The legislator introduced the protective shield proceedings to promote a positive reorganisation culture in Germany. If the company is still fully solvent but at risk of running short of money in the short term, protective shield proceedings recomment themselves as a restructuring tool.
In the perception of the broad public, the protective shield proceedings pursuant to Section 270b of German Insolvency Statute are an almost out-of-court restructuring procedure for companies.
The stigma of insolvency is often blanked out in the context of protective shield proceedings. The proceedings may even be designed in such a way that the court waives official publication.
Protective shield proceedings provide for a number of privileges for entrepreneurs to encourage them to use it as a restructuring tool at an early stage. This includes that they can choose the insolvency monitor who monitors the reorganisation process and that the restructuring may be done under the company's own management.
In order for the entrepreneur to secure these privileges, he must at an early stage deal with the reorganisation alternative and initiate concrete steps. This primarily includes the conceptual preparation and pre-structuring of the process. It must be documented that insolvency has not already occurred but is just "imminent". Overindebtedness is also allowed, but this fact must likewise be documented to stand up in court and be certified by an independent expert.
Frequently, protective shield proceedings are a realistic option for the entrepreneur to reorganise the company in the context of court proceedings and to return it to profitability and competitiveness in this way.
The consultants of hww have wide experience with the designing of reorganisation procedures in the context of protective proceedings.