Key terms explained

Insolvency proceeding under § 270 InsO in which management stays in office and continues to operate under supervisor oversight. read more →

Restructuring instrument in German insolvency. Governs debt restructuring, monetisation and, where relevant, going-concern continuation. read more →

A court-ordered security measure (§§ 21 f. InsO) between the insolvency petition and the opening decision, protecting the debtor's assets until the court rules on opening proceedings. read more →

Standard German insolvency proceeding with appointed administrator who takes over disposal rights from the debtor. read more →

Preliminary Eigenverwaltung with restructuring protection. Grants the debtor up to 3 months without enforcement to file a restructuring plan. read more →

Preliminary court measures between insolvency filing and opening decision. Protects the insolvency estate. read more →

Out-of-court restructuring procedure without formal insolvency. Enables restructuring without opening an insolvency case. read more →

A later distribution of assets discovered or that become available only after the insolvency proceeding has been formally closed — e.g. a released purchase-price retention or proceeds from a successful avoidance claim. The administrator's office is revived just for that distribution. read more →

The insolvency administrator's right to choose, for contracts not yet fully performed by either side, between performance (which becomes a preferential estate liability) and refusal (leaving the counterparty with a mere insolvency claim). read more →

German statutory rule under which the debtor's rental, lease and employment relationships continue automatically once insolvency proceedings open — unlike most other contracts, the administrator has no right of election here under § 103 InsO. read more →

Lets the insolvency administrator terminate employment relationships with a maximum notice period of three months to the end of a month — regardless of longer contractual or statutory notice periods. read more →

An agreement between the insolvency administrator and the works council that names the employees to be dismissed — court review of the underlying social selection is then limited to gross error. read more →

Bars management from making payments out of company assets once insolvency (illiquidity or over-indebtedness) has occurred — with personal repayment liability for breaches. Replaced the equivalent GmbHG/AktG rules in 2021. read more →

Lets the insolvency administrator realise moveable collateral in its own possession — e.g. machinery transferred by way of security — even where a creditor holds a right of separate satisfaction over it. The administrator retains cost contributions for the estate in return. read more →

Hearing at which claims filed against the estate are formally admitted or disputed on the insolvency table. Little direct deal relevance for buyers, but a useful signal on creditor structure. read more →

Court decision closing the insolvency proceeding once the final distribution to creditors is complete. The last public milestone in the case — usually too late for a deal. read more →

Duty to appoint a preliminary creditors' committee for larger companies — already before the case opens, with a say in choosing the administrator. read more →

Anyone continuing a business under its existing trade name is generally liable for the debts that arose in that business — a classic pitfall when a buyer wants to keep the brand name in an asset deal. read more →

Court rejection of the petition to open proceedings because the estimated estate wouldn't even cover the costs of the proceeding. Not a regular monetisation route — but the company remains legally in existence. read more →

German statute under which all employment relationships transfer automatically to the buyer when a business or business unit changes hands — the central liability trap in insolvency asset deals. read more →

Governs a business acquirer's liability for certain business tax debts of the predecessor — but expressly does not apply to acquisitions from the insolvency estate, a material advantage of insolvency timing. read more →

Governs the (partial) forfeiture of corporate tax loss carryforwards on a change of shareholders — the central tax pitfall in an insolvency share deal. read more →

German statutory rule on public announcements in insolvency proceedings. Requires opening decisions and case acts to be published on insolvenzbekanntmachungen.de. read more →

Deadline for creditors to file claims with the administrator. Typically 4–6 weeks from publication of the opening decision. read more →

First creditors' assembly in the proceeding. Administrator reports asset status and proposes next steps. read more →

Anyone who acquires a commercial business — including out of insolvency — and continues operating it under the previous trade name is statutorily liable for the seller's pre-existing business debts, unless an effective liability exclusion is agreed and made public. read more →

The administrator's notice to the insolvency court that the estate can no longer cover existing estate liabilities in full. Reorders the payment ranking and is a serious warning sign for buyers. read more →

Central element of the balance-sheet insolvency test: the predominantly-likely assessment of whether a company will remain solvent through the current and following financial year. If negative, it triggers the duty to file for insolvency once liabilities exceed assets. read more →

Rules coordinating parallel insolvency proceedings of several companies within the same corporate group — including a shared group venue and an optional coordination procedure. The aim is a coordinated approach instead of separate administrators acting independently per group company. read more →

A wage-replacement benefit paid by the Federal Employment Agency that covers employees' last three months of pay before the insolvency event — funded by a levy on all employers, not out of the insolvency estate. read more →

The administrator's right to unwind pre-filing acts that disadvantaged creditors — relevant for buyers who dealt with the later debtor before insolvency. read more →

The share of their filed claim that unsecured insolvency creditors actually receive at the end of the proceeding. In Germany, historically in the low single-digit to low double-digit percent range. read more →

