What Can Struggling Businesses Learn from the Pandemic?

 He shares how eCommerce has impacted businesses and the potential effect the decisions German parliament have made will have on companies.

Due to the pandemic, many companies, especially high street stores are suffering; what are their options before claiming bankruptcy? How can these options help save a company?

In Germany, the main restructuring options are currently still opening up with formal insolvency proceedings. That will change fundamentally in 2021. On the basis of the European restructuring directive, a new law will significantly facilitate out-of-court restructuring.

In hindsight, what should such businesses have done in order to stay afloat during testing times?

The companies have often very short-sightedly applied for state funding without actively tackling the necessary restructuring of their company. It was thought that the pandemic only had a selective effect and that one could quickly return to the old normal. That was the wrong premise for such business decisions post March 2020.

How much impact has eCommerce had on businesses? Is it vital to address the importance of eCommerce when high streets are struggling?

The pandemic has significantly accelerated digitisation and the trend towards more eCommerce. All of this would have happened anyway, only later. Adjustment processes would have been preferred, however, state aid has often slowed down the necessary changes which has thus had a negative effect.

There is likely to be a considerable impact, as the companies which may have the potential issue of bankruptcy have postponed it to 2021.

What can companies and the legal sector learn from this pandemic, in terms of corporate law and bankruptcy?

A schizophrenic situation has arisen due to the suspension of the obligation to file for bankruptcy. The number of formal insolvency proceedings is the lowest in the last 25 years. The number of companies in the economic crisis is probably the highest. There is a lot of catching up to do at the beginning of 2021.

In September 2020, German parliament adopted a law which extends the suspension period in case of over-indebtedness until 31 December 2020. What impact do you think this will have on businesses? Is it enough?

There is likely to be a considerable impact, as the companies which may have the potential issue of bankruptcy have postponed it to 2021. In fact, less than 5 per cent of bankruptcy applications in Germany are due to over-indebtedness. So therefore, in reality, there should have been numerous bankruptcy filings, but as a result, zombie companies continued to be produced and this noticeably worsens the chances of being able to restructure if applications are made much too late in 2021.

How can companies go about looking for new buyers during testing times?

There is still investor capital from the good days before the pandemic. I think there will remain to be enough interested and prospective buyers.

When is restructuring the better option for struggling companies?

The essential thing is whether there is a market in the “new normal”.  If so, then it will pay to restructure and invest. In some industries, however, I tend to see the need for market adjustment.

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Römermann Insolvenzverwalter GmbH

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Dr Volker Römermann was admitted to the bar in 1996. In addition to his work as a lawyer, he is Chairman of the Board of the Institute for Insolvency Law (since 1998) and an honorary professor at the Humboldt University in Berlin. Attorney Prof. Dr. Volker Römermann, CSP, is a member of the board of Römermann Rechtsanwälte AG in Hanover, Hamburg, Berlin, Frankfurt, Erfurt and Mannheim and is known as an expert and consultant or representative in three areas: in corporate law, in insolvency law and in the law of the liberal professions (especially in Professional law of lawyers). In bankruptcy law, his clear focus is on the reorganisation and restructuring of companies. Especially in difficult and complex contract negotiations, the many years of experience of Prof. Dr. Römermann and the conduct of negotiations valued at home and abroad; He has been teaching this subject at German universities since 1997 and trains numerous managing directors.

Römermann Rechtsanwälte AG has long been known for its result-oriented and practical advice based on extensive scientific expertise. The lawyers are characterised by scientific publications and a consistent specialisation in business law. A cornerstone of the philosophy of Römermann Rechtsanwälte AG is to gain creative solutions through active scientific analysis.

Römermann has several branches: legal advice (Römermann Rechtsanwälte AG) and insolvency administration (Römermann Insolvenzverwalter Rechtsanwaltsgesellschaft mbH). We are active from several locations across Germany. The firm has existed since 1962.