Overcoming corporate crises
Paths out of the crisis – harness your legal potential
When companies face an existential crisis, every decision counts. Yet even in seemingly hopeless situations, opportunities for a fresh start can open up. By deploying legal instruments in a targeted way, companies can not only safeguard their financial viability but also set a course for a sustainable future.
We bring together deep expertise in insolvency law and adjacent fields to steer your company out of crisis. Our legal advisory team works closely with specialists in finance, operations and strategy to deliver holistic crisis advice from a single source.
Causes of corporate crises
There are many reasons why companies fall into crisis or slide into insolvency. External factors include weak demand, intensified global competition and disruptions to the business model. Rising production costs, trade wars and interruptions to global supply chains can also put companies in a difficult position.
Internal factors include failing to further develop the business model in a dynamic market with changing customer needs. In addition, a lack of product innovation, inefficient processes, incorrect management decisions and rigid organisational structures can trigger a crisis.
Which measures help in which situation
Depending on your company’s situation, we work with you to develop tailored solutions to lead you out of crisis quickly and sustainably.
It is vital to recognise crises early and take immediate action – whether by adapting the business model, improving operational performance or strengthening financial capacity.
In a dynamic economic environment, early crisis detection is crucial to preserving your company. Company directors are responsible for identifying potential challenges in good time and taking appropriate measures. With an effective early warning system, you protect not only your company but also your employees and partners.
The key to early crisis detection lies in combining forward‑looking corporate planning with continuous monitoring. Even small financial or operational changes can have long‑term effects. From the loss of key customers and reliance on short‑term financing to unexpected political decisions, early warning signals can appear at various stages of a crisis. A well‑structured early warning system helps you identify relevant risks and analyse how they interact.
The legal toolkit also offers a wide range of restructuring options. Depending on the situation, measures such as out‑of‑court reorganisation, self‑administration, protective shield proceedings, transfer reorganisation or regular insolvency proceedings may be appropriate.
Approach and success factors
For restructuring to succeed, a pragmatic approach and the right balance between stakeholder interests are essential – from management and executives to the works council, employees and the HR department, through to creditors, investors and suppliers. A stakeholder analysis provides clarity on who is affected by the restructuring, to what extent, and how much influence they have.
Further key success factors include structured, rigorous project management and sustainable adaptation of the business model. In practice, restructurings tend to be most successful where management is coached at each phase and the workforce and co‑determination bodies are engaged respectfully through change management and communication.
Legal aspects of reorganisation and insolvency
Modern insolvency law aims to reorganise companies, preserve jobs and enable the reorganised company to make a fresh start. We support you in the following areas:
- Legal review of grounds for filing for insolvency
- Preparation of certificates pursuant to § 270d InsO, profit and liquidity planning, and ongoing target/actual comparisons before and during the proceedings
- Preparation of the insolvency application in close coordination with internal stakeholders
- Review of claims and approval of ongoing payments
- Advice on all commercial and legal aspects of reorganisation and restructuring
- Preparation of a reorganisation plan
- Coordination and preparation of an insolvency plan and submission to the court
- Implementation of the insolvency plan
- Negotiation and conclusion of estate loan agreements and any other agreements that may be necessary
- Review of any existing rights of segregation and separation
- Review of restructuring alternatives under StaRUG and the InsO, taking into account prospects of success
- Identification and design of suitable restructuring measures
- Notification of restructuring projects to the restructuring court
- Drafting restructuring plans and accompanying agreements
- Conducting or facilitating negotiations with creditors
- Implementation of out‑of‑court voting on plans
- Representation in judicial plan confirmation proceedings
- Acquisition of companies in crisis outside or within court‑supervised reorganisation or restructuring proceedings (“distressed M&A”)
- Legal due diligence
- Review of risks of avoidance actions and liability in acquisitions in the context of insolvency proceedings
- Identifying and approaching potential buyers/sellers
- Operational restructuring measures
- Structured M&A processes, taking into account all factors relevant under crisis and insolvency law
- Analysis of weaknesses in corporate planning and identification of realistic opportunities for growth
- Implementation of transaction solutions in crisis situations, including negotiations and employment law crisis management
- Handling critical transformation processes
- Review of the liability risks of a company’s corporate bodies or shareholders during the reorganisation phase
- Advice on liability risks for senior employees within the company
- Review and defence of liability claims, in particular due to payments made after the company became insolvent
- Strategies to avoid liability
- Representation of managing directors; defence against claims brought against managing directors, in particular allegations of delaying an insolvency filing
- Default prevention in crises
- Agreeing security interests
- Assessment of solution proposals submitted by the insolvent company; negotiation and implementation of alternatives
- Advice to suppliers and customers
- Review of insolvency plans that affect a creditor’s legal position, taking into account the client’s interests
Corporate law reorganisation measures
Corporate law reorganisation measures play a decisive role in overcoming financial crises. They are designed to restore a company’s liquidity and profitability to secure its long‑term survival. These include, for example, capital increases, restructuring of liabilities, negotiations with creditors and adapting the company’s strategy.