A liability the administrator incurs against the insolvency estate after proceedings open — paid preferentially from the estate, ahead of the quota owed to ordinary insolvency creditors. read more →

Antitrust review by the Bundeskartellamt (or the EU Commission) of whether a merger significantly impedes competition. A common closing condition on larger distressed deals — though the „failing-firm” exception can ease clearance. read more →

The core creditor safeguard in insolvency-plan and StaRUG proceedings: no participant may end up economically worse off under the plan than they would without it — chiefly, than under a regular liquidation. The basis for a minority-protection challenge. read more →

Lets a court treat a dissenting creditor group's consent to an insolvency plan as given where the group is not worse off under the plan than without it and shares appropriately in the plan's value — enabling a plan to pass despite one group's opposition. read more →

Court decision opening the insolvency proceeding. Essential starting point of the administration and monetisation phase. read more →

An agreement among several secured creditors — typically financing banks — to jointly administer their differing security interests and split realisation proceeds under an agreed formula, rather than enforcing individually and in competition with each other. read more →

Exception to the subordination of shareholder loans: if an investor acquires shares in a distressed company for restructuring purposes, that investor's new loans are not treated as subordinated shareholder debt. read more →

Agreement under which a supplier remains owner of delivered goods until the purchase price is paid in full. In its extended form the security also covers the receivable from any resale — relevant for buyers taking over inventory or receivables. read more →

The right to fully reclaim an asset from the insolvency estate because it never belonged to the debtor — e.g. leased equipment, consignment stock or simple retention of title. read more →

A secured creditor's preferential right to be satisfied from the proceeds of a specific estate asset — e.g. a land charge, security ownership, or extended retention of title — rather than sharing a pro-rata quota like ordinary insolvency creditors. read more →

A creditor's right to net its own debt to the insolvency estate against its own claim. A set-off position existing before the case opens stays protected under § 94 InsO; §§ 95 f. InsO restrict it in specific cases. read more →

Loans a shareholder grants to their own company. In insolvency, repayment claims from such loans are subordinated by law — paid only after all other creditors have been satisfied in full. read more →

The employer's (or administrator's) duty, when making operationally driven dismissals, to select who is let go among comparable employees using social criteria. Applies in insolvency proceedings too. read more →

Compensation scheme agreed between employer and works council for staff affected by a business change — capped in amount during insolvency, with its own fast-track dispute mechanism. read more →

A contractual agreement under which a creditor ranks their claim behind all other creditors in insolvency — even behind the claims already subordinated by law under § 39(1) InsO. A key tool for avoiding balance-sheet over-indebtedness. read more →

German VAT rule under which selling a continuable business or business unit to a buyer who carries it on is outside the scope of VAT — no VAT is charged on the purchase price. Frequently applies to going-concern asset deals out of insolvency, but is not automatic. read more →

Insolvency ground for legal entities: assets no longer cover liabilities AND continuation of the business is not more likely than not — a two-stage test. read more →

By far the most common statutory insolvency ground: the debtor can no longer meet due payment obligations. Under settled BGH case law, a liquidity gap of 10% lasting more than three weeks already indicates illiquidity. read more →

Externally appointed restructuring managers who steer a distressed company's operational and financial turnaround before or outside formal insolvency proceedings — often the first serious negotiating partner for buyers in the pre-crisis phase. read more →

Oversight body appointed by the court or creditors' assembly that supervises the administrator and must consent to material decisions. read more →

Body of all voting creditors, convened by the insolvency court. At the report hearing in particular, it decides whether the business continues or is wound down, elects the creditors' committee, and can vote out the administrator. read more →

Court-appointed representative of the insolvency estate. Takes disposal rights, monetises assets in creditors' interest. read more →

Supervisor appointed in Eigenverwaltung. Oversees management without replacing it. read more →

Officer appointed alongside the regular administrator for a specific, delineated task — in particular when the regular administrator has a conflict of interest, such as claims against themselves or related parties. read more →

Bank pre-financing of net wages for up to three months after proceedings open, while the Federal Employment Agency's own insolvency benefit has not yet been paid out. Keeps operations running until a sale. read more →

Acquisition of individual assets (brand, inventory, contracts, staff) instead of company shares. read more →

A new or already existing company of the buyer that, as part of a business transfer restructuring, takes over and continues the business, assets and staff out of the insolvency estate — the practical vehicle through which the asset deal is executed. read more →

Financial security — typically a bank guarantee or deposit — that bidders in an administrator's sale process must post to prove the seriousness of their offer and protect the administrator against a withdrawal. read more →

Structured, usually two-round investor process the administrator runs to compare several prospective buyers in parallel and secure the best possible proceeds for the estate. read more →

