Insolvency does not automatically mean the cessation of business operations. Today it is usually a matter of reorganizing and repositioning the ailing company. For this it is essential to maintain important business relationships and to ensure the continued supply of the company. But what does cooperation under these circumstances mean for the contractual partners?

Willingness to talk – the first important signal for sales partners

Regardless of whether insolvency is carried out in self-administration or as a standard procedure - in the event of a company's insolvency, the best economic solution must be found for all parties involved. There is often little time for communication, which is why transparent handling of the crisis is important for the success of the insolvency proceedings. After all, sales and business relationships must remain intact and a company must not lose the trust of its customers and partners. It is an important signal for sales partners when a crisis-ridden company communicates openly and approaches them when there are alarm signals. Together they can then continuously talk about solutions.

Special regulations for contractual relationships in insolvency

The insolvency administrator exercises the so-called right to choose performance for contracts that have not yet been fully performed. This means that he can freely decide whether he chooses to fulfill or not to fulfill the contract. In self-administration, this choice is the responsibility of the managing director. For some contracts, such as rental or lease agreements, there is even a special right of termination. The insolvency administrator or self-administering management will exercise this right in the interests of the creditors if either restructuring is ruled out or the continued contractual relationship is disadvantageous for the insolvency estate, i.e. the remaining funds of the troubled company.

If the insolvent company is successfully restructured, another supplier relationship is possible. In this way, short-term cuts can potentially be compensated for in the longer term.

Jacqueline Jakubik; Lawyer and insolvency administrator at the Tiefenbacher law firm.

Contractual partners must act quickly

If the crisis itself did not give rise to an early initiative, those affected should immediately contact the insolvency administrator or the company to discuss the contractual relationship. From an economic point of view, it can be worthwhile to accept changed contractual conditions. Because: If the insolvent company is successfully restructured, another supplier relationship is possible. In this way, short-term cuts can potentially be compensated for in the longer term.

Whether and when open invoices are settled depends on several factors. Basically, a distinction is made between claims that arose before or after the opening of insolvency proceedings.

Insolvency claims vs. mass liabilities

Unpaid claims that arose before the opening of insolvency proceedings are considered insolvency claims. They are only satisfied at the end of the insolvency proceedings in the amount of the insolvency quota. The prerequisite for this is that the creditors register their claims in writing with the insolvency administrator and the claim is included in the insolvency table.

Claims that arise after the opening of insolvency proceedings - for example, through appointments by the insolvency administrator - are assets. They are usually paid quickly and in full by the administrator from the insolvency estate. Receivables resulting from contracts that have not yet been fully fulfilled are also classified as liabilities from the estate. To do this, those responsible must select the “fulfilment” option after the insolvency proceedings have been opened. However, there is also a risk of failure here. If the insolvency administrator indicates that the assets are not sufficient to settle the liabilities, in principle insolvency proceedings follow: the insolvency administrator's suppliers may only receive pro rata payments from the assets. To avoid this, advance payment can be agreed, for example.

Payments received are also at stake

If a customer becomes insolvent, there is a risk of contesting the insolvency. It enables the insolvency administrator to reclaim payments already received without the contractual partner receiving his performance back. This threat is difficult to contain. The customer's financial difficulties are usually known in advance and may be documented in emails or letters. The closer the payment was made to the opening of insolvency proceedings, the higher the risk of rescission. One way to reduce it is to comply with the “cash business privilege”. A challenge is usually excluded if the service and consideration are equivalent and were exchanged directly. A maximum period of 30 days between performance and consideration was previously classified as “immediate”.

Effectively agreed security rights also remain valid in the event of insolvency.

Jacqueline Jakubik; Lawyer and insolvency administrator at the Tiefenbacher law firm.

Security rights help to bring values back

Effectively agreed security rights also remain valid in the event of insolvency. However, their enforcement depends on the insolvency code. The extended retention of title is used most frequently. If this has been effectively agreed, the insolvency administrator or the self-administration must in principle hand over any goods that have been delivered. If these have already been resold, the supplier is entitled to the relevant claims. They will then be collected and paid to the contractual partner less a flat-rate fee. If a customer is in insolvency, the insolvency administrator or the self-administration should be notified immediately of existing security rights.

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