The legal framework for such measures varies depending on the company’s legal form and the national legislation concerned. A key aspect is close collaboration between management, shareholders and creditors to reach consensus on the necessary steps.
- Ordinary capital increase
- Venture capital injections
- Simplified capital reduction
- Debt‑to‑equity swap (internal, e.g. shareholder loans)
- Conversion measures
- Taking out shareholder loans
- Creditor support
- Deferral of claims (moratorium)
- Strengthening equity (e.g. debt‑to‑equity swaps, asset contributions, mezzanine)
- External financing (e.g. bridging and reorganisation loans)
- Hybrid capital measures (mezzanine loans, warrant bonds, convertible bonds)
- Disposals (e.g. carve‑outs/asset stripping)
Employment law in reorganisation and insolvency
Restructuring requires carefully prepared steps in dealings with the workforce and their representatives. On the one hand, the right strategic approach to employment law issues is crucial in short‑term cost‑saving programmes. On the other, the aim is to set the framework for a resilient future for the company over the long term together with employees, works councils and trade unions. Together with management and the finance and HR functions, we identify short‑ and long‑term potential for change and help to implement it.
- Efficient utilisation of your own employees (e.g. ending fixed‑term employment contracts, hiring/promotion freezes, reducing holiday and overtime, introducing short‑time working)
- Use of nearshoring and offshoring structures, shared service centres and managed services
- Managing all third‑party personnel engagements (e.g. reducing third‑party personnel and freelancers, scaling back temporary agency work, focusing on utilisation of the core workforce, reducing external service providers)
- Changing terms and conditions of employment (e.g. variable remuneration, special benefits, training, business travel)
- Reorganisation of occupational pension schemes
- Voluntary terminations by agreement
- Termination of managing directors’ service agreements/employment contracts with executives
- Implementation of headcount reductions, including socially responsible approaches
- Stakeholder strategies, communication and change management
- Negotiation of reconciliation of interests and social plan (outside or in insolvency)
- Comparison of employment law restructuring budgets inside and outside insolvency proceedings
- Transfer companies, retention programmes
- Employment law support for the restructuring of business operations and M&A processes (e.g. HR due diligence, purchase price allocation)
- Litigation
How PwC Legal supports you
In today’s complex corporate landscape, it is crucial to have an adviser at your side who brings multiple disciplines together under one roof. In a restructuring, numerous topics interlock and cannot be neatly separated. Comprehensive support that includes legal and tax advice as well as strategic advice makes it possible to consider all relevant aspects efficiently and make well‑founded decisions.
With our holistic advisory approach, we lead your company out of crisis and help you build lasting resilience. We also support you in special situations connected with reorganisation measures – whether cross‑border cases or ESG, IP/IT and subsidy‑related matters – with the right expertise.
Alongside deep experience, best practice and agile cost modelling, we rely on modern tools to steer all measures efficiently via the Project Management Office (PMO). These include, for example, a restructuring dashboard that lets you compare different scenarios, calculate restructuring costs and track the implementation of operational measures.
Whatever your situation, we will support you through every phase and offer tailored solutions.