Structured, usually two-round investor process the administrator runs to compare several prospective buyers in parallel and secure the best possible proceeds for the estate. read more →

A contract clause giving the counterparty a special termination right if control over a contracting party changes — for example through a sale out of insolvency. Can put a target's key customer, supplier or licence contracts at risk. read more →

Digital repository of all deal-relevant documents — contracts, financials, headcount, IT — that the administrator or advisor opens up to bidders for review. read more →

Converting creditor claims into equity in the (restructured) company — a standard tool in an insolvency plan or StaRUG proceeding that deleverages the balance sheet without drawing cash from the estate. read more →

Corporate acquisitions in crisis or insolvency contexts. Characterised by compressed timelines, high information asymmetry and alternative price discovery. read more →

Systematic review of the target before the purchase decision. In insolvency, usually a compressed red-flag review within a few weeks rather than the months-long full review of classic M&A. read more →

A purchase-price component that only becomes payable after closing, contingent on the target's future performance (e.g. revenue, EBITDA). Bridges valuation gaps between buyer and seller. read more →

Time-limited commitment by the administrator not to negotiate with other bidders during the due diligence phase — usually granted only after a binding LOI, and rarely without something in return. read more →

Sale of estate assets outside a formal bidding or auction process — the standard route for asset deals out of insolvency. read more →

Acquisition of the business as a continuing entity — staff, customers, operations stay together. In insolvency the king's road for strategic buyers. read more →

Auditor's note that there are doubts about the going-concern of the business. Early distress warning. read more →

Auditing standard from the German Institute of Public Auditors for restructuring opinions: a structured expert assessment of whether a company is capable of being restructured. Used by banks and investors as a decision basis before restructuring financing. read more →

Reducing a distressed company's share capital — usually to zero — followed by a capital increase subscribed by new investors or creditors. Wipes out incumbent shareholders and gives the restructured company a clean capital structure. read more →

Non-binding written statement of intent from a prospective buyer to the administrator, setting out the key parameters of a possible deal before a binding purchase agreement is negotiated. read more →

Non-binding written statement of intent from a prospective buyer to the administrator, setting out the key parameters of a possible deal before a binding purchase agreement is negotiated. read more →

Two valuation benchmarks for the insolvency estate: proceeds from piecemeal liquidation versus the higher value achieved selling the business as a continuing, functioning unit. read more →

Contract clause in a business purchase agreement giving the buyer a withdrawal or price-adjustment right if a material adverse change occurs in the target between signing and closing. read more →

Loan the insolvency administrator takes on against the insolvency estate to fund ongoing operations until sale — not a financing source for the buyer. read more →

A contractual confidentiality obligation a prospective buyer signs before gaining access to the data room or other confidential company details — a standard entry requirement in practically every insolvency bidding process. read more →

Two mechanisms for tying the final purchase price to the target's actual financial position — either fixed as of a reference date before signing (locked box) or determined after the fact from a closing balance sheet (closing accounts). read more →

Part of the purchase price is withheld at signing rather than paid out, held in an escrow account for a defined period to secure warranty or remediation claims. read more →

Acquisition of company shares — including all liabilities. In insolvency the exception. read more →

Signing is the binding execution of the purchase agreement; closing is the actual completion — transfer of ownership, possession and economic risk. In insolvency deals the two dates often fall apart in time. read more →

An early, binding purchase offer that sets the price floor for a subsequent bidding process. In exchange, the stalking-horse bidder usually receives a break-up fee if a higher bid wins the auction. read more →

A fixed-term employment company that takes on, via a tripartite agreement, staff not taken over in a business transfer — qualifying and placing them in new jobs instead of a straight dismissal. read more →

Transfer of a still-viable business or business unit out of the insolvency estate to a new or existing legal entity — legally an asset deal, and economically the most common way to save jobs, contracts and going-concern value beyond insolvency. read more →

Due diligence review commissioned by the seller or administrator, whose report is made available to multiple bidders in parallel. Speeds up bidding processes and cuts the review burden for each individual bidder. read more →

In insolvency asset deals the administrator sells virtually always „as is” — with a broad exclusion of defect and title warranties. Warranty & Indemnity (W&I) insurance can close this gap for the buyer, but insolvency-specific cover is rarer and pricier than in regular M&A. read more →

Official federal publication portal. Contains annual accounts of all corporations subject to disclosure. read more →

Officially registered business purpose in the commercial register. Legally binding description of the activity. read more →

The time span between an official event (opening decision, court security measure, commercial-register entry) and the moment a buyer learns about it. The decisive but rarely measured quality factor in insolvency data. read more →

Public register of merchants and trading companies. Central primary source for structural and representation data. read more →

Minimum capital of the company. GmbH: EUR 25,000 · UG: from EUR 1 · AG: EUR 50,000. read more →