for insolvency and the transfer of assets is not contestable if the company, contrary to plans, cannot be liquidated outside of insolvency.
It goes without saying that we take into account and map all civil and tax law-related particularities in liquidation.
If a company requires financial restructuring in order to avoid insolvency proceedings and only a majority of creditors are likely to agree, the preventive restructuring framework (StaRUG) may be applied. This requires, however, that insolvency is only imminent but has not already occurred. Therefore, a timely planning of the course of action is decisive. If there is a sufficient majority, opposing creditors can be forced to cooperate in the restructuring as long as they are not placed in a worse position than they would have been without the restructuring. If the proceedings are conducted in public, they can claim validity at least in the European Union. The proceedings do not have to be published, so confidential restructurings are also possible. The court can (and in certain cases must) appoint a restructuring officer or a restructuring facilitator (usually a lawyer) as a neutral person to whom certain tasks are assigned by the court as required.
The procedure aims to ensure that creditors unanimously or by a majority agree to a restructuring plan or a restructuring settlement, which is then confirmed by the restructuring court. Thus, the company and creditors achieve greater legal certainty in connection with the restructuring’s implementation and permanence. The proceedings can only be applied for by the company and can be terminated again by the company’s sole decision.
Attorney-at-Law (Rechtsanwalt), Specialist Lawyer for Insolvency and Restructuring Law, Specialist Lawyer for Banking and Capital Markets Law
The legislator has titled Art. 270d InsO “Preparations for restructuring”. Such “protective shield” procedure is intended to initiate a still possible restructuring in insolvency in due time. Baker Tilly’s consulting approach is based upon IDW S9, but also attaches importance to a presentation of the reorganization’s prospects that is appropriate for the addressees. Only if the court and the creditors are convinced that the intended restructuring has good prospects of success, the protective shield procedure will be successful. Baker Tilly has already issued various certificates which resulted in the opening of protective shield proceedings.
The German Act to Further Facilitate the Restructuring of Companies (“ESUG”) enabled a restructuring in insolvency without losing the management authority. Baker Tilly supports companies in continuing their business through debtor-in-possession management. To that end, Baker Tilly develops a restructuring concept tailored to the individual insolvency situation, supports the management with the required insolvency expertise and ensures that day-to-day business and operations are managed also during insolvency.
In particular in the area of value added tax (VAT), developments in case law and the correlation between tax and insolvency law pose challenges for all parties involved in insolvency proceedings. As a result, professional creditors expect securities for their own tax risks resulting from their investment during insolvency proceedings which leads to a significant strain on liquidity when it is needed the most. Furthermore, errors in the processing of apparent standard business transactions, such as the settlement of collateral revenue with creditors, can quickly negatively affect the insolvency estate. Therefore, appropriate advice on the handling of tax issues is inevitable in order to avoid severe damage to the insolvency estate. Baker Tilly supports in the routine handling of all tax-related aspects during insolvency proceedings in close consultation with the competent tax office. With regard to specific insolvency-related tax issues, Baker Tilly provides indemnity against liability by preparing a tax opinion.
A functioning accounting system is vital for a company’s control. In addition to the daily requirements for accounting, insolvency proceedings entail additional insolvency and tax-related challenges for the financial accounting team. At this point, Baker Tilly provides support by establishing and supporting proven financial accounting processes and, if required, with personnel resources. After business operations have been transferred or discontinued, Baker Tilly can assume the debtor’s bookkeeping in order to continuously comply with the company’s obligations under commercial and tax law.
Due to their experience in all reporting-processes pursuant to German HGB, Baker Tilly is able to prepare, to the highest possible degree of automation and thus resource-saving, court-approved reporting in compliance with insolvency law.
In their function as supervisory bodies, the members of creditors' committees have to audit the monetary transactions and holdings in the insolvency proceedings. In particular in larger going-concern insolvency proceedings, such audit leads to a strong commitment of time and personnel resources. Through the cooperation of auditors and lawyers with a profound expertise in insolvency law and a risk-oriented audit approach, Baker Tilly is able to perform the audit in a particularly efficient and results-oriented manner. Among insolvency courts in Germany, the quality of the Baker Tilly cash audit is so recognized that it already replaces the formal part of a final account audit.
Due to their complexity, final account audits are particularly useful in larger insolvency proceedings in order to assess the final account’s quality and correctness and to create transparency and clarity. In light of this, Baker Tilly has been entrusted with the performance of final account audits by insolvency courts throughout Germany for several years. Depending on the type and size of the insolvency proceedings as well as the content of the insolvency court's order, Baker Tilly uses different checklists and sample reports in order to reliably meet the insolvency court's need for information while at the same time increasing the efficiency of the final account audit.
The term “Distressed M&A” includes the structuring of transactions in a company’s crisis situation. The company to be sold has liquidity problems or a risk of overindebtedness or already had to file for insolvency.
A distressed M&A investor process is often only initiated after the company has filed for insolvency which, in most cases, entails purchase price reductions and reputational damage for the company’s customers, employees and suppliers. This can be avoided by an early identification and acceptance of a crisis situation in the company and the corresponding use of M&A as restructuring measure. Companies in a crisis are also often sold within the scope of corresponding trusteeships.
Bringing in a new investor provides the crisis-ridden company with some leeway through the injection of fresh money and the possibility for reorganization with the help of the acquirer’s or external advisor’s experience.
Further information on Distressed M&A is available at our Competence Center Transactions’ website.
Baker Tilly has six insolvency administrators working at various courts throughout Germany. We are familiar with the practice of insolvency administration from more than 4,000 insolvency cases of all sizes and from all industries. Therefore, we are very well networked in the insolvency administration sector in Germany and know many contacts personally. We are regularly appointed as administrators in particular at the insolvency courts of Hamburg, Frankfurt a. M. and Munich as well as numerous insolvency courts in the surrounding areas.
Our expertise in practical administration helps in assessing actual risks and opportunities.
Attorney-at-Law (Rechtsanwalt), Specialist Lawyer for Insolvency and Restructuring Law, Specialist Lawyer for Banking and Capital Markets Law
Marković, LL.M. Eur.
Attorney-at-law (Rechtsanwalt), Specialist Lawyer for Insolvency and Restructuring Law, Specialist Lawyer in Labor Law