Reasons for insolvency

The insolvency order states three reasons for opening up insolvency proceedings. When applying, you need to explain the matching reason plausibly.

1. According to the insolvency order, an insolvency is defined by a company’s inability to pay all due claims. In addition, the debtor ceased all payments. The application can be handed in by a creditor or by the debtor themselves with the proper insolvency court. (§ 17 Abs. 2 InsO)

2. An imminent inability to pay (§ 18 Abs. 2 InsO) will be at hand if the company is unlikely to satisfy all claims in due time. In this case, only the debtor themselves may pose the application.

3. Another reason for opening up insolvency proceedings is excessive debt on the side of the debtor. (§ 19 Abs. 2 InsO) This will be the case if the assets of the debtor cannot meet the open claims.

General notes for CEO’s

If recent losses climb over half of the nominal equity, the business administration will be obliged to execute or commission an insolvency-related legal examination of the over-indebtedness.

If payments are made irregularly or an inability to pay is imminent, the company’s solvency needs to be examined on the grounds of the due claims.

In case of an inability to pay or over-indebtedness, you have a statutory period of three weeks to solve the reason for an imminent insolvency.

An imminent inability to pay is a reason for voluntarily applying for insolvency proceedings. The earliness of this application can secure the business administration some room for maneuver. There is an opportunity of renovating the company in parts or wholly, using an insolvency plan procedure or a commissioned renovation.

There may arise claims of private liability for CEOs who act negligently in an evident manner.