When a company in Germany becomes insolvent—meaning its income no longer covers its debts—it is legally required to file for insolvency to avoid criminal charges. The court first assesses whether the business can afford the proceedings, and if viable, appoints an insolvency administrator to draft a restructuring plan. Creditors vote on this plan while the search for investors begins, with options ranging from new loans to a competitor takeover. If the company’s debts exceed its value and sustainable funding is unavailable, it is dissolved, and assets are liquidated. The remaining funds are used to pay creditors, but if the money runs out, lower-ranking creditors receive nothing, marking the official end of the business.
This…
