“25 Years of the InsO—We Can Handle a Crisis”—that was the theme of the 21st German Insolvency Law Conference, which took place in Berlin in mid-March. Every year, this specialized event features numerous presentations and panel discussions on innovations and developments in the fields of insolvency and corporate restructuring—an industry currently undergoing a period of transformation.
A Unique Situation for All Involved
For example, dealing with stakeholders during a restructuring is playing an increasingly important role beyond purely legal parameters. The fact is that an insolvency—regardless of whether it takes the form of standard insolvency proceedings, self-administration, or protective shield proceedings—represents a unique situation for everyone involved. This ranges from the entrepreneur who sees his or her life’s work at risk, to employees worried about their jobs, to customers and suppliers who want to know how their business partner’s insolvency will affect their own companies, and to financiers seeking to secure their investments.
To do justice to these differing interests and to make possible what is normally best for everyone—namely, the continuation of the business and the preservation of as many jobs as possible—a restructuring expert should reach out to and engage the parties involved. This requires a certain degree of empathy and cannot be achieved simply by virtue of one’s official position.
Or to put it another way: The Insolvency Code and the StaRUG continue to form the legal framework. Of course, restructuring specialists need the ability to apply this knowledge. In addition, however, soft skills are also useful in corporate restructurings—namely, always keeping the interests of the stakeholders in mind and, at times, being creative in finding solutions.
Growing Together as a New Team
Empathy and open, fair interpersonal relationships are also important. After all, even the best restructuring specialist can achieve very little without a team—and by that we mean not only their own employees but also the executives and the workforce of the insolvent company. Restructuring, therefore, is always also about growing together as a new team in this unique situation.
To achieve this goal, there is generally still a great deal of educational work to be done, particularly with employees in insolvent companies. In many cases, people are completely unaware of the options available through court-supervised restructuring or insolvency proceedings to get a company back on track. As a result, insolvency is still too often associated with the automatic end of the company.
This sometimes leads to employees or suppliers—to name just two examples—initially being resistant to the restructuring efforts. However, if the restructuring expert can convey—in an authentic and transparent manner—that this approach offers a real chance to preserve the company, the jobs, and the business relationships, that attitude usually changes quite quickly.
An Important First Step
The work of educating and persuading others is therefore still essential, as perceptions of insolvency are changing only very slowly, even 25 years after the Insolvency Code (InsO) came into effect. In many insolvent companies, a sense of impending doom already prevails by the time the insolvency administrator arrives. Motivation, as well as openness and transparency, play a major role here. If management has already communicated the difficult economic situation and the filing for insolvency to the employees—which is always advisable—that is an important first step. In addition, opportunities for positive messages and justified hope must be identified to convey that, while insolvency and restructuring are by no means a sure thing, they can nonetheless represent a chance for a fresh start.
It has therefore become far more important for restructuring specialists to realistically and honestly outline the prospects for the company and employees’ jobs and to involve them in the restructuring efforts. As a rule, employees appreciate openness and are quite capable of handling it when the company’s situation is presented to them realistically, without sugarcoating it. However, this also means providing transparent information when, despite all efforts, there are no longer any options for continuing operations.
Especially in such situations—but of course in general as well—it is important to be present and to convey that while insolvency administrators have a court-ordered mandate to act in the interests of creditors, they are also points of contact for those involved and are willing to listen. Insolvencies are just as much a part of economic life as business start-ups or succession planning. But we must always be mindful that every insolvency involves issues of existential importance. And it makes no difference whether it involves a large company, a self-employed individual, or a private citizen.
The “W” in “Change” Stands for “Women”
Another aspect of change in the restructuring industry is taking place within the “staffing” structures that have evolved over many years and decades. For historical reasons, the industry is still predominantly male. As a result, particularly in larger proceedings, an male administrator is still more likely to be appointed than a female one—partly because there are more “tried-and-true” male administrators than female ones, since in the past, only a few women were active in insolvency administration and restructuring. The gender ratio in the restructuring industry is also reflected in the breakdown of speakers at the 2024 German Insolvency Law Conference, where about three-quarters were men and only one-quarter were women.
However, there are now far more female insolvency administrators and restructuring specialists than there were just a few years ago. And the exchange among them has also become much more intensive—for example, through Distressed Ladies e.V., a network for female experts in the fields of corporate restructuring, reorganization, and insolvency with over 100 members. In addition, female administrators are now increasingly being appointed to handle companies in industries that are generally considered male-dominated—such as freight forwarding or mechanical engineering. It is becoming apparent that a woman could have a significant advantage, particularly in such industries: She is less likely to be viewed by management as competition or a threat to their own position, which may also be due to her generally less “down-to-earth” demeanor. As a result, the barrier to constructive collaboration for the benefit of the company is often lower.
A mindset that distinguishes between so-called “women’s industries”—such as shoe stores or beauty salons—and so-called “men’s industries”—such as the aforementioned freight forwarding companies or construction firms—should be a thing of the past, not least for this reason.
Change Across All Sectors
In summary, it’s fair to say that the restructuring industry is changing and that this change will continue. However, it would be desirable for this change to gain greater traction in the business world as well. After all, the same principle applies to every restructuring effort: the sooner a company responds to financial difficulties, the greater its chances of success. This preserves viable companies and saves jobs!
Managers should therefore address necessary restructuring in a timely manner, while their company still has reserves. Simply waiting and hoping for a soon-to-come improvement in the business cycle and the overall economic situation is not a sensible strategy. Companies that are in a crisis or are heading toward one should at least consider restructuring as an option, using the restructuring laws that offer various procedures and tools. This is because restructuring professionals will then be in a better position to fulfill their mission: to restructure companies and guide them through urgently needed changes in situations where their very survival is at stake.
The Authors: Dr. Elske Fehl-Weileder is a specialist attorney in insolvency and restructuring law; Kristin Winter is a corporate lawyer (LL.M.). Both work at the Nuremberg, Munich, Braunschweig, and Hanover offices of the nationwide law firm Schultze & Braun, among others, and have already guided many companies through crisis situations. Fehl-Weileder is the spokesperson for the women administrators’ chapter of Distressed Ladies e.V.
